A Year From COVID: Pandemic Insurance
If financial markets needed a reminder that we still are in the grip of a global pandemic, they need look no further than use of the Pandemic Emergency Unemployment Compensation (PEUC) scheme.
PEUC data gives us a crucial glimpse into the health of the labor market outside of the usual dimensions marked by the Jobs Report and weekly jobless claims numbers. This is due to the PEUC providing unemployment insurance to people who have lost their jobs and exhausted their unemployment insurance claims.
Unemployed individuals only get 26 weeks of unemployment insurance, with this being accounted for first in initial jobless claims, when an individual first loses their job and applies for unemployment insurance; then in continuing claims. Of course, if they manage to find employment within their 26 week allotment, they will cease to be part of the continuing claims data set.
But, if they reach the end of their 26 weeks without finding a job, they also cease to be part of the continuing claims count. This produces a data set that misrepresents the state of the labor market during times of crisis. It does so by creating the illusion that less people are on continuing claims, and implying a labor market improvement, when in truth people are spending longer periods of time unemployed.
This was exactly what happened in September 2020, when continuing claims began falling even though the US economy was clearly still in its Covid funk. PEUC allowed us to see then, that the fall in continuing claims was not an improvement, but rather a transition of unemployed individuals from one benefit scheme to another.
What is the PEUC data indicating now? Nothing positive, unfortunately.
From the chart, you can see that PEUC continuing claims, that is folks who are still claiming PEUC benefits, are near their highs at slightly more than 5 million. More importantly, the number has hovered in the approximate range of 5 million to 6 million since February of this year. This stands in contrast to the improvements recorded by other labor market data sets, such as the Jobs Report, jobless claims, and JOLTS.
In addition, continuing claims (of the 26 week variety) are not tracking lower with initial claims. This points toward a large number of laid off workers who are still unable to find jobs, even as fewer people are being laid off each week. Since initial claims were over 700,000 per week for a whole year, it will be a while before the last 4 months’ fall in initial claims will bring down the continuing claims number. Barring, of course, a major surge in job creation and economic recovery.
This, when taken together with the lack of recovery in PEUC continuing claims (they have not come down appreciably), and a labor force participation rate that has refused to improve in 2021, strengthens the view that this labor market recovery is still in its early stages. It isn’t yet robust or broad enough to bring back the millions of people still stuck in medium-soon-to-become-long term unemployment.
Furthermore, as long as these trio of indicators remain stubbornly stuck at their current levels, these folks will not be brought back into the fold of employment and hence full participation in the economy.
In other words, the labor market will remain bifurcated, and inequality rife.
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