Where Have Continuing Claims Gone?
Here’s yet another look into the really-not-okay state of the US labor market. This time, the focus is on jobless claims’ close cousin – continuing claims. In recent times, continuing claims have snatched the limelight from its more famous cousin, simply because they have started to fall, even as initial claims remain elevated.
This has gotten people excited and pointing to continuing claims as evidence that the labor market is okay again… but is it really? But if it isn’t, then where have all the continuing claims gone?
An explanation of what both data points represent is needed before we can further investigate this mystery.
Americans who have been laid off (and meet the appropriate criteria), can apply for unemployment insurance (UI). The number of new UI claimants is reflected in the initial jobless claims number, while the number of existing claimants are reflected in the continuing claims series.
Therefore, continuing high initial claims demonstrate that the US economy is still shedding a lot of jobs at an unprecedented pace. But this is contradicted by continuing claims which have been falling, indicating that people are coming off unemployment insurance, which typically is a good thing – this is what has gotten so many people excited.
They either never knew, forgot, or neglected to mention that unemployment insurance can only be collected for a maximum of 26 weeks. That’s half a year, and the pandemic has been raging for almost a full year now. This alone should signal that something big is missing from the simplistic interpretation of falling continuing claims numbers.
At this point, a new character must be introduced to our little plot. PEUC, or Pandemic Emergency Unemployment Compensation is a program that provides financial aid to people who have exhausted their unemployment insurance.
Individuals who lost their jobs at the end of March, at the height of lockdowns and labor market destruction, would have finished their 26 weeks of unemployment insurance close to the end of September, after which they would have been left without aid. The PEUC was created to rectify this, giving them an extra 53 weeks (after an extension) of aid. That it was deemed necessary to even create the PEUC should highlight the lack of enough recovery in the job market.
Now let’s take a look at how all of them come together.
Looking at PEUC vs continuing claims, you can see what everyone is getting so excited about. After the initial spike from lockdowns, continuing claims have steadily fallen ever since. Some of this is to be expected as States reopened their economies, bringing workers back on payroll. However, in the same period of falling continuing claims, you can see that PEUC claims climbed steadily higher, and exploded higher at the end of September, as those who first applied for unemployment insurance in March hit their 26 week limit.
That’s where continuing claims have disappeared to: folks who still could not get jobs, but instead rolled from one unemployment assistance program to another.
While PEUC claims have continued to come in on the high side relative to continuing claims, it is important to note that the situation is not as clear cut as saying unemployed persons simply moved from one program to the other.
We know this because the fall in continuing claims is much larger than the rise in PEUC claims, which hints at a very mixed reality. Some Americans managed to find work again (good!); some managed to get into the PEUC program (bad!); some did not manage to get into the PEUC program and have exhausted their 26 weeks of unemployment insurance (ugly!).
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