Unemployment claims double in 2 days in California as coronavirus takes economic toll

California is seeing a big spike in unemployment claims as the state and nation hurtle towards the first recession in 12 years.

“We are currently experiencing a large increase in claims filed in our programs and have staff working overtime to keep up with the demand,” said Loree Levy, spokesman for the state’s Economic Development Department.

“In addition, we are working to redirect other staff, and hire additional staff, as much as possible to assist with the claim filing process,” she said.

Gov. Gavin Newsom said Wednesday evening that the state typically receives about 2,000 claims daily. “Two, three days ago we saw about 40,000 ... then 70,000.” he said. “Yesterday, 80,000 applications. It doubled in a 48 hours period.”

He said the administration is asking state workers in other departments with the necessary skills to help process the influx.

“They are making themselves essential and rotating out of their job description to meet this moment,” he said.

On Thursday morning, the federal Department of Labor reported advance claims on unemployment insurance rose to 281,000 nationwide and 58,208 in California — gains of 70,000 and 14,823, respectively.

The total number of new claims in California represents a 34% increase over a week ago.

The state has not received details on how the federal government will help. The Senate Wednesday passed, and sent to President Donald Trump, a stimulus plan that includes money to help states with the sudden explosion in jobless claims nationwide, a bill that’s now being considered by the Senate.

In California, if anyone is missing work because they are sick or having to care for a covered family member who is sick or medically quarantined, the department is encouraging them to apply for Disability Insurance if sick or Paid Family Leave insurance if providing care.

The state Disability Insurance program covers both of these benefit programs, and most Californians pay for coverage through payroll deductions noted as “CASDI” on their paycheck stubs.

If someone is missing out on work for anything but these specific medically related reasons should they apply for unemployment insurance. Gov. Gavin Newsom has waived the one-week waiting period before someone can claim benefits.

Levy noted that these are all insurance programs, so someone had to contribute to them on a worker’s behalf for a worker to be able to collect benefits once found eligible. There are some situations where a self-employed individual may be found eligible including perhaps past jobs over the last 12 to 18 months. The EDD webpage has more information.

Unemployment insurance benefits in California range from $40 to $450 a week and are available for up to 26 weeks. The average weekly benefit the week of February 29, the latest data available, was $338.90.

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California is expected to feel the recession slightly more severely than the rest of the country, according to a new forecast from the UCLA Anderson School of Management.

Employment is expected to drop in the current quarter, which ends June 30, and in the next quarter at an annual rate of 2.6%. By the first part of 2021, the state is expected to lose more than 280,000 payroll jobs.

More than one-third are likely to be in the leisure and hospitality and transportation and warehousing sectors.

The one bright spot is that Washington, D.C., has traditionally been quick to help California and is likely to do so again.

Boosting unemployment benefits, usually by extending the usual 26 weeks of benefits, is widely viewed as a useful way of easing a recession’s sting.

“It’s been shown to make a meaningful difference in the ability to put food on the table, pay utilities and housing,” said Andrew Stettner, senior fellow at the Century Foundation.

But more is going to be needed from Washington, said Karen Dynan, nonresident senior fellow at the Peterson Institute for International Economics.

“One billion dollars is a drop in the bucket by the standards of our unemployment insurance system. With no recession, we could have expected to pay out close to $30 billion in unemployment benefits this year,” she said.

She noted that in the last recession, “We saw government spending on unemployment benefits at levels several times the normal amount.”

Every recession since 1950 has seen additional federal benefits. The 2007-09 recession allowed up to 47 weeks of benefits through early 2014.

The state has been struggling for years with keeping its unemployment insurance fund solvent. The state unemployment insurance fund gets its money from a state payroll tax paid by employers on the first $7,000 in wages. The federal government pays for most of the cost to administer benefits.

In 2018, the unemployment insurance fund had a balance of $2.3 billion — after nine years of insolvency. During the last recession, the fund needed to borrow from the federal government to cover the cost of benefits. Once the economy recovered, state employers paid a slightly higher payroll tax. The extra amount was then used to repay the federal loans received during the recession.

The Economic Development Department’s last forecast was that the fund would increase to $3 billion by the end of 2019, $3.3 billion by the end of 2020 and $3.4 billion by the end of 2021.

But, it warned, “if changes are not made to the current financing structure, the UI Fund may not maintain a balance high enough to withstand an economic downturn.”

The state’s UI fund could become insolvent during a moderate recession. If this occurs, though, the federal government would provide emergency loan funds to ensure benefit payments continue to go out to unemployed workers.

Once the economy recovers, employers and the state repay the federal loans over time. Thus, during a recession, the state can defer the cost of expensive benefits into the future, which can help keep money in the state’s economy during an economic crisis.

Congress’ bill that includes a $1 billion provision for unemployment help has two parts.

It would allocate $500 billion nationwide for “immediate additional funding to all states for staffing, technology, systems, and other administrative costs, so long as they met basic requirements about ensuring access to earned benefits for eligible workers.”

Among the requirements are that workers have at least two ways, such as online and phone, to apply for benefits.

Another $500 million would be used for grants to states where unemployment has spiked at least 10%. Among the uses for that money would be temporarily easing eligibility requirements to make it easier for people affected by coronavirus outbreak to get help.