Is unemployment really falling?
Here’s what you need to know.
The stock market is nearing an all-time high. Coronavirus cases and hospitalizations are surging. Despite these facts, however, it’s hard to imagine that both these statements can be true for the long-term. Which one is the best barometer of the economy? The stock market has remained resilient despite scientists blowing whistles for the oncoming Covid-19 resurgence. At the same time, unemployment numbers appear to be dropping. Does this mean the economy is bouncing back? Perhaps, but not necessarily.
The latest unemployment statistics show that unemployment is falling compared to its 14.7% high earlier this year, when more than 30 million Americans filed for unemployment benefits. According to the U.S. Bureau of Labor Statistics, the unemployment rate is 6.9% as of October.
What’s driving unemployment?
- Certainly, there are people returning to the work force, which helps explains at least some of the drop in unemployment.
- At the same time, others have temporarily stopped receiving unemployment benefits, or they have fully exhausted their federal and state unemployment benefits.
- As a result, they may not be counted by the official labor statistics, which may distort the headline unemployment number.
- If true, this would imply a higher unemployment rate than the reported 6.9% unemployment rate.
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Therefore, a drop in unemployment doesn’t mean that there is definitively more employment.
What unemployment insurance is available?
There are many types of unemployment benefits. Some unemployment insurance is available through state programs, while other unemployment benefits are provided through the federal government as a result of the Covid-19 pandemic. Since many of these programs are time-limited, recipients may exhaust their unemployment benefits if they remain unemployed. Here is a snapshot on some programs:
- State Unemployment Benefits: In most states, you are paid weekly and can receive unemployment benefits up to half your wages, subject to a maximum benefit. Most states such as New York, California and Texas offer 26 weeks of unemployment benefits through a state-funded unemployment insurance system.
- Pandemic Compensation: You can still receive up to 39 weeks of unemployment through Pandemic Emergency Unemployment Compensation (PEUC), which provides an additional 13 weeks of unemployment benefits.
- Pandemic Unemployment: If your state provides less than 39 weeks of unemployment benefits, you can receive the difference through Pandemic Unemployment Assistance (PUA).
Will there be unemployment benefits in the next stimulus deal?
The future of unemployment benefits could depend on the composition of Congress. If Democrats control the U.S. Senate, Democrats will be more willing to continue enhanced unemployment benefits during the Covid-19 pandemic. If Republicans retain control of the U.S. Senate, unemployment benefits may be time-limited or focused on either a wage replacement formula or a lower flat dollar amount.
Don’t expect a stimulus deal this year. Congress likely won’t pass any stimulus package during the current congressional term. Before the November election, both Democrats and Republicans had agreed in principle to include enhanced weekly unemployment benefits as part of the stimulus. Democrats have called for extending $600 a week unemployment benefits, while Republicans have offered several proposals ranging from $300-$400 a week to a wage replacement measure that would provide supplemental wages based on your income when you were last employed. For example, Sen. Mitt Romney (R-UT) and other Senate colleagues proposed a three-month weekly unemployment benefits extension based on a sliding scale of wage replacement that would be capped at $500 a week in the first month, $400 a week the second month and $300 a week the third month. Thereafter, the unemployment benefits would expire. Sen. Ron Wyden (D-OR) has a plan to extend unemployment benefits that would base the duration and amount of unemployment benefits in a particular state based on that state’s unemployment rate.