California economy, workers lose billions as unemployment payments shrink. Does it matter?
The state’s economy is losing more than $1 billion weekly — money that until recently was sent to millions of out-of-work Californians — because of last month’s expiration of federal unemployment benefits that were available during the COVID pandemic.
Payments to unemployed people have plunged from $2.1 billion during the week ending Sept. 11 to $677 million during the week ending Sept. 25 and $545 million last week.
Most experts don’t see this having a huge effect on the state’s economy, which is slowly recovering from last year’s recession.
“Generally it might have a very short-term impact on the economy overall, but this is something that had been anticipated for months. Households knew this day was coming and had been planning for it over the past several weeks,” said Michael Shires, vice dean for strategy and online programs at Pepperdine University.
More than 2 million Californians are expected to lose benefits because of changes in federal unemployment payments.
The popular Pandemic Unemployment Assistance program throughout this year provided as much as $750 weekly to claimants, a total that included the federal $300 added to weekly benefits.
The program helped independent contractors, gig workers and others traditionally not covered by regular unemployment insurance. It ended Sept. 4 and no payments can be made for weeks of unemployment after that date.
Also gone last month were emergency federal programs, as well as the additional $300 a week that every unemployment recipient had received since January.
During the week ending Sept. 11, the state’s Employment Development Department paid out a total of $1.8 billion between the now-ended PUA, Pandemic Emergency Unemployment Compensation and the Federal-State Extended Duration Benefits Program, or FED-ED.
People can still apply for regular unemployment insurance, which paid out $226 million in the week ending Sept. 25. Maximum benefit is $450 weekly, and the average benefit has been $314. To qualify, one has to have had earnings on a W-2 form.
Lost unemployment money
The state’s gross domestic product, the value of its goods and services, was estimated at about $2.7 trillion last year, so losing $1 billion or more a week may be a jolt, but not a lethal one, economists said.
They noted that savings rates are up and the state offers a wide variety of other safety net programs for people still out of work.
“I don’t think it will have a meaningful impact for now,” said Sung Won Sohn, Professor of finance and economics at Loyola Marymount University, of the loss.
“Consumers have a lot of savings to cushion. In addition, the state has begun to send out additional checks to help out families; this is not a part of unemployment benefits,” he said.
The latest economic forecast from the UCLA Anderson School of Management sees a recovery that’s slower than anticipated earlier this year, but still steady.
The state’s August unemployment rate of 7.5% was the nation’s second highest, behind only Nevada, that month.
The UCLA forecast expects the rate to drop steadily, but because of the Delta COVID virus, “it will come down more slowly than we thought,” said Jerry Nickelsburg, forecast director.
Washington lawmakers are making no effort to revive the federally-funded benefits. They’re eyeing a more sweeping reform of how the unemployment system works, hoping to include it as part of the broad Biden administration tax and spending package.
Among their proposals are making it easier for people to get unemployment payments, and guaranteeing states provide up to 26 weeks of benefits.
This story was originally published October 11, 2021 at 5:00 AM.
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