Millions apply for unemployment due to COVID-19 layoffs

How quickly could Indiana recover from the stay at home order now in place for the state? Experts say it could take time. Submitted photo

WASHINGTON — More than 6.6 million Americans applied for unemployment benefits last week — doubling a record high set just one week earlier — a sign that layoffs are accelerating in the midst of the coronavirus pandemic.

The stunning report Thursday from the Labor Department showed that job cuts are mounting against the backdrop of economies in the United States and abroad that have almost certainly sunk into a severe recession as businesses close across the world.

Applications for unemployment benefits generally reflect the pace of layoffs. Combined with last week’s report that 3.3 million people sought unemployment aid two weeks ago, the U.S. economy has now suffered nearly 10 million layoffs in just the past several weeks — far exceeding the figure for any corresponding period on record.

Some of last week’s jobless claims are likely delayed filings from the previous week, when state offices that handle unemployment benefits were overwhelmed by a surge of online and telephone claims.

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The accelerating layoffs have led many economists to envision as many as 20 million lost jobs by the end of April. That would be more than double the 8.7 million jobs lost during the Great Recession. The unemployment rate could spike to as high as 15% this month, above the previous record of 10.8% set during a deep recession in 1982.

Many employers are slashing their payrolls to try to stay afloat because their revenue has collapsed, especially at restaurants, hotels, gyms, movie theaters and other venues that depend on face-to-face interaction. Auto sales have sunk, and factories have closed.

More than two-thirds of the U.S. population are under stay-at-home orders, imposed by most U.S. states. That has intensified pressure on businesses, most of which face rent, loans and other bills that must be paid.

The White House and Congress expanded the unemployment benefits system in last week’s $2.2 trillion economic rescue package. That legislation added $600 a week in jobless aid, on top of what recipients receive from their states. This will enable many lower-income workers to manage their expenses and even increase their purchasing power and support the economy.

It also makes many more people eligible for jobless aid, including the self-employed, contractors, and so-called “gig economy” workers such as Uber and Lyft drivers.

The legislation will also help fund unemployment benefits for workers whose hours have been cut. That would enable these people to replace some of their lost income with unemployment aid even as they keep their jobs.

About 26 states allow workers with reduced hours to claim benefits. Most economists support doing so because it encourages companies to cut back on hours rather than lay off workers. Any program that encourages companies to maintain connections with their workers can help the economy rebound faster after the virus outbreak is contained.

Typically, people who receive jobless aid are required to actively look for a new job and to document their searches. But Congress has passed other legislation that encourages states to drop that requirement, given that so many businesses are closed, and most Americans have been ordered to stay mostly at home.

Mark Zandi, chief economist at Moody’s Analytics, said this week that just 6% of companies surveyed by Moody’s say they’re hiring — down dramatically from 40% in the weeks preceding the coronavirus outbreak. The plunge in hiring underscores the difficulty that anyone out of work would have finding a new job.

Today, the government will issue the March jobs report, which economists forecast will show a loss of 145,000 jobs. That report is based on data gathered mostly before the spike in layoffs began two weeks ago. Though relatively small, that loss would still end a record-long 113-month streak of job growth.

Numerous state unemployment agencies have struggled to keep up with the flood of applications for jobless benefits.

In Indiana, Purdue University economists said Thursday as the COVID-19 pandemic pauses the United States economy and resulted in historic levels of unemployment, it’s unclear how easily the light switch can be turned back on.

Malls and department stores — including Simon Property Group, the nation’s largest mall owner, as well as Macy’s, Kohl’s and other retailers — furloughed hundreds of thousands of workers while moving to online-only sales. Automobile and airline manufacturers, meanwhile, have temporarily shuttered operations.

In Indiana, 120,331 people filed unemployment claims last week, compared with 2,312 two weeks ago, according to the Indianapolis Business Journal.

On Thursday, Indiana Department of Workforce Development reported it has received 146,243 claims for the week ending March 28. In comparison, the number of claims for a week in January was 28,000.

The Indiana Department of Workforce Development said Hoosiers should file for unemployment insurance if their employment has been interrupted or ended due to COVID-19, and each claim will be evaluated. Individuals must apply for benefits online, using a computer or smart phone at Unemployment.IN.gov.

For questions, the state asks Hoosiers to review the Frequently Asked Questions, the Claimant Handbook or the online video tutorials before calling the 1-800-891-6499 helpline, which continues to experience a high volume of calls.

Beginning next week, the department hopes to roll out an additional way to apply on the phone, but emphasized the quickest way to apply is online.

Indiana waived the one-week waiting period for payment of unemployment benefits, and it is retroactive to March 8. Qualified claimants can typically receive benefits for up to 26 weeks, but this has been extended by an additional 13 weeks.

Due to the action of the federal government, unemployed workers who file and are approved will see an extra $600 per week for four months.

Relief in the form of direct payments to every U.S. taxpayer, as part of the recent $2 trillion stimulus package, will allow recently furloughed and laid-off workers to make their rent and mortgage payments. But the money is unlikely to be spent on non-essential goods and recreational activities, which won’t help to offset the cascading economic effects of nationwide lockdowns, Kevin Mumford, an associate professor in the Krannert School of Management and the Kozuch Director of the Purdue University Research Center in Economics.

“People are spending a lot less,” Mumford said. “Is the reason that they don’t have enough money, or is the reason that they are following the instruction to stay at home? Direct payments will not have a large effect on aggregate demand but should instead be thought of as social insurance.”

When commerce is allowed to resume for all sectors, it’s unclear which jobs will still be there, says Timothy Bond, an associate professor in the Purdue Krannert School who specializes in labor economics. Certain industries that are temporarily offline are “recession resistant” and will quickly bounce back, Bond says, such as elective surgeries, dentistry, optometry, weddings, funerals and professional sports.

“But that’s a small portion of the economy,” he says. “A lot of middle- and low-wage earners are in industries that are not going to be easy to turn back on, such as the restaurant and durable goods industries.”

Some workers may never return to the labor force, says Timothy Moore, an associate professor in the Krannert School who specializes in health economics and social insurance programs. In recessions and periods of high unemployment, the number of people filing disability applications tends to increase, and the rate of people retiring could also rise, Moore says.

“If people get sucked out of the labor force now, either through retirement or through disability claims, that can lead to permanent exits in labor force participation that can last for many years,” he says. “Someone who is 62 years old might decide to retire and claim Social Security. Someone who is 40 years old, who’s got some health conditions, might decide to claim disability now, and then they’re highly unlikely to return to the labor force, even if it gets better in a few years’ time.”

— The Associated Press contributed to this story.

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The Indiana Department of Workforce Development is hosting a Facebook Live Event with agency leaders to discuss the latest available details on the federal stimulus package (CARES Act) and how it affects unemployment insurance benefits.

The live event will be held at 10:30 a.m. April 8 and will be recorded and made available to the public on agency’s Facebook page.

The hour-long program will be hosted by workforce development, several of its regional offices and the Indiana Manufacturers Association. It will also include information for self-employed individuals and contractors affected by COVID-19, and the most commonly asked questions the agency receives.

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The Indiana Department of Workforce Development reminds Hoosiers that applying for unemployment insurance benefits is completed electronically. Hoosiers can apply on a computer or smart phone.

For more information on unemployment insurance, visit unemployment.in.gov.

There, Hoosiers can find the Claimant Handbook, Frequently Asked Questions, a link to online filing and more information.

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