clock menu more-arrow no yes mobile

Filed under:

Biden faces a historic unemployment crisis

The week before Biden took office, 1.4 million Americans filed for unemployment.

A man wearing a mask dragging a suitcase.
A man in a face mask walks past closed shops in downtown Los Angeles on April 22, 2020.
Frederic J. Brown/AFP via Getty Images
Emily Stewart covered business and economics for Vox and wrote the newsletter The Big Squeeze, examining the ways ordinary people are being squeezed under capitalism. Before joining Vox, she worked for TheStreet.

The day after Joe Biden’s inauguration, America’s unemployment situation looks bleak.

On Thursday, the United States Labor Department released its latest weekly jobless claims numbers, which showed that 900,000 people filed new unemployment claims the week ending January 16 — President Trump’s final full week in office. Additionally, 423,000 people filed new claims for Pandemic Unemployment Assistance (PUA), expanded unemployment insurance for freelancers, gig workers, contractors, and the self-employed.

It’s a stark indication of the economic hill the new administration has to climb when it comes to getting desperately needed help to millions of workers. Overall, 16 million people were on unemployment as of January 2 — a tough start for the year and a big hole to dig out of.

Prior to the Covid-19 pandemic, the record for weekly jobless claims was 695,000, set in 1982. Since the outbreak hit the US, however, claims have consistently remained above that, topping 6 million in the spring. While during much of last year, the situation was modestly improving, it’s begun to worsen again, with new claims rising in recent weeks.

The December unemployment report also reflects that trend: The US actually lost 140,000 jobs in the last month of the year for the first time in months. Given the current jobs deficit, the country needs to be adding jobs to speed up the recovery, not losing them. People with low-income jobs in areas such as leisure and hospitality, and women — particularly women of color — were hard hit.

“One thing that we’re seeing is that people are losing their jobs anew,” said Andrew Stettner, a senior fellow at the Century Foundation think tank.

As the pandemic has worsened in many parts of the country, so have economic conditions — you can’t fix the economy without dealing with the virus first. Stettner elaborated: “It’s definitely linked to the pandemic surge and economic restrictions in big places like California that are facing some new rounds of layoffs and furloughs on top of the usual seasonal activity.”

Biden’s team is aware of the urgency of the moment. National Economic Council Director Brian Deese said in a statement regarding the claims number on Wednesday that it is “another stark reminder” that more help for the economy is needed. “We must act now to get this virus under control, stabilize the economy, and reduce the long-term scarring that will only worsen if bold action isn’t taken,” he said.

What’s actually going on with jobless claims is a little tricky to parse

The jobless claims data this year has been a little, well, funky.

Congress waited until the very last minute to pass a second stimulus package in 2020, and Trump dragged his feet on signing the $908 billion bill. The legislation entailed more relief for unemployed workers, including tacking on an additional $300 in weekly federal payments through mid-March and extending PUA and the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of regular state unemployment insurance. The latter two programs were part of the CARES Act passed in March and were set to expire in December. Because legislation to extend them came so late in the game, they sort of expired anyway.

“Congress just waited too long, so no matter what they did that week of Christmas, there was still going to be a short period of delay for people on those federal extension programs,” said Elizabeth Pancotti, a policy adviser at the advocacy group Employ America.

That this happened isn’t a surprise — experts and advocates warned for months last year that too much procrastination on extending unemployment insurance programs had the potential to push millions of workers off a financial cliff. Some states have been able to get their ducks in a row to ensure continuity, but many have not. Systems were preprogrammed to shut down in December, and they did.

“There are probably millions of families waiting on two, three, four weeks of unemployment checks that aren’t getting them,” Pancotti said.

To put this a little more concretely, the latest jobless numbers show a drop in people on PEUC — the extended benefits after the regular ones expire. That could very well be tied to that cliff at the end of the year where the program itself lapsed.

“What we have seen is that most states were not paying out PEUC benefits in early January,” Stettner said. “Most of them were waiting on the guidance [from the federal government] and new programming, and that’s why the number really went down. Some states were probably not taking claims at all or particular individuals may have been blocked. Even though you saw today’s report that 3 million people filed PEUC claims, I can guarantee you 3 million people didn’t actually get paid.”

Millions of unemployed workers are now Biden’s problem to address

The Biden administration has signaled it plans to hit the ground running, including on the economy and delivering help to American workers. The country still has 10 million fewer jobs than it did pre-pandemic, and millions more have dropped out of the workforce altogether.

Stettner said that one starting point for the administration is to try to get the programs to work better. A federal government that is firing on all cylinders can get regulations out faster and offer clearer guidance to states on how to handle the unemployed.

Biden has already put forth a framework for Congress to pass follow-up stimulus legislation that includes support for people out of work. Last week, Biden unveiled a $1.9 trillion proposal for a follow-up Covid-19 relief bill. It includes $400 a week in expanded federal unemployment insurance and extends emergency unemployment programs, including PEUC and PUA, through September 2021. Legislation will ultimately have to be drafted and written by Congress, and this is basically Biden’s opening bid.

As a starting point, the timing of Biden’s proposal is good in that it is early: Current benefits and programs are set to expire in mid-March, so there’s time for this proposal to work its way through Capitol Hill or, at the very least, for Democrats to realize Republicans won’t play ball and pivot to a different plan. The Biden administration has signaled it wants to try to pass this package through regular order, which would require 60 votes. Many Republicans are already signaling they aren’t on board with this plan, meaning Democrats could turn to budget reconciliation, which would require only a simple majority.

Another positive sign: The framework Biden put forth nods to automatic stabilizers, which would tie social safety net mechanisms (i.e., unemployment) to certain economic conditions. If such mechanisms were put in place, that would mean expanded benefits and emergency programs would be tied to the economic situation actually being better — the unemployment rate at a certain level, and the public health emergency actually over — than a random end date picked by lawmakers. The extra $600 in unemployment benefits from the CARES Act ended on July 31 for no real reason except Congress was overly optimistic about when the pandemic would subside and chose that date.

“They probably have one shot to get this right and they should really move in that direction [of automatic stabilizers] and try to lock in assistance throughout the duration of the crisis,” Stettner said. “They should have the courage … not to put an arbitrary date on this.”

Biden’s initial stimulus proposal, the American Rescue Plan, is part of what his team says will be a two-part effort on the economy. This is the “rescue” portion, and then there will be a “recovery” one to come later. But it’s not guaranteed Democrats will get a chance to do a bunch of big packages — in 2009, in the midst of the Great Recession, they only got one shot and went too small.

“When Democrats passed the recovery act in 2009, it was smaller than was necessary, and a lot of members thought there was going to be another bite at the apple. There wasn’t,” one Democratic aide recently told me. “Members who were around in that time period are very much cognizant of that lesson.”

Pancotti stressed that there are unemployment-related items not in Biden’s framework that should be — for example, funding for states to improve their unemployment insurance structures. Each state determines its own administration, and lots of systems are outdated and insufficient. Congress has provided some federal funding to help states process claims during the pandemic, and it can provide more.

“The Biden administration doesn’t call for that in the framework, but as Congress works on turning that framework into legislative text with a lot more specifics … I think that conversation will reemerge of what investments do we need to make in our systems for the things we care about to actually work,” Pancotti said. “These systems need short-term investments to make these programs work and long-term investments in reform.”

Sign up for the newsletter Today, Explained

Understand the world with a daily explainer plus the most compelling stories of the day.