For several weeks now, many Americans have been sitting at home and biting their nails over whether they are going to have a job to go back to once the lockup period for COVID-19 ends. Here’s the good news if you are in that camp: it appears that you may have nothing after all to worry about.
While mainstream media reports have focused on the 22 million job losses not coming back any time soon, all reports seem to have missed a key factor: that Federal non-farm payroll data includes many of those who have full-time jobs too.
In March, the federal government expanded unemployment benefits dramatically after the country was declared under lock-down. Benefits that could be obtained from the government by those with unemployment insurance were under an executive order suddenly expanded to include the following categories of people:
- Your employer permanently or temporarily laid you off due to coronavirus measures
- Your employer reduced your work hours due to coronavirus measures
- You are self-employed and have lost income due to coronavirus measures
- You’re quarantined and can’t work due to coronavirus
- You’re unable to work due to a risk of exposure to coronavirus
- You can’t work because you’re caring for a family member due to coronavirus
It’s clear that by the end of March, two-thirds of these requirements (points 2, 3, 4 and 5) applied to pretty much the entire country, which means that they apply to pretty much anyone who has any state or federal unemployment insurance plan irrespective of whether or not they had lost their job recently.
The reason this is significant is that unemployment benefits claims is how federal non-farm payrolls (unemployment) benefits data is calculated. Therefore, the number of people claiming unemployment benefits is how the government interprets the national unemployment rate. Usually, it is naturally not allowed for someone to be in full time employment and also make an unemployment benefits claim, but it seems that in the case of the recent lockdown, the federal government changed the rules so that it was allowed. We can see this is the case by looking at the federal unemployment data (see headline image).
The critical question thus becomes – who has the requisite unemployment benefits insurance to become eligible to claim their portion of the federal government’s quarterly bonus check? The answer is – just about everyone working in the country.
In general, employers have to pay for unemployment insurance for their employees to remain legal. This may well mean that far from looking like an economy in distress, the US seems to appear somewhat of the opposite: an economy that is crazy-rich. With unemployment claims at around 18%, this either means that 72% of the US workforce feels rich enough right now not to have to claim unemployment benefits, or it means that nearly three-quarters of employers are breaking the law. It is almost impossible to imagine such a large number of employers flouting the legal requirement for employment.
In summary, what the recent 18% unemployment headline rate boils down to seems to be the fact that far from despairing about how they will pay next month’s mortgage, the vast majority of Americans, despite being offered free money, are simply turning it down. If so, then that's a weird form of poverty.
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