U.S. unemployment system still plagued by delays 3 years after pandemic-era downturn

People wait in line to attend a job fair at SoFi Stadium on Sept. 9, 2021, in Inglewood, California.
Patrick T. Fallon | Afp | Getty Images

These days the U.S. unemployment system is somewhat of an anomaly.

Almost three years after the Covid-19 pandemic caused the worst jobless crisis in the U.S. since the Great Depression, unemployment has recovered to near-historic lows. Applications for unemployment insurance have been at or below their pre-pandemic trend for the better part of a year.

Yet Americans who need jobless benefits aren't getting them quickly — a dynamic at odds with an apparent lack of stress on the system.

The federal government considers a first payment "timely" if states issue funds within 21 days of an initial claim for benefits. In March 2020, 97% of payments were timely; today, the share is 78%, on average, according to U.S. Department of Labor data.

The Labor Department views an 87% share as the barometer of success for first-payment timeliness.

The result is worse for workers who file an appeal over a benefit decision. For example, less than half — 48% — of hearings in a lower appeals circuit are resolved within 120 days. The pre-pandemic share was almost 100%, according to Labor Department data.

To be sure, delays aren't as bad as they used to be. At the pandemic-era nadir, just 52% got a "timely" first payment of unemployment insurance, for example. They also vary significantly between states, which administer benefits to laid-off workers, and the delays are getting shorter.

But the delays are still "significant," the Government Accountability Office said in a June report.

They can have real-world effects: deferred bills, postponed rent, accrued credit card debt, raided retirement savings, loans from family and friends for living costs, and a reliance on community food pantries to subsist before payments arrive, the GAO said.

Unemployment experts chalk up the discrepancy — i.e., longer delays despite fewer claims to process — to vestiges of the pandemic and state agencies that were already running on financial fumes heading into the crisis.

"Even though new claims are low, states are still digging out from the workload during the pandemic," said Nick Gwyn, an unemployment insurance consultant for the Center on Budget and Policy Priorities and a former staff director for the House Ways and Means subcommittee overseeing jobless benefits.

Pandemic pushes system 'out of whack'

The downward trend over this time reflects an underlying tension in the system's structure. States get funding based on their administrative workload, like the volume of claims states are paying.

At present — as in the years after the "great recession" — states are getting lower relative levels of federal funding due to more muted jobless claims. About 186,000 people filed an initial claim for benefits in the week ended Jan. 21, according to the Labor Department, fewer than the roughly 200,000 or so who filed a weekly claim at the outset of the pandemic.

That reduced funding is running headlong into a morass of leftover administrative work, some of which was sidelined as states rushed to implement CARES Act programs.

It's a topsy-turvy situation that's "out of whack" from the norm, Stettner said.

"The states were very threadbare going into the pandemic, which left them very unprepared," Stettner said. "One reason this backlog built up: [States] had to put off certain work when all the new claims were coming in, and they're just trying to catch up to it now."

Part of the current administrative burden is a kind of forensic accounting of funding issued during the pandemic, said Michele Evermore, a senior fellow and unemployment expert at The Century Foundation.

For example, states are assessing the extent to which they may have overpaid benefits, she said.

That's especially true for one CARES Act program, Pandemic Unemployment Assistance. Some state agencies didn't realize they had to reassess — on a weekly basis — a worker's qualifying reason for benefits, whether it be illness, caring for an ill individual, child care, or a disruption in gig work and self-employment. Now, they're asking PUA recipients to verify they are indeed qualified for all the benefits they received, Evermore said.

Tech layoffs aren't contributing to significant unemployment, says Moody's Mark Zandi
Tech layoffs aren't contributing to significant unemployment, says Moody's Mark Zandi
Closing Bell

Criminals 'got hooked' on unemployment fraud

A system unprepared for another recession


Related Posts