Key Point: PUA is helping states pay for unemployment insurance. However, this cannot go on forever.

This morning’s initial unemployment insurance (UI) claims report from the US Department of Labor (DOL) reflects that while unemployment remains high, labor market conditions continue to gradually improve. Initial claims for state UI benefits continued to trend down last week, with seasonally adjusted initial claims for the week ending June 6 totaling 1,542,000, a decrease of 355,000 from the previous week’s level. The more stable four-week moving average of initial claims has now fallen for seven consecutive weeks since peaking at an astonishing 5.8 million in the week ending April 18. For comparison, before the coronavirus crisis and government-mandated shutdowns took effect in March, a typical February 2020 week saw just 210,000 initial claims for unemployment benefits.

While spotlighting welcome trends, today’s headline data offer only part of the broader unemployment benefits picture. For example, you have to dig deeper into today’s report to find data about benefits paid under the unprecedented federal Pandemic Unemployment Assistance (PUA) program. PUA was created in the March 2020 CARES Act and is designed to assist the self-employed, independent contractors, and others not typically eligible for UI who are currently unable to work. While operated by state UI agencies, PUA is supported entirely by federal funds, and its benefits (which include the current $600 per week federal bonus through July) are available for up to 39 weeks per person through December 2020. 

As reflected in the chart below, total PUA claims have risen rapidly to 9.7 million nationwide for the week ending May 23. That means PUA supported one third of all unemployment benefit recipients nationwide that week.

PUA continuing claims are already roughly twice the size the Congressional Budget Office projected in April, when it expected the program to assist 5 million people and cost $35 billion. And that’s despite PUA claims data being far from complete. Most states only recently started paying PUA claims, with first payments beginning in late April and early May. As today’s initial claims report notes, “for the week ending June 6, 42 states reported 705,676 initial claims for Pandemic Unemployment Assistance.”  Eleven states and territories (Arkansas, Delaware, DC, Florida, Georgia, Kansas, Kentucky, New Hampshire, Oregon, USVI, and West Virginia) reported no PUA claims for last week. (The UI program includes DC, Puerto Rico, and the US Virgin Islands among its 53 “state programs.”)

As I previously noted, one contributor to elevated PUA claims may be fraud. The DOL Inspector General warned the PUA program is at “significant” risk of “improper payments and fraud.”  One security expert recently summarized “multiple U.S. states struggle to combat a tsunami of phony Pandemic Unemployment Assistance (PUA) claims.”  Some issues involve identity theft, while others are built into the program’s design. For example, unlike the regular UI program, PUA allows benefit claimants to “self-certify” their prior employment and wages in order to become eligible on the front end — and maintain eligibility for checks lasting up to 39 weeks. Those concerns apply on the back end as well, so that some people may collect PUA longer than they should. As Iowa’s UI director testified before the Senate Finance Committee this week: “For the self-employed there is no currently no way to verify that they have not returned to work while receiving benefits beyond their self-attestation.”

The House recently passed legislation that would simply extend the PUA program without changes through January 2021, with a phaseout through March 2021. That extension would leave it to the next Congress and administration to determine the longer-term fate of PUA program, while minimizing the extension’s contribution to the legislation’s staggering $3.5 trillion overall cost. Meanwhile recent reports suggest Congress will address unemployment benefit issues after the Fourth of July. Whenever it does, as I noted before, it should make clear that continued eligibility for PUA should require more than self-certification of wages. It should also address the return-to-work concerns flagged by Iowa’s UI Director. Finally, Congress should examine broader UI program integrity reforms about which the DOL inspector general testified this week, some of which date from the Obama administration.

This article first appeared in 2020  on the AEI Ideas blog. 

Image: Reuters.