Michigan jobless claims skyrocket 550%, experts say big stimulus needed to stop COVID-19 recession

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Goldman Sachs estimates about 2.25 million Americans filed initial unemployment claims this week in the wake of job layoffs due to the COVID-19 pandemic. If that prediction proves to be accurate, it would be the highest number of filings on record. 

What can be done? A “large fiscal stimulus” is needed to stave off an impending economic recession caused by the COVID-19 pandemic, according to the Economic Policy Institute (EPI). 

Michigan’s domestic automobile corporations were some of the latest to feel the pandemic’s impact, as well: Ford Motor Co., General Motors and Fiat Chrysler Automobiles decided to close their facilities until March 30 to halt the spread of COVID-19. 

Per a Center for Automotive Research (CAR) estimate, an industry shutdown for six weeks could result in a loss of 566,000 U.S. jobs and $43.7 billion in wages. Some automobile manufacturers, GM and Ford included, are now exploring how to convert their operations to making COVID-19 medical supplies.

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“Clearly, this is going to have an impact on our economy,” Whitmer said on the Big Three closures in a Wednesday press conference . “ … The factory setting is a unique setting and that’s why I trust that this was the right judgment for each of the Big Three. These are people who work hard and are the backbone of the Michigan and the American economy and I know this was not an easy decision for them. And that’s why it’s so critical that each one of us does our part so that we can get our economy back up and running in the quickest, safest possible moment.” 

National unemployment insurance claims increased from 211,000 on March 7 to 280,000 by March 14, according to EPI, a Washington, D.C.-based think tank. Prior to the disruption caused by the pandemic, those claims had stayed between 210,000 and 230,000 for more than two years.  

According to the EPI, last week’s claims spike was the biggest one-week increase since 2012. The 33% increase also means it was the biggest, percentage-wise, since 1992 – larger than anything seen during the Great Recession that lasted from late 2007 to June 2009.

Just this week, Michigan’s Unemployment Insurance Agency (UIA) saw a 550% increase in filed unemployment claims. About 55,000 people — a 1,500% increase — filed claims between Monday and Wednesday, per Jeff Donofrio, the director of Michigan’s Department Labor and Economic Opportunity (LEO). 

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State action

Whitmer also issued an executive order expanding benefits for unemployed Michigan workers. It extends the unemployment application eligibility period from 14 to 28 days, allows state benefits to continue for 26 weeks instead of 20 and suspends in-person registration and work search requirements.

“I was pleased that Gov. Whitmer expended the 20-week maximum duration to 26 weeks,” said Peter Ruark, a senior policy analyst with the nonpartisan Lansing-based Michigan League for Public Policy (MLPP). “That will be very helpful for workers who had to receive unemployment earlier within the past year or find themselves unemployed again.”

Michigan’s earnings requirements are restrictive compared to other states, Ruark said. It makes it more difficult for people who work under 40 hours or have trouble finding work to qualify for unemployment benefits. 

“They still depend on those wages, so they should be able to collect unemployment insurance, but Michigan’s requirements for doing that are much more prohibitive,” he said.

Ruark said MLPP valued the governor’s efforts to make the unemployment insurance claims process easier during the pandemic, even if the wage-earning requirements weren’t adjusted. 

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“We appreciate that she has done what she can to make it easier to apply for and receive unemployment insurance,” Ruark said. “Even though she was not able to adjust the wage-earning requirements, i.e. to expend the eligible population, what she’s been able to do is expend the circumstances in which someone can be eligible for unemployment insurance.”

The number of claims is also forecast to grow in the coming weeks. More people practicing social distancing to prevent COVID-19’s spread could mean further revenue losses for businesses and additional closures and layoffs.

LEO is taking a number of actions to offset unemployment concerns.

“Through executive order, Michigan has expanded eligibility, increased the duration benefits and timelines to apply, and suspended the normal in-person registration and work search requirements for unemployment insurance,” said Erica Quealy, a LEO spokesperson.

Michigan also expanded the state’s work share program, which allows businesses to stay open during business declines. 

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“Employers are encouraged to implement the program that permits employers to maintain operational productivity during declines in regular business activity instead of laying off workers,” Quealy said. 

“This, I think, is done more to address the aftereffects of this crisis, when business is hurting and will have to lay people off,” Ruark said. “This allows businesses to share the pain a little bit across employees, where everyone gets their hours cut, but some of it gets made up through unemployment insurance.”

The state Department of Treasury also announced it would offer collections assistance to newly-unemployed Michigan residents who are making payments on past-due state tax or other debts.

“If you are currently unemployed or are facing other hardships due to the COVID-19 emergency and are paying on a state tax debt, please contact us so we can work with you during this difficult situation,” said State Treasurer Rachael Eubanks.

Federal stimulus

At the federal level, Congress took preventative policy action to aid unemployed workers this week when it passed the Families First Coronavirus Response Act. The bipartisan relief package — which allocates more funding to state programs to curb the pandemic’s fiscal impact — was signed Wednesday night by President Trump. 

U.S. Sens. Gary Peters (D-Bloomfield Twp.) and Debbie Stabenow (D-Lansing) supported the bill. In a Thursday appearance on MSNBC, Peters called the package “a meaningful step,” but said there’s a consensus in the Senate that more bills need to be designed to ease unemployment.

We have to simultaneously deal with a public health crisis and an economic crisis at the same time, and it’s going to take massive intervention to get through this,” Peters said.

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People nationwide facing unemployment due to recent shutterings of restaurants, bars and other businesses will be impacted by the bill, he said.

“It’ll beef up unemployment insurance, make sure people can get that money coming into their household,” Peters said. 

Another federal coronavirus relief package has also been in the works. On Thursday, the U.S. Senate GOP unveiled a $1 trillion package that would give cash directly to Americans to offset COVID-19’s impact. EPI projects that even a moderate fiscal stimulus could still mean a loss of 3 million jobs by summertime, especially if policymakers are slow to act. 

“By the summer, millions will likely be laid off, or not hired when they otherwise would’ve been,” according to EPI. 

EPI recommends that the next package should finance household consumption, give aid to states, give payroll tax credits to businesses if they don’t lay off workers and increase government purchases of medical equipment to stop COVID-19.