Washington led the nation in new unemployment claims last week, and while that may be just a seasonal fluke, economists say the state could be headed for another wave of pandemic-related job losses.
“I suspect we are seeing the beginnings of a second major wave of layoffs to rival what we saw in March and April, and driven by a spike in COVID cases that looks much worse than what we saw then,” said Jacob Vigdor, an economist at the University of Washington Evans School of Public Policy and Governance.
Washingtonians filed 25,201 new, or “initial,” claims for regular unemployment benefits during the week ending Saturday — a 71.7% increase from the prior week, the state Employment Security Department (ESD) reported Thursday. That appeared to be the largest weekly increase reported by any state last week, according to Labor Department data. Nationally, initial claims fell 6.3% to 709,000 last week, the U.S. Labor Department said.
Washington’s spike was also the sharpest the state has seen since March 21, as the first big layoffs related to COVID-19, the illness caused by the coronavirus, were generating tens of thousands of new jobless claims. It comes amid a surge in new COVID-19 cases statewide that could prompt Gov. Jay Inslee to reimpose restrictions on business and other activities as early as next week.
ESD regional economist Anneliese Vance-Sherman said last week’s uptick likely reflected a “combination of seasonal effects and the challenges of the pandemic.”
Many of last week’s claims were in industries affected by seasonal layoffs, including construction, agriculture, retail, and hotels and restaurants, she said.
In some sectors, those seasonal cuts also might be “amplified” by the pandemic, Vance-Sherman said. At restaurants, for example, higher claims could reflect the fact that temporary solutions such as outdoor dining “are not sustainable in the damp, cool November weather,” Vance-Sherman said.
But claims also rose sharply in other, nonseasonal sectors, such as manufacturing. Although ESD can’t disclose claims data for specific employers, if some of last week’s 2,147 manufacturing claims “correspond to” recent layoff notices filed by Boeing with ESD, “then former Boeing employees are likely among the newly unemployed,” Vance-Sherman said.
The latest jobless claims also showed spikes in health care and social assistance and government, sectors that saw roughly a doubling in new claims, while claims in the wholesale trade sector jumped 132%.
But even white-collar sectors that have largely avoided big cuts during the pandemic saw large increases in jobless claims. Claims in the information sector, which includes tech firms, jumped 151.7% while claims in finance and insurance jumped 223.6%.
The increases go “well beyond the expected seasonal culprits,” said Vigdor, the UW economist.
Paul Turek, state economist with the ESD, acknowledged that the labor market is “very vulnerable and can react pretty strongly to news about the virus.” Given that job growth has already slowed in Washington recently, any new virus concerns could cause employment growth to “turn negative in coming months,” Turek said. “Not only would employers willingly curtail hiring, but layoffs would rise as businesses close, resulting in more initial claims.”
Turek cautioned that this was “a worst-case scenario.” Although claims data is often a “forward indicator” of changing labor market conditions, last week’s spike could be an anomaly. Claims data “can be notoriously volatile and can bounce in any given week,” he said. “One can attach a red flag to today’s claims results, but it is not conclusive.”
Hovering over the vulnerable job market is continued uncertainty about an extension of unemployment benefits, small business loans and other federal pandemic relief.
That relief was crucial in softening the social impacts of the first wave of layoffs in the spring, but it’s unclear whether Congress — or the administration of President-elect Joe Biden — will agree to extend that relief.
That federal intervention “kept money flowing through the economy,” Vigdor said. “What’s going to happen this time around?”
The number of Washingtonians collecting unemployment benefits last week was 271,436 — around 7% of the state’s workforce — down 10.4% from a week earlier.
Some Washingtonians are still seeing delays in receiving benefits. As of last week, 19,114 claimants were not receiving benefits and were waiting for the ESD to resolve a question with their claim, the agency reported. That was a drop of 3.7% from the prior week.
The average time needed to resolve delayed claims was 9.4 weeks, up from 9.2 weeks the week before.
Earlier this year, Washington and other states also saw claims soar due to a wave of fraudulent claims filed using stolen Social Security numbers, although there was no indication that was a factor in last week’s claims data in Washington.