US Government Has Been Underpaying and Miscounting Unemployment Recipients Ahead of December Covid-19 Benefits Expiry

As millions of Americans grapple with the fact that they are slated to have a less-than-joyous Christmas given the impeding expiration of unemployment benefits and eviction moratoriums come January 1, it appears that the US Department of Labour is partly to blame. According to a scathing report published by the General Accountability Office (GAO), the DOL has been systematically underpaying unemployment benefit recipients as well as both under- and over-counting them, all while they prepare to phase out key Covid-19 aid programs by the end of December.

Although benefits are typically calculated relative to an individual’s wage during their prior job, many applicants – including those that wouldn’t normally qualify for unemployment benefits during the pre-pandemic era – have only been receiving the very bare minimum on their weekly checks. Thus, the Pandemic Unemployment Assistance (PUA) program, which provides up to 39 weeks worth of unemployment benefits to gig-economy or self-employed workers, has been underpaying over 9.1 million Americans as of the beginning of November.

But the statistical crisis continues: the GAO has also accused the DOL of both overcounting and undercounting the true number of unemployed Americans, which of course is likely the result of standard data collection methods, which during an atypical unemployment environment are going to be way out of whack and nearly useless in determining the true situation of the labour market. The GAO pointed out the significant backlogs that persist in the DOL evaluating individual cases, which in turn has lead to artificially deflated unemployment numbers being reported. In the meantime, repeated claims that have been submitted by the same person are being wrongly recorded as numerous newly unemployed individuals.

Following the finding, the DOL has agreed to a recommendation that would include a disclaimer acknowledging that the data being represented in its weekly reports is not an actual representation of the true number of individuals claiming benefits. In addition, the DOL also partially agreed to use state-level data as a means of increasing accuracy in its calculations – whatever ‘partially’ may mean.

Nonetheless, the official October unemployment rate currently sits at 6.9%, which translates to 11.1 million jobless Americans. The unemployment rate does not however, account for those that have given up looking for work, those that have never held a job, or those that are underemployed (meaning anyone who works for more than one hour per week). However, according to the latest DOL data (taking questionable accuracy into consideration), there are over 20.4 million Americans currently receiving some form of unemployment insurance, with 9.1 million and 4.5 million enrolled in the PUA and PEUC programs respectively.

However, both of those programs are slated to phase out by the end of December, meaning that not only will there be over 13.6 million unemployed Americans without jobless benefits come the 1st of January, at least 9.1 million of them will have even less monetary fumes to hold them up until the next stimulus bill is put into action – which likely won’t be until the presidential inauguration.

Information for this briefing was found via the GAO, the DOL, and the BofA. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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