Long-term unemployment spikes for millions of Americans. Aid that’s kept them afloat may end soon

Personal Finance

Carson Noel, right, has been unemployed since March due to the coronavirus pandemic.

Carson Noel

Carson Noel is running out of options.

When the coronavirus pandemic hit in early March, two full months of work he’d lined up as a freelance journeyman in live events disappeared.

“For the past seven months, I’ve been living off of savings and what I’ve gotten from PUA,” said Noel, 51, referring to the Pandemic Unemployment Assistance program that expanded benefits for those not previously eligible.

At first, he was getting about $840 per week with PUA plus the additional $600 established by the CARES Act. But that expired in July, and the additional $300 per week from President Trump’s executive action has also run out for Noel, who lives in Phoenix.

Now he receives about $240 per week, not enough to cover his insurance, rent and car payment. He’s put out hundreds of job applications but hasn’t heard anything back, he said. He also recently found out that come Dec. 1, he’ll have to move — his condominium building was sold to a new owner who is looking to raise the rent, which Noel can’t afford.

“I’m in a really bleak situation,” said Noel. He’s also become involved with an advocacy group, Extend PUA, and has met with Senators to tell his story and urge them to pass further aid.

Long-term unemployment is on the rise

It’s been more than seven months since the coronavirus pandemic hit, leading to sweeping shelter in place orders in March that put millions of Americans out of work. While some of those laid off due to shutdowns have been able to return to their jobs, permanent unemployment has increased.

In September, long-term unemployment, or those that have been out of work for 27 weeks or more, jumped to 2.4 million, the highest thus far in the coronavirus pandemic-induced recession, according to the Bureau of Labor Statistics. Nearly 800,000 out of work Americans moved into the long-term unemployed category from August to September, the largest month-over-month increase ever, according to Michele Evermore, senior policy analyst at the National Employment Law Project.

At the same time, the number of Americans out of work for 15 weeks to 26 weeks was nearly 5 million in September.

Thursday’s jobless claims report also showed that more than 500,000 people moved to the Pandemic Emergency Unemployment Compensation program as of Oct. 3, bringing the total to 3.3 million. The program gives unemployed Americans an additional 13 weeks of benefits after they’ve exhausted state benefits, which generally last 26 weeks.

The pace of the uptick in long-term unemployment is concerning. After the Great Recession, long-term unemployment hit a record high of 6.5 million and made up 44% of all unemployed in March 2010 — 10 months after the year-and-a-half long downturn ended in June 2009.

Now, long-term unemployment makes up nearly 20% of total just eight months after the country officially fell into a recession.

“You had all these people who were long-term unemployed in the Great Recession, they trickled in,” said Martha Gimbel, an economist and labor market expert at Schmidt Futures. “But this is all hitting at once.”  

An unemployment cliff

The CARES Act in March extended the number of weeks that Americans can claim unemployment insurance and expanded who is eligible to receive weekly benefits. It also gave unemployed workers an extra $600 per week, which kept millions from falling behind on important bills such as utilities and rent.

But the additional money expired in July without another relief bill, slashing income for millions. In August, Trump’s executive action gave unemployed workers an additional $300 per week, but that has also ended for many.

The future of further aid is highly uncertain as Democrats and Republicans have remained at odds for months over another round of stimulus. On Thursday, House Speaker Nancy Pelosi, D-Calif., said that while she and Treasury Secretary Steven Mnuchin have made progress on a deal, it could take a while to write and vote on any legislation.

It’s unlikely that another bill will be passed before the Nov. 3 presidential election. Even if there is more aid passed this year, it may not be implemented until 2021.

That leaves a looming fiscal cliff for the roughly 13.5 million Americans currently collecting benefits in any of the federal unemployment programs, which expire at the end of 2020.

“What you’re going to have is that people are going to be heading into long-term unemployment and they’ve exhausted their resources, and they’ll be doing that as government support is running out,” said Gimbel.

‘I don’t know what to do’

Jeff Catanese, shown here directing a play, has less than $1,800 to last him the next month and a half, he said. He’s been unemployed since March due to Covid-19.

Tempus Fugit Design

To weather the crisis, there’s evidence Americans are making prudent financial decisions — saving more if they can, cutting down on expenses and pulling money from emergency funds, according to an October survey from the National Education Federation.

But there’s only so much that people can do, and few were prepared to go more than seven months without work amid a pandemic that’s shuttered entire industries and has no end in sight.

Jeff Catanese, 52, an actor, director and educator from Asheville, North Carolina, has cut back on expenses such as eating out, entertainment and more to live on the benefits he’s received since March. He’s also been able to pick up some small odd jobs, including working polls for early voting and the presidential election.

Still, he’s worried about the future — he has $1,776 to last the next month and a half, he said.

“Then it’s kind of a fourth and 10 punt,” said Catanese, who is also involved with Extend PUA. He’s also worried about the chance of a second shutdown, which would further keep him from finding or doing any work. “I might be back to lockdown with zero funding and I don’t know what you do in that situation,” said Catanese.

Bleak outcomes

Finding a job right now is difficult and, in many cases, tied to luck — for example, some restaurants have been able to reopen but at lower capacity, meaning they have called back some, but not all employees.

There also aren’t many open jobs, especially in the industries most impacted by the pandemic. The August Job Opening and Labor Turnover Summary showed that there are roughly two unemployed people for every open job.

There are lasting impacts of long-term unemployment on individuals, families and the economy, according to economists.

Long periods of unemployment can make it more difficult to find another job as workers are less likely to be in touch with a previous employer after months out of work. And, people with gaps in work history have been less attractive to employers in the past, according to Gimbel, though the pandemic may shift that thinking, she said.

“You can have these real scarring effects, both emotionally and financially, and that is really bad,” said Gimbel.

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Persistent unemployment that lasts months could also damage the economic recovery, especially if there isn’t further aid passed, said Elise Gould, senior economist at the Economic Policy Institute, a left-leaning think tank.

If people “exhaust their benefits we’re going to see the kind of devastation we’re already hearing stories about — people not being able to make ends meet, evictions, people going hungry,” she said.

That will have huge implications for the individuals involved and the economy, according to Gould. “It really weakens the recovery because we need people to spend, and if they don’t have money to spend on what they need, then money is not circulating in the economy.”

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