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Initial unemployment claims reflect a serious economic downturn

Suspicions of fraud in California have led to an investigation and an estimate. In the week ending the 26th, some 837,000 workers applied for unemployment insurance (UI) for the first time.

Job losses are slowly receding as the COVID-19 pandemic continues for more than six months. This time last year, 218,000 workers were in this situation.

The previous week the figure was revised upwards to 873,000.

In addition, some 650,120 people also applied for Pandemic Unemployment Assistance (PUA), which is available to independent contractors, freelancers and gigs. This assistance, for people who normally do not have the UI social network, expires at the end of the year.

Between UI and PUA, the number of new requests for assistance remains at 1.49 million.

In total, 26,529,810 workers now depend on this social protection network. Last year at this time the figure did not exceed 1.4 million. The economy remains fractured and there is a lack of demand for many sectors, so the labor market is not yet fully activated. The more time passes, the more difficult it will be to recover the pace lost before the COVID-19.

However, last week’s figures are approximate and not only because they are always reviewed a week later but also because suspicions of fraud in California have led the Department of Labor to use the previous week’s figures as a reference for calculation. Meanwhile, California is not accepting unemployment claims until the first days of October, as those already made are being processed and investigated.

As this is one of the most populated states, and with the highest unemployment figures, there is speculation that the overall figures, once investigated, may be reduced.

In any case, unemployment is very high and last week was the ninth consecutive week in which those who live on insurance for lack of work did not have a bonus because of the pandemic. The $600 a week was used up by the end of July and most of those who receive this benefit receive the equivalent of 40% of the salary they lost.

Gregory Daco, chief economist of Oxford Economics explained that either unemployment is beginning to drop dramatically or there is a new stimulus because private finance has reached the point where it cannot sustain the consumption on which the economy depends. If consumption is not maintained, citizens do not buy or use services, sectors will begin to falter and there will be more unemployment. For this economist, it is important that there be transfers to the states that have large deficits.

In Washington, a new round of stimulus is still being negotiated after the Republican Party has been pushing for months for very limited assistance that does not cover the main needs of an economy affected by a virus that is still not controlled in the country.

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