Impact of Expanded Unemployment Benefits on Texas Unemployment Rate after lift of COVID restrictions

 

INTRODUCTION

On March 2, 2021, Texas State governor, Greg Abbot, issued a decisive executive order to reopen the state locked down due to the COVID-19 pandemic. Activities resumed in the state but with a slow return to work even with COVID restrictions lifted. Some business owners complained that they’re struggling to fill jobs, since the opening of the state, arguing this to be a result of unemployed Texans making more money on expanded unemployment benefits provided by the federal government. This argument triggered Governor Abbot’s ending of expanded unemployment benefits on June 26, 2021, to encourage a full return to work of the totally and partially insured unemployed Texans claiming benefits under the programs. Megan Menchaca and Mitchell Ferman quote Abbot as stating in a press release sent from the governor’s office, “The Texas economy is booming and employers are hiring in communities throughout the state... According to the Texas Workforce Commission, the number of job openings in Texas is almost identical to the number of Texans who are receiving unemployment benefits. That assessment does not include the voluminous jobs that typically are not listed, like construction and restaurant jobs.” Abbot’s position on this issue has been faulted by unemployment benefits claimants that argue that there are less than sufficient job openings suitable for their qualifications. This project's aim is to show the relationship between the state’s unemployment rate and pandemic unemployment claims before and after the lift of COVID restrictions in March 2021. Data was sourced from the Federal Reserve of Economic Data FRED and the Bureau of Labor Statistics BLS for this analysis.

EXPANDED UNEMPLOYMENT INSURANCE PROGRAMS DUE TO THE PANDEMIC

The Coronavirus Aid, Relief, and Economic Security Act (CARES), signed into law on March 27, 2020, provided $268 billion for expanded unemployment insurance benefits provided through three programs, the Federal Pandemic Unemployment Compensation (FPUC), the Pandemic Unemployment Assistance (PUA) and the Pandemic Extended Unemployment Compensation (PEUC). For a clear understanding of each of the different programs, a reference is made to Bea.gov, an official website of the United States government, where the three programs are explained as follows:

The Federal Pandemic Unemployment Compensation (PUC) provided weekly supplemental benefits of $600 for people that received unemployment benefits for weeks of unemployment between April 5, 2020, and July 31, 2020.

The Pandemic Unemployment Assistance (PUA) program temporarily provided unemployment benefits to people unable to work for reasons related to COVID-19 who were not usually eligible for unemployment assistance, including the self-employed, independent contractors, and those with limited work. This program paid for up to 39 weeks of unemployment benefits between January 27, 2020, and December 31, 2020.

The Pandemic Emergency Unemployment Compensation (PEUC) program provided an additional 13 weeks of unemployment benefits to people who had exhausted all available regular and extended unemployment benefits through December 31, 2020.

The website also explained further extension of these programs with the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, signed into law on December 27, 2020. This Act included an 11-week extension of unemployment insurance (UI) benefits that were provided in the CARES Act that were set to expire in December 2020. This extension provided an additional $300 per week supplement to state UI compensation under the FPUC program (half of what was paid in the program under the CARES Act) and also lengthened the PUA and PEUC programs to September 4, 2021, but some states including Texas decided to cut off the extended benefits before the official cut-off date. 

DATASET PREPARATION AND ANALYSIS

RStudio was used to prepare and analyze data for this research. Texas’ Unemployment Initial and Continued Claims, Pandemic Emergency Unemployment Compensation claims (PEUCC), Pandemic Unemployment Assistance Initial Claims (PUAIC), Pandemic Unemployment Assistance Continued Claims (PUACC), and Insured Unemployment Rates were sourced from FRED while the state’s unemployment statistics were sourced from BLS. Data collected was from March 2020 to June 2021. Unemployment insurance claims data were not seasonally adjusted, unlike the unemployment statistics data. The unemployment insurance claims datasets showed numbers of claims filed under the various programs by weeks ending Saturday. The claims datasets were joined into a dataset to show 77 observations and 9 variables with week_ending as the only categorical variable. Rows of the joined dataset were aggregated to show claims’ numerical values by month. The aggregated claims dataset and the Unemployment Statistics dataset were merged into a final dataset used for analysis, with some of the variables renamed.

An exploratory data analysis was used for this project. Multivariate graphic methods used for visualizations include bar plot and scatterplots. The barplot was used to represent continued claims filed under the pandemic expanded programs versus the unemployment rate from March 2020 to June 2021.

 

This chart shows the count of pandemic continued claims to be at their minimum in March 2020 followed by a surge in April when Governor Abbot issued a stay-at-home order leading to more than twice the number of claims filed compared to March. The numbers decreased steadily until September 2020 when most of the state reopened per Abbot’s declaration.  The chart shows the rise and fall of the pandemic claims from October 2020 to March 2021. Across this period, PUACC and PEUCC claims filed are visibly high as shown by the color shades of the bar.  In April 2021, the two categories of the pandemic continued claims were at their highest as reflected by the color of its bar.

The dot plot below shows the rates of unemployment and insured unemployment each month. Within the period, the insured unemployment rate was at its highest at 51.78% in May 2020 while the unemployment rate was at 11.78%. In June 2021, the rate of insured employment was lowest at 4.92% with the unemployment rate at 6.5. There was a slight increase in the insured unemployment rate in April 2021, following the lift of COVID restrictions, but the unemployment rate steadily decreased from March to June 2021.

The visualization is to compare the unemployment level to the initial claims. Initial claim measures the number of new claims filed by unemployed Texans seeking to receive unemployment benefits. Initial claims (IC) are different from Continued Claims which measure totally or partially unemployed people who already filed an initial claim and are allowed to receive weekly benefits. This plot shows regular and PUA initial claims against unemployment numbers from March 2020 to June 2021. The size of the dots and their positions on the plots visually represents the number of unemployed Texans against initial claims filed each month. The big dots on the graphs for April, May, and June 2020 indicate the high levels of unemployment but decreasing consecutively over the three months like the initial claims. For April, May, and June 2021, months after the state reopened fully, the dots shrunk significantly in size indicating a significant reduction of unemployment numbers as the traditional and PUA initial claims decreased.

Multi-panel plots were used again to show the trend of the numerical variables in the dataset from March 2020 to June 2021. The dataset was split into groups using ggplot's facet wrap tool, with each variable having its own graph.

In comparison, there’s an obvious difference between the PEUCC and PUA trend lines, and the rate of unemployment within the period. The line plots show the rise and fall in the numbers of each variable. The line plots for the pandemic continued claims show a contrast in trend compared to the unemployment line plot.

 DATA INTERPRETATION

The data analysis shows that from April to May 2020, PEUCC and PUACC numbers increased but with an unemployment rate decrease. Notably, zero PEUCCs were filed in March 2020 but the state’s unemployment rate in that month was at a high rate of 12.9% compared to the previous month. The PUACC recorded its minimum number in the same month.  As a reminder, PEUCCs are federal emergency benefits for claimants who exhausted their regular state and extended benefits but are still unemployed. From March to June 2021, the state’s unemployment rate steadily decreased while the pandemic unemployment continued claims’ numbers fluctuated within the period. Analysis shows no indication of a direct relationship between claims filed under the pandemic unemployment programs and the unemployment rate. 

SUMMARY

This study shows that claims covered by the federal pandemic unemployment programs do not determine the state’s unemployment rate. It shows that there’s no significant effect of expanded unemployment benefits on the state’s overall unemployment rate. Other factors considered to influence the lack of effect of these programs on the state’s unemployment rate include:

• Claimants who are employed but still receive partial unemployment benefits based on reduced work hours and earnings like claimants under the Shared Work program.
• Claimants who opt not to return to work because they would rather care for their child(ren) for fear of exposing them to COVID at childcare centers and/or schools.

The Bureau of Labor Statistics in its article How is the unemployment rate related to unemployment insurance claims? pointed out a misconception about unemployment claims as a source of unemployment numbers stating, “Some people think that to get these figures on unemployment the Government uses the number of persons filing claims for unemployment insurance (UI) benefits under State or Federal Government programs. But some people are still jobless when their benefits run out, and many more are not eligible at all or delay or never apply for benefits.” In summary, unemployment insurance claims cannot be used as a source for complete information on the number of unemployed.  

REFERENCES

Megan Menchaca & Mitchell Ferman. (2021, May 17). Jobless Texans will lose all federal unemployment benefits, including an extra weekly $300 after Gov. Greg Abbott opts out of the program. The Texas Tribune. https://www.texastribune.org/2021/05/17/texas-unemployment-300-federal-benefit/