Yahoo U: Why U.S. jobless claims are likely much higher than 38M

Yahoo Finance’s Brian Cheung breaks down the latest numbers on jobless claims.

Video Transcript

ADAM SHAPIRO: Brian Cheung is back to help us understand what these jobless claims are really telling us. Brian?

BRIAN CHEUNG: Well Adam, as we know, currently over the last nine weeks over 38 million people have had to turn to jobless claims to bridge through this period during COVID-19. But jobless claims don't necessarily tell the whole picture. And I want to explain that. But first, let's take a look at those initial claims figures, which we did see coming in just yesterday in the morning.

So what you're looking at here are the initial claims. Again, this is not seasonally adjusted here. And you're probably wondering, why would you not seasonally adjust? Well it's because we want to get a raw look at the amount of people that filed for claims before the crisis, which really wasn't all that long ago, and then in the midst of it. So if you remove the seasonal adjustment for the week ended in May 16, which we've just got yesterday, we saw 2.2 million new claims. And this is obviously terrible, but at least it's lower than the peak that we had in the week of April 4 when we had a shockingly high 6.2 million people that filed for unemployment claims.

Now every data point here is showing new claimants for the week. So what you can do here is you can add up all the numbers here to get a picture of just how many total people have had to turn to UI during this crisis. And it's over 35 million on a not seasonally adjusted basis, 39 million on a seasonally adjusted basis.

But here's a challenge-- the figures that I'm showing you right here don't actually include what they call, pandemic unemployment assistance. Now there are millions of Americans that don't qualify for regular unemployment insurance because they're either a self-employed worker or an independent contractor, maybe you're a gig worker, you drive full-time for Uber or Lyft. Then the CARES Act actually created the PUA to help these workers by giving them up to 39 weeks of benefits.

Now the program, though, didn't get fired up until the last week of April, so this program is actually retroactively paying back weeks since the pandemic began. And this is a pretty big [INAUDIBLE]. I mean, this program is not a watered down version of regular unemployment. And as is the case for regular UI, this program actually covers payments that would have the weekly benefit amount, which is going to be different depending on your income and by the maximum by state, in addition to the extra $600 per week, which covers early April through the end of July.

Now again, this is going to be retroactively paid out, so even if you apply for PUA, say, right now, you would get the money covering that period. So in New York, for example, this could be the difference where you actually have a max weekly benefit of up to $504, which means in total you could be getting up to $1,100 per week in help, at least in New York state. So the question then is, how many people nationwide have actually taken this up?

And here's the same chart that I showed you earlier but it actually has the PUA in the form of the purple line here. And when you account for that, it actually doesn't really look so nice. At first it looked like the initial claims were really coming down, but if you actually add back those that have gotten unemployment insurance through the PUA, it really looks more like a bottoming out. And what's important to note, though, is that the PUA only just began. So there's an argument that there's a pipeline of people that haven't been able to apply yet that are still going to be waiting for their unemployment insurance, which means this, in theory, could even come back up again.

So there's reason to believe here that we really haven't seen the full depth of the tragedy and job loss. And when we look across regions, across the country we can see where specifically the most damage was done. And this is new data from the Bureau of Labor Statistics that just dropped this morning. This is the unemployment rate for April by state. And this is actually a more holistic accounting of unemployment than the jobless claims because this actually covers people that were laid off but unable to get insurance.

And the highest that you can see is in Nevada. Nevada right here, 28.2% unemployment rate for April. Pretty shocking there. And that's about one fourth of the people in the state that didn't have a job. So there's not a lot of really good news here, Adam. But the one good news is that the unemployment insurance exists at all. This is no fault of their own that these 40 million people don't have a job. It's not their employer's fault. So when the recovery comes to you, hopefully ideal that you can pull back on these programs and people can get back to normal. But Adam, as we know, getting back to normal is a timeline that no one can predict.