The dirty little secret behind jobless claims: record-low numbers aren't all they seem

Jennifer Materkoski didn’t even bother applying for unemployment benefits when she abruptly lost her public relations job early this year.

“I wasn’t sure I would qualify” says Materkoski, 35, who lives in Wheeling, West Virginia, and doubted she could access benefits because she was a contract employee. She also figured she had a good shot at another job. She got one, but it took two months, leaving her and her husband in a financial hole after buying a house late last year.

“I’m still behind on my mortgage and other bills from the hardship ... of no income,” she says.

Her hesitation to seek unemployment insurance is becoming more common, and it's distorting the perception of the economy's health.

On the surface, things looks almost too good to be true. The number of people applying for unemployment benefits for the first time hit a 49-year low in September. Since the figure broadly reflects how many workers are being laid off, it underscores the strength of the job market and the economy.

Some unemployed people who don’t apply, such as Materkoski, are among the nation’s growing legion of freelancers, contractors and temporary workers, many of whom either aren’t eligible or don't think they are. Others are deterred by state cuts to benefits or state-imposed hurdles that have made it harder to apply for, and keep, benefits since the Great Recession of 2007 to 2009. Still others are baby boomers who may decide to retire early rather than seek jobless benefits.

“If it’s a problem now, when the next recession hits, the (benefits) program isn’t going to have the same kind of stimulative effect on the economy” and provide the same lifeline to jobless Americans as it did during the Great Recession, says George Wentworth, senior counsel for the National Employment Law Project (NELP), a worker advocacy group.

In recent months, about 60 percent of laid-off workers have applied for jobless benefits for the first time, down from about 100 percent during and after the Great Recession, according to an analysis by Moody’s Analytics. Of course, fewer unemployed Americans seek benefits when the economy is good and job openings are plentiful.

Yet the 60 percent share of unemployment insurance applicants is significantly below the 75 percent portion during the last two economic expansions in the late 1990s and mid-2000s, the Moody’s study shows. In 2000, the unemployment rate fell as low as 3.8 percent, close to today’s 3.7 percent. Payroll processor ADP Thursday that businesses added a solid 179,000 jobs last month, below the 199,000 economists expected. Friday's employment report is expected to reveal 198,000 total job gains.

Here's why many laid-off workers aren’t filing claims:

Faced with insolvent unemployment trust funds, nine states have lowered the duration of basic unemployment benefits over the past seven years, from a standard 26 weeks to as few as 12 weeks. The states are Arkansas, Florida, Georgia, Idaho, Kansas, Michigan, Missouri, North Carolina and South Carolina.

Some states – such as Indiana, North Carolina, Pennsylvania and Rhode Island – also have reduced the size of the unemployment checks that jobless workers receive, according to NELP. North Carolina slashed the maximum weekly benefit from $525 to $350.

Rather than cut benefits, Wentworth says the states could have increased the insurance premiums that employers pay into the trust fund.

The Moody’s study found the nine states that trimmed the duration of benefits have seen an average 12,000 fewer initial claims each month. Knowing they’ll receive checks for a shorter period, some jobless workers choose not to apply, Moody’s economist Dante DeAntonio says. As a result, the number of first-time claims in those states is nearly half of their previous lows in the 1990s.

By comparison, in the 41 states that didn’t cut benefits, first-time jobless claims are about 30 percent below the prior bottom.

Chris Edwards, an economist with the conservative Cato Institute, backs states that have dialed back jobless benefits. “The longer the benefits are, the more they encourage unemployment,” he says.

While Wentworth agrees the nine states cited by Moody’s are playing a role in discouraging the jobless from applying for unemployment insurance, he says it’s not because they’ve scaled back benefits. Laid-off workers, he argues, still want their unemployment checks, even if they'll get less. Rather, he says, the nine states, and some others, have made it harder for the unemployed to apply for and hold onto the benefits at all.

In Florida, laid-off workers must complete a lengthy online skills test. In Oklahoma, applicants can be denied if they don’t register for a job-finding service and post their resume online within seven days of filing claims.

States such as Florida, Nebraska, North Dakota, South Carolina and Utah require benefit recipients to apply to four or five jobs a week, compared with one or two in most states, NELP says. And states including Maine, New Hampshire, Tennessee and Wisconsin have cut off benefits if applicants don’t accept “suitable” job offers, expanding the parameters of that term in recent years to include, for example, positions with lower salaries.

“It shouldn’t be an obstacle course,” Wentworth says.

But, Edwards says, “I do not have a problem with putting hurdles in front of people who want government benefits. It weeds out the people who only have low-level claims from people who really need it.”

Thirty-one percent of U.S. workers were freelancers, contractors and temporary workers last year, up substantially from prerecession levels, according to Barry Asin, president of Staffing Industry Analysts, a research and consulting firm. In many cases, such workers don’t have direct employers that pay into the unemployment fund on their behalf, so they wouldn't qualify for benefits.

But the question of eligibility can be fuzzy. Contractors who are supervised just like employees – as Materkoski of West Virginia says she was – may be able to prove they were misclassified and receive benefits, Wentworth says. 

With baby boomers aging, 23 percent of the labor force is 55 and older, up from 13 percent in 1990. Older workers may be less likely to apply for unemployment because they have a bigger nest egg or expect to retire soon and receive Social Security payments, DeAntonio says. Yet that could mean they'll have to make do with less income in the meantime if they don't find another job.

Without the various factors that have discouraged unemployment insurance applications, the share of laid-off workers applying for benefits and the level of claims would be close to what they were in the late 1990s and mid-2000s expansions, DeAntonio says. 

If first-time jobless claims are historically low because fewer laid-off workers are applying, it could become a bit tougher to sniff out a weakening economy. Initial claims, released by the Labor Department every Thursday, typically reflect how many workers were laid off the week before, providing the best real-time gauge on the state of the economy.

In September, first-time claims sank to 202,000, lowest since 1969. The showing was especially impressive since the workforce is much larger than it was 50 years ago. On Thursday, the Labor department said claims fell 4,000 to 231,000 the week ending Dec. 1 . They've trended higher the past couple of months but are still well below the 300,000-plus weekly applications filed in the late 1990s and mid-2000s.

Citing the lower share of laid-off workers seeking benefits, DeAntonio says, “I don’t think the relationship between claims and the health of the labor market is as clear as people think it is.”

But economist Jim O’Sullivan of High Frequency Economics downplays the concern, saying he focuses on the change in claims rather than the level.

The bigger issue, analysts say, is that when the next downturn comes, fewer Americans will rely on unemployment insurance.

During the last recession, the benefits “prevented millions of workers from falling into poverty,” Wentworth says. Now, “It’s kind of a shell of its former self.”

 

December 06, 2018

Sources: USA Today

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  • FTSE LIVE: Thomas Cook may sell off airline arm; Superdry blames warm weather for falling sales

    FTSE LIVE: Thomas Cook may sell off airline arm; Superdry blames warm weather for falling sales

    airline business amid concerns over the company's future.  </p><p>Superdry has blamed 'unseasonably warm weather' for a dip in third quarter sales, with revenues at its stores sliding 8.5 per cent in the last three months. </p><p>The Bank of England is widely expected to keep interest rates where they are in the latest decision due later today. </p><p>Thomas Cook may wave goodbye to its airline arm amid mounting losses at the firm</p><p>Good morning. The Footsie didn't move much at the open today. It slipped a few points but is now broadly flat at&nbsp;7,167.03.&nbsp;</p><p>Do you want to automatically post your MailOnline comments to your Facebook Timeline?</p><p>Your comment will be posted to MailOnline as usual.</p><p>Do you want to automatically post your MailOnline comments to your Facebook Timeline?</p><p> We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. To do this we will link your MailOnline account with your Facebook account. We’ll ask you to confirm this for your first post to Facebook.</p><p>Part of the Daily Mail, The Mail on Sunday &amp; Metro Media Group</p>

    1 February 07, 2019
  • Sanlam's list of the 14 best income UK funds yields 5.6%

    Sanlam's list of the 14 best income UK funds yields 5.6%

    ld but when it comes to long-term returns they are among the most reliable.</p><p>The Barclays Equity Gilt study shows £100 invested in the UK stock market in 1899 would have been worth £16,004 by 2017 - but would have reached £2,635,984 with dividends taken into account and reinvested.</p><p>The tricky part for investors is navigating their way through the stock market and spotting the companies that can deliver over time – or the fund managers who are good at unearthing them.</p><p>If you can find an investment that pays out dividends as reliable as clockwork then the returns will build up over time</p><p>For the latter, there are a few handy reports that come out each year and the latest edition of one of them Sanlam’s White List has just landed.</p><p>It looks at total income, capital growth and volatility over the past five years in an attempt to name the best prospects for investors. The top 14 fund on it have an average yield of 5.6 per cent.</p><p>Sanlam names Troy Trojan Income, Axa Framlington Monthly Income and Miton UK Multi Cap as its top three UK income funds.</p><p>The Sanlam study is worth a look for some pointers, but there is, of course, the question of why would you even use a fund manager?</p><p>Plenty of investors choose to research and buy individual shares themselves, but the reality is that many people don’t have the time to do that properly.</p><p>For those who would rather outsource the hard work to someone whose job it is and has greater resources to do it, a fund or investment trust is a wise move.  </p><p>You could pick a tracker that simply follows the stock market and picks up the dividends along the way – the broad UK stock market index, the FTSE All-Share, currently yields a chunky 4.29 per cent.</p><p>However, that does mean relying heavily on a fairly limited number of companies to do the dividend heavy lifting – and these tend to be big, mature firms with limited opportunities for growth, such as Shell, BP, HSBC and GlaxoSmithKline.</p><p>Alternatively, you could find a fund or investment trust manager who goes looking for dividend prospects among smaller and medium-sized companies with headroom to grow.</p><p>This is something that is well worth bearing in mind when weighing up funds or investment trusts and Sam Lees, at Fund Expert argues that ‘the consistency of growth in the income a fund pays out’ is as important as any of the measures in the Sanlam study.</p><p>This is one of the reasons why I favour funds and particularly investment trusts that look for dividends lower down the company scale than among the giants of the FTSE 100.</p><p>What’s also important is avoiding the dividend traps.</p><p>These are the companies that look like they pack a hefty payout, but only have a big eye-catching yield due to a collapse in their share price - and a dividend cut or worse is on the way.</p><p>In my early days of investing, my first experience of a dividend trap was HMV. I was lured into its shares by an 8 per cent yield, thinking that as the last remaining music store on the High Street the firm couldn’t possible fail. I was wrong and it went bust (and recently did so again).</p><p>I imagine there were more than a few income fund managers who also made that HMV mistake, but the advantage of a fund or trust is that your money is spread around, so at least you are not too heavily affected by such a collapse.</p><p>Investing for income through an investment trust carries an extra advantage too, they are able to hold over some of their payouts in the good years to help cover the bad.</p><p>Investing has proven to be the best way to beat inflation and grow your wealth over the long-term, but how do you get started?</p><p>And if you do already invest but feel you’ve lost track of your goals or ended up with a jumble of investments, how can you improve things?</p><p>In this podcast, Simon Lambert and Georgie Frost dive into how to be a smarter investor.</p><p>They bust the jargon and look at why people should invest, how to get started, what investments you can choose and how to find the right ones for you.</p><p>Do you want to automatically post your MailOnline comments to your Facebook Timeline?</p><p>Your comment will be posted to MailOnline as usual.</p><p>Do you want to automatically post your MailOnline comments to your Facebook Timeline?</p><p> We will automatically post your comment and a link to the news story to your Facebook timeline at the same time it is posted on MailOnline. To do this we will link your MailOnline account with your Facebook account. We’ll ask you to confirm this for your first post to Facebook.</p><p>Part of the Daily Mail, The Mail on Sunday &amp; Metro Media Group</p>

    1 February 07, 2019

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