Tidal wave of layoffs growing

San José, CA - On Thursday, March 19, the Department of Labor reported a surge of applications for Unemployment Insurance (UI) benefits as the COVID-19 pandemic began to bite into the economy. For the week ending March 14, a seasonally adjusted 281,000 claims were filed, up 70,000 (or one-third) from the week before and much greater than the predicted 220,000. A National Public Radio poll also conducted last week showed that 18% of all households had already lost income from layoffs or reduced work hours.

But this is just the beginning of the tidal wave of layoffs in the works. In the first three workdays of this week, new applications for unemployment insurance benefits grew more than 25-fold in Ohio from the week before. The websites used to apply for unemployment insurance crashed in Colorado, Kentucky, New Jersey, New York and Oregon. All of this points to a massive increase in applications in next Thursday’s report on this week.

The Unemployment Insurance system had fundamental problems even before COVID-19 hit. Six states, including California, have less than six months of reserve payments - meaning that they could run out of money in a month or two with the surge of applications happening now. Here in California, U.I. is funded by a tax on businesses on the first $7000 of wages - far less than what the average worker earns. No surprise that California has the lowest reserves in the nation, with only two and half months of reserve benefits - which could be wiped out in a week or two.

While President Trump signed a bill to extend sick and family leave for up to 12 weeks, it was a watered-down version. Big business and Senate Republicans insisted on leaving out larger businesses with more than 500 workers and allowed smaller businesses with less than 50 workers to get exemptions. This leaves less than one-fourth of all workers who work for firms with between 50 and 500 workers covered.

The Trump administration and Senate Republicans are now working on a huge bail-out bill that would give billions to big corporations seeking handouts. The promised cash payments will have to go through the IRS, whose staff has been cut and who are busy with processing tax returns. The lowest-paid workers are most likely to be overlooked. The bill also puts even more limits on the extended sick and family leave passed just a few days ago.

In contrast, the government in socialist China ordered large state-owned businesses to spare no expense to fight the COVID-19. Firms were urged not to lay off workers and even hire more. State-owned construction firms rushed to build temporary hospitals in Wuhan, the epicenter of the epidemic. State-owned utilities lowered electricity prices while state owned property management companies reduced rents to aid businesses. State-owned oil and gas, chemical and pharmaceutical companies stepped up the production of medicines and medical equipment.