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The unemployment insurance system plays an essential role in the economy by protecting workers against significant income losses during intervals of unemployment and stimulating the economy at times of recessions. This proved especially important during the COVID-19 pandemic that has disrupted the U.S. and world economies for almost two years, causing historically unprecedented increases in the level of unemployment claims filed.

Since the pandemic’s beginning, approximately 50 million U.S. individuals have lost their jobs, with unemployment peaking at 15% in April 2020. However, the number of workers applying for unemployment benefits recently fell to its lowest level since the pandemic began, showing that the job market is slowly healing from the coronavirus recession.

Unemployment Benefits Reaching Pandemic Low

The COVID-19 pandemic made a huge impact on the U.S. economy, forcing many businesses to close or reduce hours of operation and keeping many Americans at home as a health precaution. Last summer, however, with the rollout of vaccines, the economy began its recovery process. This caused unemployment claims to decline and move toward the pre-pandemic levels.

During the week ending November 20, the number of unemployment claims reached the lowest point since 1969. According to the Department of Labor News Release, the states reported that 199,000 workers filed for new unemployment benefits, a decline of 71,000 compared to the week before that. Reaching below the 200,000 level for the first time since the COVID-19 pandemic began is a significant sign of economic improvement.

In addition to this, continuing claims for regular state unemployment benefits have also drawn closer to pre-virus levels, with a decline to 2 million. After reaching the lowest level since March 2020 in the week ending November 13, continuing claims also neared their 2019 average rate of about 1.7 million per week. By comparison, there were 22.7 million claims at this time last year, with federally supported unemployment benefits still in place.

Taken together, the numbers show that the U.S. is coming closer to its pre-pandemic normal, but there is still a significant distance to be covered. In his statement, President Joe Biden addressed the unemployment claims decline as a milestone in the economy’s recovery from the pandemic. At the same time, the president said there is still much more work to be done before the economy is back to normal, especially given that consumer prices are rising at the highest pace in 31 years.

Changes to Unemployment Insurance During the COVID-19 Pandemic

Unemployment insurance has been a crucial element of the U.S. government’s response to the economic disruption caused by the COVID-19 pandemic. The Coronavirus Aid, Relief and Economic Security Act (CARES), signed into law in March 2020, expanded existing unemployment insurance programs, making more individuals eligible and providing more significant benefits than existing programs. Subsequent legislation, the American Rescue Plan Act of 2021 (ARP), extended these benefits until September 6, 2021.

Among other things, the CARES Act created three programs:

Federal Pandemic Unemployment Compensation (FPUC)

FPUC program added $600 per week to state-funded unemployment benefits financed by the federal government and expired on July 30, 2020. In December 2020, Congress voted to provide expanded benefit payments of $300 per week, and the ARP extended this increase until September 6, 2021. The ARP also exempted the first $10,200 in unemployment benefits received in 2020 from taxation, but only for those whose income was below $150,000.

Pandemic Unemployment Assistance (PUA)

PUA program extended unemployment benefits to previously ineligible workers, such as part-time workers, freelancers, independent contractors, and the self-employed. This provision of the CARES Act expired on September 6, 2021.

Pandemic Emergency Unemployment Compensation (PEUC)

PEUC program extended the duration of unemployment insurance benefits by 13 weeks beyond each state’s maximum. This provision was set to expire on December 31, 2020, but was extended by Congress through March 14, 2021, in addition to increasing the number of weeks from 13 to 24. The ARP raised the duration of benefits to 53 weeks and extended the PEUC to September 6, 2021, when it expired.

However, twenty-six states prematurely terminated these programs between June and late July 2021. Also, by letting the federal law expire in September, Congress and the White House ended pandemic UI programs entirely. As a result, more than 10 million workers lost all of their unemployment benefits because of either the state-level program terminations or the September program expiration.

While these emergency programs were never intended to be permanent, they did provide a critical lifeline to workers and their families during the pandemic. Thus, there has been some disagreement surrounding their termination. Still, preliminary results suggest that states that opted out of the federal expansion to UI programs saw faster employment growth than states that did not.

Managing Unemployment Claims

The wide availability of vaccines and businesses resuming operations together with the recent plunge in unemployment claims point to sustained strength in the economy as a year marked by shortages, and an unending pandemic is coming to its end. Still, employers’ obligations and responsibilities remain, and the system of unemployment insurance requires careful management and oversight.

As unemployment claims fall and the unemployment crisis caused by the COVID-19 pandemic subsides, employers should make an effort to stay abreast of the associated regulations, prepare for changes in employment tax rates and the overall scheme for unemployment funding. Managing unemployment claims, wage determinations, fraudulent applications, unemployment insurance appeals, and other aspects of unemployment insurance can be daunting, especially with the still active pandemic.

On the other hand, outsourcing the entire process provides employers with seamless administration of unemployment claims, unemployment tax rates, benefit charge audits, and appeal hearings combined with the expertise and knowledge of the unemployment system. Thus, they can not only prevent unemployment tax expenses but also focus on solving other pressing business challenges.


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