Iowa’s employment apocalypse

As daunting as we may find the new unemployment claims numbers, they understate the true scale of the damage to the economy.

This morning, the Department of Labor released the count of new weekly claims for unemployment insurance, marking the second week of claims reflecting the employment impact of the COVID-19 crisis. The numbers are staggering, not just for their scope but for their suddenness. Most downturns in the business cycle occur gradually over a number of months; this spike has occurred in just a couple of weeks. These numbers are also the best metric we have in this unfolding crisis, providing us a near real-time measure that the April jobs report (with a March 12 reference point) will largely miss.

Nationally, new claims for the week ending March 21 were 3.28 million; last week we added another 6.65 million new claims — a total fully 10 times the previous weekly peak. In the week ending March 21, Iowa fielded 40,952 claims for unemployment insurance; in the week ending March 28, we added another 58,453. The total over the last two weeks — almost 100,000 new claims — is about the same number of new claims filed in the first four months of the Great Recession. The graph below plots weekly claims since 2007, the Great Recession indicated by the grey shading.

These numbers, of course, understate the true scale of the damage. Those ineligible for regular unemployment insurance — including the self-employed, gig workers, independent contractors, and new entrants to the labor market) do not show up in the claims data — although this will change once the federal Pandemic Unemployment Assistance Program kicks in. And the underemployed, those who are hanging on to whatever hours they can get, are also uncounted here.

And Iowa is not alone. In a longer post at Dissent, I plot all the state numbers: Off-the-charts rates of new claims over the past two weeks are evident in almost all states — but especially in those with a high share of leisure and hospitality workers, and those hard hit by the pandemic itself. California logged 186,000 new claims in the week ending March 21; and added almost five times as many (878,000) this week. New claims in Louisiana, as a telling measure of the mess many states are in, spiked on March 21 to the same level (over 70,000) as those made in the immediate wake of Hurricane Katrina — and this past week added another 97,000 claims.

The best numbers we have show that Iowa and the nation will see a lot of economic harm. It is essential to help all workers now.

Colin Gordon is a professor of history at the University of Iowa, and senior research consultant at the Iowa Policy Project. He has authored or co-authored IPP’s State of Working Iowa series and several other IPP reports on issues affecting working families, jobs, pay and benefits.

Too soon to consider recovery?

Even economists point the immediate focus to public health — and keep recovery in the wider view.

What is needed in a pandemic is for citizens to stay home, and for public policy to assure access to unemployment insurance and health care, and push support to the health system.

Economists such as former Labor Secretary Robert Reich are making these points — that limiting the spread of the coronavirus is the top priority to save lives.[1] When even economists are pressing the point about public health, our leaders should pay attention. Now is not the time to talk about being “open for business” prematurely, as President Trump once suggested we do by Easter.

That is not to say a public health spotlight precludes steps in the coming weeks and months to set up recovery when that can be the main focus.

Now, jobs remain in critical services in hospitals and electric stations, and some in construction. Factories where people stand next to each other on a production line have different social distancing from workers who build things in the open air. We could expand more of the latter jobs right now where the materials are at hand.

Good examples: Wind turbines and solar installations and the power lines that connect them to the electric grid. Right now we could be constructing clean energy facilities that can be producing electricity in six months or a year when we all want demand to expand. It is an opportune moment to think ahead and start replacing older coal production plants, which have their own health problems.

Public policy has a role here. Just before the Iowa legislators recessed because of the COVID-19 pandemic, they passed — and Governor Kim Reynolds signed — a bill to stabilize the solar industry. It would do this by setting the price for the next seven years for the electricity that MidAmerican and Alliant buy from homeowners and businesses.[2]

Another step the Legislature could take is lifting the limit on the tax credit for businesses and homeowners when they install solar.

The annual amount that could be taken on the credit was not fully used in the first year, but in all years since 2013 installations exceeded the cap, now at $5 million per year, pushing installations completed later in the year to a waitlist.[3] The tax credit eventually comes but not until at least a year later. While an installation completed today will get a federal tax credit when taxes are filed in April 2021, the Iowa tax credit will not happen until 2022 or later.

Why make these Iowa investors wait? Extending the total amount eligible for the credit from $5 million to perhaps $20 million would further stimulate the construction of solar panels just when the economy needs the jobs.

There also is a federal role, as the amount of that credit for both solar and wind is phasing out. This would be a good time to stop the phaseout for the next several years. Tax credits of electric cars could also be enhanced.

COVID-19 has slammed the economy. We need to think about when we will recover but also how we will recover. Jobs in clean energy have been on a growth curve that can be re-established quickly. And these jobs are creating a new energy system that will help us with the next crisis, climate change.

Most agree we should follow science to confront the pandemic. We should also follow the science to prepare for the next crisis — climate change.

David Osterberg is an economist and lead environmental researcher at the nonpartisan Iowa Policy Project in Iowa City. Contact: dosterberg@iowapolicyproject.org.

A version of this column also ran in the April 1 Quad-City Times.

 

 

 

 

[1] MSNBC interview, March 17, 2020. https://www.msnbc.com/the-beat-with-ari/watch/-our-economy-is-shutting-down-clinton-wh-veteran-pushes-lives-over-dollars-in-covid-19-crisis-80868933847

[2] O. Kay Henderson. Iowa House and Senate give solar bill unanimous support. Radio Iowa March 4, 2020. https://www.radioiowa.com/2020/03/04/iowa-house-and-senate-give-solar-bill-unanimous-support/

[3] Iowa Department of Revenue. Solar Energy System Tax Credit Annual Report for 2019. https://www.legis.iowa.gov/docs/publications/DF/1126111.pdf

Churchill’s words for Iowa’s future

Iowans should take this opportunity to build a stronger, more resilient state that is forward facing and not just rebuilding what came before.

“Never let a good crisis go to waste” — Winston Churchill.

Mass government spending and social distancing nearly everywhere is a response to the COVID-19 outbreak in the United States. Perhaps we, like Winston Churchill, writing during World War II, might find a silver lining.

There is a sense of national unity or purpose, an outpouring of selfless action by medical professionals, and a renewed sense of national urgency to “Wash your damn hands!” What is intriguing to me is the number of individuals who — if they are still working — are suddenly shifted to a work from home situation and the follow-on effects that this has had.

While not all the “dolphins returning to the canals of Venice videos” are real (sorry!), the reduction of air pollution and greenhouse gas (GHG) emissions in China are observable and documented.[1] European cities are seeing similar reductions in GHG emissions and air pollution. A similar impact may soon be seen in the United States as “shelter in place” directives, which cut driving and factory production, take hold across the nation. The economic slowdown from the spread of COVID-19 could lead to a 9 percent reduction of emissions from the sector that is the largest GHG generator across the nation.

The transportation sector is the largest source of GHG emissions nationwide, and nearly one-third of all miles driven are for commuting purposes.[2] While only 5 percent of Americans regularly work from home today,[3] the Bureau of Labor believes that nearly one-third of Americans could do so.[4] Winston Churchill might ask: How can this be made sustainable?

From recent personal experience, working from home, especially if your partner also is now working from home, requires very few things — a comfy chair, a tub of salted pretzels, and high-speed internet. I am fortunate that I live in an area with access to broadband, but many Iowans find broadband access prohibitively expensive or lack access at any price. My own family members who live in rural areas of Iowa have experienced broadband access problems.

This disparity is well known to Governor Kim Reynolds’ office, which has encouraged the growth of broadband throughout the state through a grants program.[5] Even with this support, much of Iowa remains in a broadband desert, without access to the high-speed internet that allows for teleworking options for Iowans. The blue-shaded areas in the map below indicate areas lacking 25-megabit-per second download speed and 3-megabit upload speed, known as 25/3 broadband, in June 2018.[6]

Similarly lacking in quality are Iowa roads. The American Society of Civil Engineers gives Iowa an overall grade of “C,” with an even lower grade of D+ and D for our bridges and dams.[7] This is also not a new phenomenon, and the old joke of the Midwest having two sessions, winter and construction, points to the constant state of improvements we often find.

With these poor infrastructure grades in mind, how do we make the crisis of COVID-19 not go to waste? The federal government is passing legislation and considering more policy to provide needed financial support for workers, businesses, and the states.

While funds must first go to supporting those who have lost their jobs and for healthcare, infrastructure programs are also a way to quickly inject money into local economies once the crisis has subsided. We can even ensure some workers stay employed as we increase infrastructure construction during these economic lean times.

How? We can super-charge telecommunications investments by the state, either directly or via low-interest loans and grants to existing telecommunication firms. We can use the available public right-of-way that exists on local and state roads to lay fiber for broadband communication capacity across the state while also jump-starting road and bridge repair projects.

When telecom companies are given loans or grants, they should come with price caps to ensure that broadband service extensions are actually used by the rural public. Roads should be rebuilt with an eye less toward peak commuting travel, but more realistic travel demands in a world with expanded telecommuting and reduced motorist traffic.

In short, Iowans should take this opportunity to build a stronger, more resilient state that is forward facing and not just rebuilding what came before. And, they should ensure that fair and prevailing wages are paid for all construction contracts.

This time is one full of heartbreak for families directly affected by COVID-19 and anxiety for those wondering if and when their own family will fall ill. Industries are struggling and the economy may be grinding to a halt by the swift application of painful, but necessary, distancing efforts.

But within these trying times is an opportunity to respond with the future in mind. Like Churchill said, we should not let this crisis go to waste.

 

[1] https://www.politico.com/news/2020/03/13/climate-advocates-hit-political-turbulence-127649

[2] https://www.fhwa.dot.gov/policy/2015cpr/chap1.cfm

[3] https://www.cnbc.com/2019/10/13/people-who-work-from-home-earn-more-than-those-who-commuteheres-why.html

[4] https://www.bls.gov/news.release/flex2.t01.htm

[5] https://ocio.iowa.gov/broadband

[6] https://ocio.iowa.gov/broadband-availability-map-version-2

[7] https://www.infrastructurereportcard.org/wp-content/uploads/2016/10/ASCE_Brochure-IOWA2019.pdf

Joseph Wilensky is a Master’s Degree candidate in the University of Iowa School of Urban and Regional Planning. He has been an intern at the Iowa Policy Project during the 2019-20 school year.

New solutions needed long term

Federal emergency legislation will make important unemployment insurance reforms on a temporary basis. Iowa — like other states — should make secure and equitable changes permanent.

Current estimates of job losses in the COVID-19 recession are hard to fathom. Even with a sizable stimulus, the national economy would shed nearly 14 million jobs by mid-summer; Iowa is projected to lose more than 140,000.

To make matters worse, as Josh Bivens of the Economic Policy Institute underscores, this recession is “laser-targeted at low-wage, low-productivity, and low-hours jobs in service industries.”[1]

Our most vulnerable workers, in other words, will bear much of the burden: They do not have the option of working from home — a luxury enjoyed by two-thirds of workers in the top quarter of the earning distribution and by one-third of white workers, but by fewer than 1 in 10 workers in the bottom quarter of the distribution, 1 in 5 African-American workers and 1 in 6 Latinx workers. These vulnerable workers face both a much greater risk of unemployment as the service economy shuts down and a heightened risk of exposure to the virus if they keep working.

This is a scale of unemployment and social and economic dislocation that our existing programs are ill-equipped to handle. This demands a policy response — state and federal — unprecedented in its scale, and innovative in its efforts to reach those most affected. At the forefront of that policy response is both a dramatic expansion and a fundamental rethinking of unemployment insurance.

The first step here has already been taken by the federal government. The Families First Coronavirus Response Act (passed March 18) pumped $1 billion into the administration of state unemployment insurance (UI) programs, in exchange for new state standards and conditions. In order to draw down these funds, states must improve their methods of notifying workers of their eligibility for benefits, provide multiple (not just online) methods of filing, provide prompt notice of the receipt of a claim, waive waiting periods for benefits, waive the requirement that recipients be actively searching for work, and ensure that employers are held blameless for COVID-19 layoffs. (Conventionally, UI is “experience-rated” so that employers with histories of layoffs are taxed at a higher rates).

As Peter Fisher pointed out in recent days, Iowa has met all these conditions. There is still a lot of work to be done — not just to meet the current crisis, but to ensure that our unemployment insurance system is recast for the 21st century and ready for the next crisis.

The first task is to make unemployment insurance accessible and available to more workers.

In Iowa, just 41 percent of unemployed workers ever see a benefit check. This is better than the national rate (28 percent), but it is still a scandal that well over half of the jobless are left in the cold. We should sustain the “Families First” Act’s commitment to raising the recipiency rate by streamlining the claims process. Federal and state unemployment law should revise our definition of “employee” to better capture the diversity of employment (including the self-employed, gig workers, and the like) in the modern economy. Too often, workers — cleaners, homecare workers, delivery drivers — are misclassified as “independent contractors” and shut out of basic social insurance programs like UI. The Pandemic Unemployment Assistance Program embedded in the latest COVID-19 stimulus bill provides up to 39 weeks of benefits to those (like the self-employed) otherwise ineligible for UI. This is a start — but the real fix would be to recast the law so that such workers are eligible in good times and bad.

By the same token, we should make permanent the more generous standard for a “good cause” separation, allowing workers — not just in pandemic conditions — to qualify for UI when they leave their jobs for compelling personal reasons. Iowa should make better use of its work sharing program, which allows workers partial compensation for reduced hours, while retaining their attachment to the labor force and their access to job-based benefits such as pensions and health insurance. And we should make benefits available to new entrants to the labor force — students graduating into a recession, returning caregivers, the formerly incarcerated — who deserve support even in the absence of a recent work history.

Second, we need to bolster the size and the duration of the basic benefit. Iowa’s current “replacement rate” is less than 50 percent of current wages — higher than the national average (38 percent) but still woefully insufficient to maintain basic expenses.[2] The logic here, of course, is that a low replacement rate will compel the unemployed to look for work. But low replacement rates (and short benefit windows) create enormous economic burdens and, by pressing workers back into the labor force, actually worsen re-employment prospects. As a baseline, UI benefits should be closer to two-thirds wages. And, for the duration of this crisis, they should be 100 percent. After all, places of employment are under order to close down, and those displaced have few options. This is why the pending stimulus bill bumps UI benefits by $600/week through the end of June.

Finally, we need to improve the funding of state unemployment insurance programs. The $1 billion boost to administration in the “Families First” legislation does not come close to backfilling cuts in federal aid since the 1980s. During the last recession, 36 state UI trust funds went broke — and most of those entered the current crisis with insufficient reserves. Iowa’s trust fund is in better shape than most, but all state funds will be exhausted once this crisis lifts. Under current law, the state only taxes the first $7,000 in earnings. This should be increased dramatically (Social Security taxes the first $137,700), so that revenues are sufficient to sustain UI administration, and pay extended and disaster benefits when needed.

Federal emergency legislation — some in place, some in the pipeline — will install many of these reforms on a temporary basis. But many of the problems being addressed — the accessibility of benefits for deserving workers, the low percentage of the unemployed who receive benefits, the insufficient level and duration of benefits — are broader problems with the UI system itself. Iowa should, of course, do what it can to qualify its workers for extended and enhanced benefits paid for with federal dollars. But it should also follow the lead of other states in making its UI system more secure and equitable on a permanent basis.

[1] Josh Bivens, Economic Policy Institute, “Coronavirus shock will likely claim 3 million jobs by summer,” March 17, 2020. https://www.epi.org/blog/coronavirus-shock-will-likely-claim-3-million-jobs-by-summer/

[2] The inadequacy of this replacement level is compounded by the fact that the benefits are still taxable, and yet they do not count as earnings for purposes of the Earned Income Tax Credit, creating an additional income loss for low wage workers receiving that tax credit.

Colin Gordon is a University of Iowa professor of history and is senior research consultant for the nonpartisan Iowa Policy Project. He has authored several IPP reports since the organization began in 2001. Among these are the State of Working Iowa series, and the October 2019 report “Race in the Heartland: Equity, Opportunity and Public Policy in the Midwest,” for Economic Analysis and Research Network members IPP, Policy Matters Ohio and COWS.

Lesson from the Recovery Act

The 2009 Recovery Act offered a good example of how state fiscal relief, in addition to the temporary boost in Medicaid funding, can aid in recovery from economic problems caused by the current health emergency in the United States.

Editor’s Note: This is an excerpt of a larger report from the Center on Budget and Policy Priorities (CBPP), “Immediate and Robust Policy Response Needed in Face of Grave Risks to the Economy.” It points to lessons policy makers can take regarding state fiscal relief in the American Recovery and Reinvestment Act of 2009, enacted to move recovery from the Great Recession. For the full CBPP report, click here.

Providing Additional Needed State Fiscal Relief

Given the severe threat to the economy — and the resulting threat to state finances — states will likely need additional fiscal relief beyond what (a temporary increase in the share of Medicaid costs borne by the federal government, or FMAP) … would provide. During the last recession, states faced budget shortfalls totaling about $600 billion. The Recovery Act’s FMAP provisions provided roughly $100 billion in fiscal relief — a big help, but well short of what it would have taken for states to avoid laying off teachers and other workers and cutting services in other ways that deepened the recession. Increasing the FMAP is the single most important way to get fiscal relief efficiently to states, but Congress should also enact additional emergency fiscal aid to states. We recommend that this added fiscal relief take a similar form to the Recovery Act’s State Fiscal Stabilization Fund (SFSF), which provided roughly $60 billion in fiscal aid to states.

Given the wide range of fiscal challenges states are facing, they should have significant flexibility over how to spend this aid. The SFSF required states to spend 82 percent of the aid on education, including both K-12 and higher education. A new version of the SFSF should allow states to spend a smaller percentage of the aid on education, so that states are free to best respond to the COVID-19 outbreak and its economic fallout, but still require that a substantial share be used to support state education systems. While many schools and universities will likely be closed in the next few weeks, teachers still need to be paid (to avoid hardship and further drag on the economy). And if revenues decline as sharply as expected, states will face serious difficulties in adequately supporting their schools in the coming fiscal year, when schools will be trying to make up for lost class time. Education accounts for roughly 40 percent of state spending, the single largest part of state budgets, making it very difficult for states to avoid cutting educational services when revenues decline sharply.

As under the Recovery Act, states would be required to distribute funding to schools using their existing funding formulas, which favor low-income districts, or by distributing funding directly to Title I schools (schools that serve a large number of disadvantaged students). States should also be encouraged to use the funding to increase college tuition assistance for low-income people facing a tough job market and students whose families’ ability to help pay for school has diminished. Targeting state fiscal aid to protect education systems in the coming year would benefit the nation’s economy in the longer term by improving the educational outcomes of students, many of whom are now missing weeks of school. And requiring states to distribute a substantial share of this aid to schools would help protect against some states accepting the aid and then using it instead to cut taxes. As under the Recovery Act, this new version of the SFSF should include a maintenance-of-effort provision that requires states to maintain their own education spending at current levels.

Finally, Congress should also consider certain forms of direct aid to localities, whose own budgets will also be deeply harmed. For example, Congress should consider direct aid to public transit systems, whether buses or subways, which stand to lose much of their fare revenue in coming weeks — losses that many of these systems will likely have difficulty recovering from on their own and that will further strain local budgets, risking cuts in other needed public services.

This excerpt is one small section of a CBPP report by Sharon Parrott, Aviva Aron-Dine, Michael Leachman, Chad Stone, Dottie Rosenbaum, LaDonna Pavetti, Ph.D., Peggy Bailey, Chuck Marr, and Kathleen Romig. We share it on the Iowa Policy Project blog as an example of one approach that research and experience have shown will be needed as states and local governments attempt to contribute to recovery from the current health emergency.

Good start on Iowa unemployment insurance in health emergency

Actions by the state are welcome news. The four-week break in the legislative session is a good opportunity to look for other ways to strengthen the system to protect working families.

With widespread layoffs anticipated or already occurring in key sectors of the state’s economy, it is welcome news that the state has relaxed eligibility standards for receiving unemployment insurance benefits. In our IPP blogs of March 14 and March 15 we identified key changes that states could make fully in accord with U.S. Department of Labor guidance for increasing program flexibility to deal with the pandemic.

On Monday, Governor Kim Reynolds announced key changes by Iowa Workforce Development to the state’s UI system that align with these recommendations:

•    Work search requirements are waived for individuals filing an unemployment insurance claim as a result of COVID-19.

•    Individuals who have to leave their job because they are ill, because they are self-isolating due to exposure to COVID-19 or because they are caring for an ill family member, or because the business has shut down due to COVID-19 will be eligible for UI as long as they meet other standard requirements — having worked for six of the last 18 months and earned at least $2,500 during that period. Workers are expected to utilize sick days, paid leave, or telecommuting options if they are available.

•    Employers will not be charged for any employee receiving COVID-19 related unemployment benefits; i.e, their future insurance rates will not be raised.

Employees wanting to find more information on these provisions or to determine if their particular situation qualifies can find some answers on the Iowa Workforce Development website here.

The U.S. Department of Labor also reminded states that two other forms of flexibility may be helpful in the current situation: waiving the one-week waiting period before receiving benefits and establishing a Short Time Compensation (STC) program. Fortunately, Iowa does not have a waiting period, and already has an STC program called Voluntary Shared Work. The latter program allows the employer to reduce work hours for several employees instead of laying off a smaller number, with the employees then eligible for partial UI benefits to replace most of the wages lost due to reduced hours.

Voluntary Shared Work can be an important tool for employers and employees alike, allowing the business to keep trained workers and allowing more workers to retain their employment connection. In order to utilize the shared work provisions, an employer must apply. Employers who have not yet instituted work sharing should be encouraged to do so; they can find more information from Iowa Workforce Development here.

These actions by Iowa Workforce Development are welcome news. Federal emergency legislation just passed may provide additional flexibility to states.

The four-week break in the state legislative session is a good opportunity to look for other ways to strengthen the state system to protect working families who are affected in the current emergency. That will help the Iowa economy to come out stronger on the other side of the crisis.

Peter Fisher is research director of the nonpartisan Iowa Policy Project.

pfisher@iowapolicyproject.org

JobWatch: Tough January, rough 2019

NEWS RELEASE

First net job loss over calendar year since Great Recession

IOWA CITY, Iowa (March 16, 2020) — Iowa payroll jobs dropped in January for the third straight month, the latest official numbers confirming a net job loss for 2019.

The nonpartisan Iowa Policy Project released this statement from executive director Mike Owen about the preliminary January numbers reported Monday by Iowa Workforce Development. February numbers are expected later this month.

“Today’s report does not bode well for Iowa jobs or the Iowa economy as we face the two-pronged challenge of public health threats and economic uncertainty with the spread of the coronavirus.

“Iowa had not experienced a full-year job loss since the last recession, and January did not improve that outlook. While the one-month job loss of 900 appears small, the longer look shows it to be part of a decline of 6,400 from January to January.

“For the calendar-year 2019, the total job loss was1,300. We had not seen a net job loss over a calendar year in Iowa since the Great Recession in 2008-09.

“Since January, the Reynolds administration has pushed a tax-cut proposal. The latest job news might change that strategy as this is no time to be reducing revenues. The state must use the funds we have to invest in supports for working families whom we can expect to struggle in the near term.

“Boosting access to health care, food assistance, unemployment benefits and paid sick leave are important components of a plan to invest in those who will determine the quality of Iowa’s future.”

Key Numbers for January 2020

Nonfarm jobs dropped by 900 to 1,584,500, the third straight monthly drop and fifth in six months.
Iowa’s unemployment rate held at the revised level of 2.8 percent, previously reported at 2.7 percent for December. That compares with 2.7 percent in January 2019.
Four of the 11 major job categories showed gains in January, and six showed declines, with no sector showing a change of 1,000 or more. Government showed the biggest gain, only 900, with construction at 800.
Manufacturing was down 800, as was trade and transportation.

Key Trends

Iowa lost a net 6,400 jobs from January 2019 to January 2020.

For the calendar year 2019, nonfarm jobs averaged a 100-job monthly decline. In 2018, jobs declined in only four of the 12 months; in 2019, they increased in only four of the 12 months.

The year was the first since 2009 with a net drop in payroll or nonfarm jobs. Jobs dropped by 15,600 in 2008 and 47,800 in 2009. For calendar 2019, Iowa lost 1,300 jobs.

From January 2019 to January 2020, the “other services” category led gains at 2,200, followed by leisure and hospitality at 1,800 and government at 1,300. Trade and transportation led declines at 4,800, followed by professional and business services at 2,500, manufacturing at 1,300, information at 1,100, and education and health services, also 1,100.

The Iowa Policy Project (IPP) is a nonpartisan, nonprofit public policy research and analysis organization based in Iowa City. IPP has been tracking Iowa job trends since its founding in 2001 and has regularly provided reflections on official monthly job reports since 2003.

 

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