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Labor Department Published 'Flawed Estimates' of Weekly Jobless Claims, Watchdog Says -- Update

11/30/2020 | 12:19pm EST

By Paul Kiernan and Sarah Chaney

WASHINGTON -- The nation's system for providing unemployment benefits to jobless workers has consistently produced inaccurate data and lower-than-appropriate payouts to some workers amid the Covid-19 pandemic, a government watchdog said Monday.

The Labor Department's weekly reports on jobless claims have published "flawed estimates of the number of individuals receiving benefits each week throughout the pandemic," the Government Accountability Office said in a periodic report.

In addition, a program created by Congress to provide jobless benefits to workers who are normally not eligible for them has underpaid recipients in most states. As a result, the average weekly payout under what is called the Pandemic Unemployment Assistance program, which is available to gig-economy workers and the self-employed, is below the poverty line in 70% of states that reported data.

"The majority of states have been paying PUA claimants the minimum allowable benefit instead of the amount they are eligible for based on prior earnings," the GAO said. While states are obligated to pay out the full amount that is owed "with the greatest promptness that is administratively feasible," Labor Department officials told the GAO they didn't know how many states had begun working to do so.

The Labor Department didn't immediately respond to a request for comment.

The GAO report comes as two key coronavirus-relief programs -- the PUA and an extended availability of regular unemployment-insurance to 39 weeks from the usual 26 -- are set to expire at the end of December. Negotiations between Democrats, Republicans and the White House over another round of coronavirus relief have been stalled for months.

Ever since lockdowns to contain Covid-19 caused economic activity to collapse in March, the Labor Department's weekly jobless-claims numbers have been one of the most important economic data points tracked by policy makers and investors. Figures are reported with a one-week delay, providing a nearly real-time picture of changes in the labor market.

But the Labor Department report for the entire U.S. relies on incoming data from state unemployment offices, which were swamped with applications for benefits in the early months of the pandemic. As a result, claims were initially underreported as state offices struggled with a huge backlog of applications.

Because the department uses the total count of weeks claimed as a proxy for the number of people claiming benefits, a laid-off worker who had to wait a month to file her claim could have been counted as four people once the application went through. In such cases, jobless claims have also been overestimated at times.

Not all states provided PUA data at the onset of the crisis, and many states have reported it inconsistently. For example, Arizona reported no PUA data in the week ending July 4, 2020, after reporting 2.3 million claims in the previous week. As a result, the Labor Department reported -- likely inaccurately -- that the number of claims in all programs during the week ending July 4 fell by about 200,000, the GAO said.

Initial unemployment claims have come down sharply from a pandemic high of near 7 million in March. But they still remain above levels seen in any previous recession on record.

About 9.1 million people were collecting benefits through the pandemic unemployment assistance program, on an unadjusted basis, in the week ended Nov. 7. That exceeded the number of individuals collecting unemployment benefits through regular state programs, which cover most workers. In the week ended Nov. 14, about 6.1 million were claiming benefits through regular state programs, on a seasonally adjusted basis.

Some economists and policy experts have previously noted that state reporting and accounting errors caused the Labor Department to overstate the number of people filing for PUA. In September, a Labor Department spokesman said the agency was monitoring PUA claims to identify potential anomalies and was working with states where claims appeared to be overstated.

But the department rebuffed the GAO's recommendation to look for ways to report the actual number of individuals claiming unemployment benefits since January 2020, citing potential challenges that could pose for state unemployment offices. The GAO countered that hundreds of billions of dollars have been set aside for unemployment programs and encouraged the Labor Department to correct the data, even if it takes time.

"Without an accurate accounting of the number of individuals who are relying on [unemployment insurance] and PUA benefits in as close to real-time as possible, policy makers may be challenged to respond to the crisis at hand," the GAO said.

Write to Paul Kiernan at paul.kiernan@wsj.com and Sarah Chaney at sarah.chaney@wsj.com

(END) Dow Jones Newswires

11-30-20 1218ET

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