California Says Fraud Inflated Jobless Claims in Recent Weeks

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Between mid-August and the first week of September, applications for Pandemic Unemployment Assistance — a federal relief program intended for self-employed workers and independent contractors — doubled in California to more than 524,000, far above claim levels when the federal program first launched in April, the state’s Employment Development Department said Thursday.

After the most populous state took action to deter suspected scammers from filing false applications in hopes of getting payments, PUA applications dropped sharply to 145,790, a decline of more than 72%, the department said.

In addition, California’s figures show a wide discrepancy with nationally-reported data on continuing PUA claims in California. While the federal Department of Labor reports that more than 6 million Californians are claiming PUA benefits each week, the state’s labor department shows that figure below 2 million, pointing to further data-reporting issues.

The Department of Labor didn’t immediately respond to requests for comment.

‘Actual Counting’

Those figures feed into a national total that the Department of Labor continues to report each week as an official tally of almost 30 million Americans receiving unemployment benefits, despite problems with inflated numbers that have been evident for months.

On the other hand, weekly national figures on initial jobless claims — the widely watched headline number, which is separate from PUA — may also be overstating the pace of layoffs: the California numbers showed 46,062 applications submitted last week for regular state benefits, compared with 230,225 that were processed, a number that corresponds with the state figure in the national report released Thursday.

That indicates the national figures may reflect states catching up with backlogs rather than representing the most recent levels of actual job losses.

In any case, the fraud issue in California underscores the widespread unemployment data challenges — including clerical errors and double counting — that state employment departments have faced since the pandemic began in March. Errors can skew economists’ outlook for the labor market because claims data are used to look for signs of distress in the job market and any recovery, along with details at the state level.

Federal Reserve Chairman Jerome Powell on Wednesday cast doubt on the reliability of the national PUA figures, saying during a press briefing that the “actual counting of the claims is volatile” and it’s difficult to “take much signal about the particular level.”

Since the beginning of August, 34 arrests have been made in California related to unemployment fraud, with more expected in the coming weeks.

“Aggressive efforts to fight fraud are yielding results in curbing the recent uptick in suspicious Pandemic Unemployment Assistance (PUA) claims in California,” the state’s employment department said.

©2020 Bloomberg L.P.

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