As businesses shut down to stunt coronavirus' spread, Iowa sees record weekly unemployment claims, mirroring U.S. increase
A third coronavirus stimulus package was announced by the Senate, reaching $2 trillion and including direct payments to individuals and hospitals. USA TODAY
Mark Nolte was following his passion.
Nolte had been making a living recruiting businesses to the community as president of the Iowa City Area Development Group. But when he learned that Moxie Solar, a solar panel installation company out of North Liberty, was going to open a production line, he joined the team.
Then, on Wednesday, Moxie Solar CEO Jason Hall stepped into his office. With an uncertain future amid the spread of COVID-19, the company couldn't risk the expansion.
Hall had to let Nolte go. Back home, Nolte applied for unemployment benefits online. His wife, meanwhile, tried to figure out how to offer her performing arts classes online so her business could stay afloat.
"This is, unfortunately, going to be the reality for a lot of families around the state," Nolte said Thursday.
According to the U.S. Department of Labor, Nolte was one of 41,890 Iowans who applied for unemployment benefits last week, the first marker of how much the coronavirus-forced business slowdown has impacted the state's economy.
The number of unemployment claims was the most for a single week in recent state history, according to data that the Labor Department's Employment and Training Administration keeps back to 1987. In those 33 years, the second-highest number of claims in a single week was less than half the new record: 14,201 in December 2000.
Steep drops in employment are unfolding across the country. According to the U.S. Department of Labor, 3.3 million people filed for unemployment in the United States in the week ending Saturday — an even more disproportionate record. Before last week, the most claims in a single week dating back to 1967, when the government began its national tally, was 695,000 in October 1982.
In Iowa, much of the economic slowdown began with Gov. Kim Reynolds' public health disaster emergency proclamation on March 17, when she ordered some retail businesses to close in an effort to contain the spread of the coronavirus.
Reynolds has curtailed more businesses since then, including on Thursday, when she called for a wider set of retail closings and extended operating limitations already in effect on bars and restaurants.
During her news conference Thursday, she acknowledged that decisions like these are costing the jobs of workers, many of them low-wage employees like waiters, bartenders and cashiers. But Reynolds held firm.
“We will do whatever’s necessary to protect the health and safety of Iowans and support the stability of our economy for the long term," she said.
How bad will this get?
From 2007 through 2009, amid the Great Recession, unemployment in Iowa grew by 47,000. Iowa State University economist Dave Swenson pointed out that the figure for last week alone was almost as large.
But will the coronavirus cause a similar, long-lasting economic downturn?
"I don't know," Swenson said. "We don't know. Nobody knows. We're only at the beginning."
The U.S. economy is in uncharted waters, he said. Recessions usually come from large problems in the economy. A housing valuation bubble burst in 2007, when banks had tied financial instruments to risky mortgages, causing the Great Recession. At the beginning of the 2000s, a tech bubble burst, sapping investors' confidence and causing a smaller downturn. In 1982, the Federal Reserve set off a harsh recession when it jacked interest rates into the double digits, intentionally slowing the economy to stop inflation rates that were spiraling out of control.
In this case, Swenson said, no high-level issue caused businesses to slow down. The government simply ordered them to stop. This comes after a decade of economic expansion. As of January, Iowa had an unemployment rate of 2.8%, tied for the 10th-lowest in the country.
Swenson said that if the federal government and health care officials can find ways to slow the spread of the coronavirus, businesses may be able to open back up. Restaurants, barbershops and boutiques may be able to resume right where they were a month ago.
At the same time, the virus could fundamentally change the way life is lived, he said.
“We don’t have a damaged economy that we’re having to rebuild, which is what happened after the last recession,” Swenson said. “That’s a plus. Other than that, man, we’re just guessing. Nobody knows.”
Of last week’s unemployment claims, according to Iowa Workforce Development, about 32% were in accommodation or food services jobs. Another 12% were in health care and social assistance, 6% were in educational services and 4% were in retail jobs.
Iowa Policy Project Research Director Peter Fisher predicted the state will see another high level of unemployment claims through the end of this week, especially given Reynolds’ new order. Like Swenson, he feels the state is in unchartered waters.
“What’s unique about this recession is the suddenness of it,” he said. “It’s like we’ve been pushed off a cliff.”
What help is coming?
Congress took its first step to address mass unemployment last week, when it passed a stimulus package that included $1 billion to go to the states. But that money will be used primarily to hire and retain employees who can administer the new claims.
The next wave from the federal government began Wednesday night, when the U.S. Senate passed a $2 trillion economic stimulus package that will include funding for more unemployment benefits. The bill now goes to the U.S. House.
This latest funding bill would give more money to unemployed workers in a number of ways.
First, the federal government will provide up to $600 a week to every unemployed worker, on top of whatever that worker gets from the state.
The amount of money Iowa doles out is based on a formula that weighs how much the worker made before getting laid off and how many dependents the worker has. Basically, the more their earnings, and the greater their number of dependents, the more the state gives them.
At the end of last year, according to the Employment and Training Administration, an unemployed worker in Iowa received an average of $390 a week. With the extra federal funding, that figure would jump to $990 a week.
On Wednesday, U.S. Sen. Lindsay Graham, R-South Carolina, protested this part of the spending bill. He said some laid-off workers will make more money from government checks than they did from paychecks.
Michele Evermore, a senior policy analyst at the National Employment Law Project, said the extra funding is a result of life amid the coronavirus. State governments are ordering shops to close. Those same state governments are asking residents to remain in their homes indefinitely.
“This is an extraordinary time,” she said. “You want recipients of unemployment insurance to go out and look for a job. But during a pandemic, you don’t want people going out of their houses.”
The extra $600 a week will last for four months, as the stimulus bill is written. It provides a couple other funding boosts to unemployed workers.
The bill extends benefits to 39 weeks. In Iowa, workers receive unemployment checks for up to 26 weeks. But in this case, Evermore said, the federal government will fund an extra 13 weeks of unemployment benefits for Iowa workers, if necessary.
The federal government also will pick up the tab under the state’s Voluntary Shared Work Arrangements. Under this program, companies cut back workers’ hours by 20%-50% to save money. The government then makes up the difference.
Iowa is one of the states that already offers this program. But for the rest of the year, Evermore said, the federal government will pay the workers whose hours have been cut back.
Under the stimulus package, the federal government also will fund unemployment benefits for workers not traditionally covered, like freelance workers and independent contractors, such as Uber drivers.
Iowa entered this downturn in a relatively good position to handle a recession. The U.S. Department of Labor suggests that every state keep enough money in its unemployment insurance trust fund to keep afloat during a recession that lasts a year.
The Department of Labor’s analysis of Iowa shows it has enough to sustain itself for almost 18 months.
But Colin Gordon, a University of Iowa history professor and research consultant at the Iowa Policy Project, said no state in the country is built to sustain a mass wave of unemployment, like this one. He said he expects another stimulus package will follow.
“We’ll all go bust,” he said of the unemployment insurance trust funds. “That is something that the feds will deal with down the road.”
'We’re all in this unknown place'
On Thursday, Iowa Workforce Development Director Beth Townsend said the department was handling “tens of thousands” of calls a day. About 250 people were manning the lines, but the department needs more. It has hired some temporary workers, who are training this week and will start Monday.
“We ask everyone to be patient and to show us grace,” she said, acknowledging that callers face long wait times.
Marquis Williams, of Davenport, said he lost his job at Greystone Manufacturing and is still waiting for his unemployment benefits. With three children, he said, he and his girlfriend are worried that they won’t be able to pay rent this month.
Anne and Dave Ducharme-Jones, who earn most of their money fronting an eponymous band, said their income has been decimated by the closure of public venues. Wedding gigs are in limbo. Corporate events — big moneymakers for them — are cancelled.
They’re spending their afternoons in their Des Moines basement, cutting a new album in their studio. They hope to sell it at shows, whenever those come again.
“We’re all in this unknown place,” Anne Ducharme-Jones said. “And it’s going to be a challenge for everybody.”
Rebecca Christiansen, of Bedford, is 35 weeks pregnant but started a $10-an-hour job as an elementary school cafeteria worker on March 3. She applied for unemployment after her supervisor told her last week that her work would be cancelled indefinitely.
But on Friday, she received a letter from Iowa Workforce Development, denying her claim. According to the letter, which she shared with the Register, the department ruled she could not receive the benefit because she had exhausted her unemployment insurance, which she received last year from June through October.
The letter says Christiansen won't be eligible for benefits again until June 7. She told the Register that her family of six is living off her boyfriend’s earnings as a welder.
“Money has always been a stress,” she said. “But it’s never been this bad. We’ve got to figure out how to get gas for the week, for him to get to and from work.”
What's in the bill?
Here’s a look at what’s in the stimulus package the Senate passed late Wednesday.
Help for families
- The bill would provide direct payments of up to $1,200 for most individuals and $2,400 for most married couples filing jointly, with an extra $500 for each child.
- Assistance would start to phase out for individuals earning more than $75,000 and for couples with more than $150,000 in income.
- Unemployment insurance benefits would be expanded, increasing the maximum benefit by $600 a week for up to four months. Benefits would be available to workers who are part-time, self-employed or part of the gig economy. People who are still unemployed after state benefits end could get an additional 13 weeks of help.
- Food assistance programs would get a boost, as would programs to help low-income households avoid eviction and a program to improve internet access in rural areas.
- Homeowners with federally backed mortgages would be protected from foreclosures for as long as 180 days.
- Students with federal loans could suspend payments until October.
- Students receiving Pell grants who have to drop out because of coronavirus would not be penalized.
Help for small businesses
- The bill would give small businesses access to a nearly $350 billion loan program to cover monthly expenses like payroll, rent and utilities. The loans would not have to be repaid if businesses maintained their workforce.
- The eight weeks of assistance would be retroactive to Feb. 15, 2020 to help bring back workers who have already been laid off.
Help for corporations
- The package includes a financial lifeline to the hardest-hit industries, including passenger and cargo airlines. Another pot of money would be available to help other businesses for a combined $500 billion.
- Companies receiving assistance would be barred from raising the pay of certain executives.
— USA Today
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