Unemployment insurance claims and COVID-19

Abstract

We explore the effect of various factors on interstate differences in weekly unemployment insurance claims, focusing specifically on the determinants over the initial period of the pandemic in the U.S. We consider the effects of COVID-19 cases, state policies enacted in response to COVID-19, relevant provisions of Federal Coronavirus Aid, Relief and Economic Security (CARES) legislation, and the nature of state economies. We find that during the initial weeks of the pandemic, unemployment claims were driven by consumer reactions to the coronavirus. We find that over the March 21-April 25 period states with greater employment in industries most affected by the virus and which issued orders closing nonessential businesses experienced greater weekly unemployment claims. We find mixed evidence that unemployment benefits affect the number of unemployment claims. However, we find no evidence that the ability to work at home mitigated the increase in unemployment rates during this period, nor evidence that the CARES Act’s Payroll Protection Program influenced the level of new unemployment claims.