Pandemic and State Shutdown Orders Seriously Hurting Self-Employed Workers

East Lansing, MI—September 3, 2020: Anderson Economic Group has been watching the Pandemic Unemployment Assistance (PUA) data closely and comparing it with traditional wage-and-salary based Unemployment Insurance (UI). Figures released today indicate that the trends have diverged.

PUA was created by the CARES act and represents an important innovation. Unlike traditional UI, PUA explicitly covers self-employed workers, contractors, “gig economy” workers, new entrepreneurs, artists, craftspeople, musicians, freelancers, and others who do not have a conventional employer relationship with a regular wage or salary.

Looking closely at the newly released data on unemployment claims, we see that:

  • UI claims jumped in March—when state shutdown orders took hold. Since then, they have steadily declined. Weekly claims numbers have flattened and are dropping slowly, indicating that the wage-and-salary employment base is slowly returning to levels we might expect amid a normal recession.
  • Unlike UI claims, PUA claims are far from declining. We had 759,000 new claims in the week of Aug 29—up over 20% from the prior week.On August 15 we had 13.5 million PUA recipients. That is nearly 3 million more than the prior week. The trend here is in the opposite direction from wage-and-salary employment.

Anderson Economic Group’s principal and CEO, Patrick Anderson, asserts that that this divergent trend is not the only worry: “We believe the PUA data significantly undercounts loss of income among self-employed workers. Because these workers have traditionally been completely left out of the UI system, they have little experience in filing. They are also likely to be discouraged by state UI systems, which are often opaque, confusing, and contradictory for self-employed workers.”

Mr. Anderson further notes that:

…traditional unemployment systems ask applicants to certify that they have been seeking employment. They also require applicants to enter their wages from previous employment. Most of the self-employed population, however, does not seek employment per se. Instead, they seek customers and investors. Rather than punch a clock, they may drive an Uber on the night shift and work on customer projects during the day.

The trend of increasing claims among this population is seriously worrying evidence that contractors, entrepreneurs, and self-employed workers are losing significant income. Some may be closing shop for good. While the self-employed are often the first to go as employers trim ranks by retaining long-time employees and shedding contract workers, the larger problem appears to be entrepreneurs and self-employed workers running out of time and closing shop because they just can’t get customers in their doors.

For further information, contact Anderson Economic Group at 517.333.6984.