How can we understand today’s enormous increase in UI claims at the onset of the COVID-19 epidemic? Given how quickly the situation has moved we knew there would be a large increase in UI claims, whereas in a slower moving crisis, the weekly flows into UI slowly increase as the stock of UI claimants balloons. To put things in perspective we can go back to the Great Recession and accumulate UI claims in excess of what we would normally expect. The chart below shows that new UI claims in one week correspond to all new UI claims during the first six months of the Great Recession.
These statistics reflect public health policy aimed at slowing the spread of the disease. In terms of the labor market, if they also represent workers on temporary layoff, with their jobs kept intact and income support, we may see a V-shaped recovery. If, on the other hand, they represent workers that have now become truly unemployed, with their jobs terminated, and little income support, this will be a painful, slow, L-shaped recovery. As Ganong and Noel note elsewhere in these facts, UI claims may even undershoot the fraction of workers who would be eligible to claim.