Iowa jobless aid claims fall below pre-pandemic levels

DES MOINES — The number of Iowans who received unemployment benefits in 2022 dropped to 34 percent fewer than the number who were receiving aid before the pandemic, according to state workforce data.

While a 2022 change in state law that reduced the amount of time Iowans can receive unemployment benefits may have factored into that precipitous drop in claims, economic experts in Iowa also suggested other factors likely played a larger role.

Due to business closures during the peak of the COVID-19 pandemic, unemployment claims spiked in 2020 in Iowa and across the country. The next year, as Americans began to return to work, those numbers began falling, reverting to pre-pandemic levels.

But unemployment claims in Iowa continued to fall.

After peaking at more than 344,000 in 2020, the number of Iowans who received unemployment aid dropped to roughly 107,000 in 2021, according to Iowa Workforce Development data compiled by the nonpartisan Iowa Legislative Services Agency.

That figure again dropped dramatically in 2022, when just over 63,000 Iowans received unemployment benefits. The figure was fewer even than the roughly 95,000 who received benefits in 2019 — the last full year before the pandemic.

What caused such a precipitous drop?

Some point to that 2022 state law change, which reduced the number of weeks that Iowans are eligible to receive unemployment benefits from 26 to 16. But economic experts have varied opinions on the degree to which that law change impacted claims.

What economic experts say

Other economic factors, like a low unemployment rate and a workforce participation rate that still lags behind pre-pandemic levels, likely had more to do with the drop in unemployment claims in 2022, some experts said.

Iowa’s unemployment rate was 2.9 percent in August, compared with 2.7 percent in August 2019, the last August before the pandemic, according to state workforce data.

And while the number of Iowans in the workforce has steadily rebounded since the pandemic, the 1.743 million Iowans working in August still is fewer than the 1.75 million working in August 2019, according to state workforce data.

Fewer workers means fewer unemployed workers seeking benefits, said Peter Orazem, a retired economics professor at Iowa State University.

“There’s just not enough workers to go around. So there’s just not many people who are unemployed,” Orazem said. “The unemployment rate still is exactly the same, but there are fewer people who want jobs. So the total number of unemployed is smaller.”

Sean Finn, a policy analyst for the progressive policy research group Common Good Iowa, said the drop in unemployment claims likely was caused by multiple factors.

“Combine the low unemployment rate, slow recovery of the labor force participation rate, and the sustained heightened level of job openings in the state, and you have clear evidence that the labor market is tight,” Finn said in an email. “Fewer workers are being fired or laid off from their jobs in 2022 — a higher proportion are quitting — meaning fewer of these newly unemployed workers quality for unemployment benefits.”

But at least one state economics expert said the 2022 state law change is likely the largest driver of the drop in unemployment claims. Professor David Cooper, chair of the University of Iowa’s economics department, said the state law change “made it somewhat less attractive” for Iowans to apply.

Cooper also said the strong job market likely factored in the drop, too.

“The state law reduced the number of weeks that you can be on (unemployment), and in other ways made it somewhat less attractive to be on unemployment. You would expect that that would, in part, purely mechanically lead to a reduction in the number of people who are filing for unemployment, and the numbers are consistent with that,” Cooper said. “The combination of reduced unemployment benefits and a strong job market would lead you to expect to see unemployment claims go down, and that's kind of what the numbers are bearing out,” Cooper said.

What lawmakers say

When asked for a reaction to the big drop in unemployment claims, state officials hailed or derided the 2022 law change passed by majority statehouse Republicans.

“Turning the state’s unemployment system into a re-employment system was always intended to get Iowans back to work sooner, and it’s gratifying to see the results,” Gov. Kim Reynolds said in a statement. “There is dignity in work, and through personalized career coaching in week one, we’re able to better help out-of-work Iowans find meaningful employment and discover a path to opportunity and prosperity.”

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A spokesperson said Iowa House Republicans see the data as an indication that “Iowans are working, and they have a government that works to support them in their endeavors,” while Iowa Senate Majority Leader Jack Whitver, a Republican from Grimes, said it shows that statehouse Republicans’ policies are working.

Democratic Iowa Sen. Molly Donahue of Cedar Rapids, the top Democrat on the Senate committee on workforce, said because Iowa’s labor participation rate remains low, the 2022 reduction in unemployment benefits was unnecessary and that lawmakers should enact policies “that protect and support Iowa workers.”

“These significant drops in unemployment benefits confirm what we’ve known since the beginning of this debate: Republican politicians are taking money away from unemployed Iowans who earned unemployment benefits after losing jobs due to no fault of their own,” Donahue said in a statement. “Cutting unemployment insurance benefits has not and will not solve the Reynolds workforce crisis.”

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