The Covid Economy

The U.S. unemployment system was already broken. Then the coronavirus pandemic hit

A view of the city of Charlotte during the coronavirus (Covid-19) pandemic, in NC, United States on March 30, 2020.
Anadolu Agency | Anadolu Agency | Getty Images

Welcome to the Covid Economy, CNBC Make It's deep dive into how the coronavirus pandemic is impacting all areas of our lives, from food to housing, health care to small business. We're focusing on North Carolina, a swing state that has seen rapid economic growth — and growing inequality — since the last recession to learn how residents are weathering the economic consequences of this once-in-a-lifetime health crisis.

Angie Bradberry was making it all work on $132 a week.  

The 41-year-old lost her job as a waitress in March when the novel coronavirus began ravaging the U.S., and North Carolina Governor Roy Cooper issued state-wide stay-at-home orders. Though Bradberry is the sole provider for her 10-year-old son, she says she was lucky at the beginning of the pandemic. She didn't have to wait long to receive benefits initially, unlike some of the other people in the unemployment Facebook groups she frequents.

Plus, her living expenses are relatively low: She pays $350 a month for her mobile home in Louisburg, North Carolina, where she homeschools her son. Between enhanced unemployment benefits of $600 per week and the stimulus check, she was able to save a bit in the early months. 

Her check dropped to $132 a week after the federal benefit ended in late July, and money was tight; she says she owes two months' worth of housing payments. But day to day, she was able to pay for gas and groceries to feed her son. She diligently recertified each week, and her benefits appeared in her account on time.

Then her luck ran out, and the "nightmare" began, she says. Bradberry received a notification at the end of July saying she owed North Carolina over $3,700 in unemployment benefits. 

As far as she can tell, an agent working for the Division of Employment Security, or DES, the agency that operates North Carolina's unemployment insurance system, had incorrectly input that she had been receiving income for weeks, though Bradberry has not been back to work. 

I was completely shocked. I have never experienced anything like this.
Angie Bradberry

"I was completely shocked," Bradberry tells CNBC Make It. "I have never experienced anything like this. I never thought a state government agency would allow this to happen."

The state took the last of the extra $300 federal unemployment payment from the Lost Wages Assistance program she earned and began cutting her weekly state payment in half to pay back the thousands of dollars she says she doesn't owe. Though she's repeatedly called DES, she couldn't get through to anyone to fix the mistake. 

For over a month, she's received just $66 each week, according to account information reviewed by CNBC Make It, forcing her to choose between buying gas and paying her electric bill. If it weren't for her low housing costs, she says she and her son would likely be on the street. She doesn't understand why the state won't help fix the mistake they made. 

"It's bad enough we are going through what we have to go through," says Bradberry. "We lose our jobs, our kids can't go to school, we can barely leave our homes. We went through all of this and … I'm at my wits' end."

After CNBC Make It inquired about her case this week, DES called Bradberry and promised to fix the issue. DES did not respond directly to CNBC Make It's request for comment.

Angie Bradberry and her son, Aydan Ayscue.
Courtesy of Angie Bradberry

Bradberry is far from alone. Tens of millions of workers across the country who have lost their jobs during the coronavirus shutdowns and ensuing economic recession have had to become experts in navigating an unreliable and underfunded unemployment insurance system, troubleshooting confusing applications and website glitches on their own and enduring months-long waits for payments

Hotlines set up to help workers are routinely understaffed, with multiple people living in North Carolina and other states telling CNBC Make It that they often know more about their state's system than those hired to help them. Most of these people won't benefit from the media inquiring about their cases.

Issues with unemployment insurance abounded before coronavirus. But the pandemic has shone a spotlight on weaknesses in the systems that have become impossible to overlook as record numbers of people try to access benefits each week. 

"It always takes a recession for people to understand what's been going on in unemployment," Michele Evermore, senior policy analyst for the National Employment Law Project, tells CNBC Make It. "For 10 years, states have been gutting unemployment insurance systems and benefits, and no one noticed. And that's one of the big reasons that the system responded so poorly this time."

Inefficiency is built into unemployment insurance systems across the U.S.

That's not to say DES isn't doing all that it can to get benefits out. "I would definitely add that they have done much better during the pandemic than I would have expected," says Evermore, noting that Governor Cooper issued one of the most expansive executive orders at the beginning of the pandemic to make it easier to get benefits.

"They've done as good a job at that as could be expected, given what they had to work with," she adds.

But what they had to work with was one of the worst unemployment insurance systems in the U.S., thanks to changes the Republican-led state legislature and former Republican Gov. Pat McCrory enacted after the Great Recession. 

North Carolina is one of just 10 states that lowered its maximum benefit duration from the standard 26 weeks, offering just 12 to 20 weeks, depending on the state's unemployment rate. The average worker's UI replacement rate also decreased from 49% of their previous weekly wages pre-recession to 38% of their previous weekly wages in 2019, according to NELP, a drop of over 10%. 

That's if workers received payments at all. In 2019, just 9.1% of people without jobs in North Carolina got unemployment insurance benefits, the lowest rate in the nation (elsewhere in the country, the rate is normally around 50%). It also ranks as the worst state for getting payments out in a timely manner.

"We have such a woefully inadequate state system," Patrick McHugh, research manager at the nonpartisan North Carolina Budget and Tax Center, tells CNBC Make It. "The state legislature kneecapped unemployment insurance benefits in the middle of a crisis and never reestablished them."

That was before coronavirus, by far the biggest stress test the UI system has ever faced. Over 1 million people in North Carolina have applied for UI benefits since mid-March, close to a third of the state's workforce and far more than the antiquated system was built to deal with.

So it's been surprising to experts that the state has fared better than expected. "I would definitely have expected North Carolina to perform the most poorly because of how bad the system was, but as it turns out, the administration really wanted to get benefits to people," says Evermore.

Though North Carolina's system is uniquely bad, it's far from the only one that has had a reckoning during the pandemic. Every state was simply unprepared to deal with the deluge of unemployment applications, writes Kathryn Edwards, an economist at the nonpartisan RAND Corporation. 

"Since its creation in 1935, unemployment insurance has been neglected to the point of obsolescence," writes Edwards. "Most unemployed people do not receive benefits, the generosity of benefits has eroded over time, and trust funds have not kept up with need." 

That's true across the country. At the peak of the pandemic, websites for applications crashed in states including Florida, Michigan, New Jersey, New York and Ohio. Nationwide, workers — many of whom are interacting with the UI system for the first time — have reported delays and frustrations with accessing their benefits

"The Covid-19 pandemic shows why it's crucial to strengthen this program so it can help businesses and workers ride out economic shocks beyond their control," writes Edwards.

Low wage, minority and women workers suffer more

Like in the rest of the country, North Carolina's job losses during the coronavirus pandemic have been concentrated in lower wage sectors like the service industry, education and retail, says North Carolina Budget and Tax Center's McHugh. Women and minority workers are overrepresented in these fields, so they have also been hit harder the past few months. They are also more likely to work on the frontlines and get sick from Covid-19. 

This is an issue that's playing out across the U.S. "The burden of a downturn has not fallen equally on all Americans. Instead, those least able to withstand the downturn have been affected most," Federal Reserve chair Jerome Powell said during a Senate Banking Committee hearing in June. 

"If not contained and reversed, the downturn could further widen gaps in economic well-being that the long expansion had made some progress in closing," he added.

The gap is already widening in North Carolina, says McHugh. Workers in low-wage jobs, particularly people of color, have barely recovered from the Great Recession, if they've recovered at all. While they may have found new jobs, wage stagnation over the past few decades ensures that they have no savings or assets like a home to fall back on during hard times. They also likely don't get benefits like sick days.

That's led to a further bifurcation in North Carolina's economy: White collar workers in cities like Raleigh, Durham and Charlotte have been able to work from home, inconvenienced but largely untouched by the recession. It's the working class that has taken on the bulk of the economic strain. 

"You're seeing more and more families being completely out of financial cushion, and that's further undermining the pace of economic recovery in North Carolina," says McHugh. "We're not even in the ballpark of having an adequate response for folks that are experiencing the worst of this recession."

You're seeing more and more families being completely out of financial cushion, and that's further undermining the pace of economic recovery in North Carolina.
Patrick McHugh
research manager at North Carolina Budget and Tax Center

Studies have shown that an adequate unemployment insurance system would go a long way to aiding recovery and helping close that widening inequality gap. The reasoning is fairly straightforward: Workers receive payments which are then spent on necessities like food and housing, providing direct stimulus to the economy. 

"Unemployment insurance is one of the best bang-for-the-buck economic stabilizers," says Evermore, noting that during the last recession, every dollar spent in UI generated $1.61 in local economic activity. 

That's why economists and other advocates are pushing for another federal stimulus package, ideally with enhanced UI benefits of some kind. Though Congress has been debating a package for weeks, it appears they are at a stalemate: On Tuesday, President Donald Trump tweeted that negotiations were off the table until after the election. It's not clear what, if anything, will pass now.

'You're left waiting and waiting and waiting'

In the meantime, there is still extreme need for benefits across the country. An increasing number of workers have been unemployed for more than three months, according to the U.S. Department of Labor, an indication that the coronavirus pandemic will have a lasting impact on the finances and economic security of ever more Americans. 

Those without jobs want to return to work, but can't either because they fear for their and their family's health, or because there still aren't jobs to return to. With many in North Carolina, and across the U.S., approaching the maximum number of weeks they can collect UI, they are left to wonder how they will pay their bills.  

Mindy Prichard is one of them. Before the pandemic, the 39-year-old was getting by as a freelance writer and events planner. Since her work dried up in mid-March, she estimates her monthly income has dropped 90%.

For months, Prichard, who lives in Statesville, North Carolina (about 45 minutes north of Charlotte), has been applying to any job she can find. Most, though, are part-time jobs at stores like Dollar General. She'll take the work, but she's desperate for full-time hours.

As a freelancer, Prichard qualified for benefits via the Pandemic Unemployment Assistance program, established by the federal government in the wake of the crisis to extend UI to people who typically aren't eligible. 

Because the system was new, it took months for her to start receiving benefits. With the expiration of the federal enhanced benefits, she currently receives $234 per week. 

Though she is able to get by on her UI payments and wages from her teenaged daughter's retail job, Prichard says it's been a stressful seven months. And she's worried for the people who haven't received benefits at all and can't reach someone at DES to help them.

"Getting any kind of help is like pulling teeth. You're left waiting and waiting and waiting on money that you need," says Prichard. "Our state is backwards sometimes, it really is."

CNBC Make It will be publishing more stories in this series each week in October. If you live in North Carolina and are interested in sharing your experiences related to the pandemic, please email reporter Alicia Adamczyk at

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