Unemployment Numbers Drop Sharply Following Fraudulent Claims

Unemployment claims plummeted following the revelation that fraudulent claims had driven up recent figures.

The sharp drop in weekly claims reported Thursday (May 18) by the U.S. Department of Labor marked a reversal of numbers from the prior week, which jumped largely due to an unexpected increase in claims in Massachusetts.

This week’s numbers showed initial claims for the week ended May 13 falling by 22,000 to 242,000, while continuing claims fell to 1.79 million, a decline of 6,000.

The Massachusetts Department of Unemployment Assistance has said that it “is experiencing an increase in fraudulent claim activities where people attempt to gain access to active [unemployment insurance (UI)] accounts or file new UI claims using stolen personal information so they can fraudulently obtain unemployment benefits.”

Massachusetts is not alone in this problem, with Kentucky also reporting similar findings recently on its website.

“The Office of Unemployment Insurance has discovered an increase in the number of imposter UI claim attempts,” the Kentucky site said. “As our office continues to work closely with the Commonwealth Office of Technology to protect the UI system against fraudulent claims, we are asking employers and individuals to take precautions and assist our efforts to ensure you are protected.”

The problem has led some economists to hold back on drawing conclusions about the recent trend showing unemployment rising.

“The headline claims numbers right now are hard to read because Massachusetts has reported a wave of large-scale fraudulent claims based on identity theft,” Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said in a note to clients after the release, per a Bloomberg News report. “Other states might also suffer from the same problem — Kentucky has acknowledged a problem — but we have no way of knowing for sure.”

While figures suggest a labor market that remains tight, recent weeks have shown dark clouds on the horizon. For example, layoffs in the retail space have begun to increase, jumping 270% between March and April.

According to PYMNTS research, nearly 70% of consumers reported reduced spending on non-essential retail products specifically because of high inflation.

Meanwhile, 60% of consumers said they’ve begun shopping at cheaper retailers, while 35% have traded product quality for less-costly, lower-quality goods.