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For the first time in five weeks, the U.S. faces an increase in the number of new applications for Unemployment insurances (UI) and Pandemic Unemployment Assistance programs (PUA). The applications went from 711,000 in the first week of Nomveber to 742,000 during the second.
Some analysts, such as Eliza Winger from Bloomberg, think “Jobless claims unexpectedly rose in the November employment survey week, suggesting the latest acceleration in Covid-19 cases and containment restrictions are starting to have an adverse impact on the labor market recovery.”
Although Covid-19 surely caused some jobless claims, it is unlikely the disease caused a spike of new applications only in one state while the others remained the same or even decreased the number of new applications.
As Matt Weidinger from the American Enterprise Institute (AEI) noticed, the data from the Department of Labor reveals unemployment applications indeed have grown in numbers, however, the increase in applications was only significant in one state: Louisiana. In fact, ruling out Louisiana, applications for Unemployment Insurances (UI) or assistancem from PUA programs have decreased all over the country.
|Type of Application||November 7 Week||November 14 week||Change in numbers||%|
|UI (without Louisiana)||715,071||700,736||-14,335||-2.0 %|
|PUA (without Louisiana)||286,680||280,671||– 6,009||-2.1 %|
Unemployment applications in Louisiana quadrupled from November 7 to 14. This has only happened twice in the past 30 years: after the state was struck by Hurricane Katrina in 2005 and during the first week of lockdowns this year.
The coronavirus may well be an explanation for the increase in applications in the coming weeks when more states impose restrictions, but at the moment, Louisiana is below the country’s average of new infections per 100,000 people.
Despite being struck by a hurricane in October, Louisiana’s job market had been recovering and economic activity, although not great, was not slowing down. For some pundits, neither the pandemic nor the economic moment can explain the rise in jobless claims in Louisiana, but a group of Nigerian hackers might.
How the CARES Act was defrauded on a massive scale
With the pandemic, scams to steal information on the internet have grown more than 3,000%. Apparently, this massive identity theft was used to steal millions of dollars from the assistance programs created by Trump’s administration CARES Act.
According to AEI, there has been a disproportionate rise in unemployment applications in at least 9 states as a result of coordinated efforts to defraud from unemployment insurances and PUA programs.
PUA programs were established under CARES Act to help people that lost their job due to the outbreak of COVID-19. Families that are eligible for assistance can receive immediate payments up to $1,200 for individuals or $2,400 for married couples and up to $500 for each qualifying child.
The lack of requirements for eligibility, like previous job certification, made PUA programs a target for scammers who took advantage of the system’s lack of accountability and rob millions of dollars that were supposed to help thousands of american families.
In some states this has become a real problem, in July, Colorado reported that as much as 75% of requests from “independent workers” for unemployment assistance were fraudulent. As reported by the Denver Post, the state received “up to 50,000 fraudulent requests”.
Washington state was also heavily affected by this wave of fraudulent requests that made it lose more than $1.5 million, as reported by Suzy LeVine, commissioner of Washington’s Department of Employment Security.
The growth in frauds was so disproportionate that in May it placed Washington state as the first in the number of requests for federal unemployment assistance, more than 30% of Washington’s workforce according to the data had made a request for assistance. A big difference, more than 5 points with Nevada, which had the second largest unemployment claims with a 24.5% rate.
The Secret Service later revealed that assistance programs in Florida, Hawaii, Massachusetts, North Carolina, Oklahoma, Rhode Island, Washington, and Wyoming were defrauded by a Nigerian organization that made up to $4.7 millions from filling false job loss claims online.
How 4.7 millions of dollars were stolen…
According to Agari cybersecurity agency, the Nigerian hacker group using Gmail “dot accounts” mass-created fake accounts on state unemployment websites and the IRS website. Because Google ignores periods when interpreting Gmail addresses, dozens of fake accounts were created for processing CARES Act payments for non-tax filers.
As part of the scam, Nigerians used Green Dot prepaid cards to receive the payments. Green Dot cards were ideal for the hackers as are advertised being able to receive government benefits, such as unemployment payments, up to four days before they’re due to be paid.
Typically requests made by this group of hackers were made on behalf of the person’s entire family group, which could mean transfers for $ 3,600 per fraudulent request. Agari estimates, the Nigerian hacker group was able to defraud up to $ 4.7 million from pandemic aid programs using this trick.
Although the impact of the pandemic should not be ruled out, the quadrupling of unemployment claims in Louisiana may well be a new sign that aid programs, on which millions of Americans who lost their jobs rely, are being defrauded by criminal groups —that do not even reside in the United States— by millions of dollars.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica