More Than 500,000 Possibly Fraudulent Unemployment Claims Have Been Filed in Maryland Since May 1

Unemployment is falling but fraudulent jobless claims are still skyrocketing in some places.

Maryland's Department of Labor has flagged more than 500,000 unemployment claims for being potentially fraudulent in just the past two months as scammers continue to take advantage of the boosted benefits provided since the start of the COVID-19 pandemic.

In remarks to the media earlier this week, Maryland Gov. Larry Hogan said the state has confirmed more than 1.3 million fraudulent unemployment claims since the beginning of the pandemic and is investigating 508,000 potentially fraudulent claims filed since the beginning of May. While Maryland's figures are eye-popping, it is likely not the only state being targeted by benefit thieves. California, Ohio, and others have been swamped by fake unemployment claims at various times during the pandemic—one particularly gutsy scammer filed a claim using Kansas Gov. Laura Kelly's name. In Washington state, one man was arrested after allegedly using more than 100 different identities to claim over $350,000 in unemployment benefits.

One estimate from a private firm that combats identity theft suggests that as much as $400 billion in unemployment payments made during the pandemic—nearly half of the national total—may have been stolen.

Thieves are probably targeting the unemployment system because that's where the money is.

"Criminals and scammers—including sophisticated, international crime rings—have been attracted by the enhanced weekly payments authorized by Congress," reports CNN. "Prior to the pandemic, unemployment benefits were typically not that generous and, therefore, not as much of a target."

As part of the Coronavirus Aid, Recovery, and Economic Security (CARES) Act, passed in March of last year, the federal government provided boosted unemployment payments that are layered atop existing state-level benefits for workers who lose their jobs. The CARES Act initially provided $600 per week in boosted payments. Since December, the federal boost has been $300 per week, and those payments will continue until September 6—though some states are already cutting off those payments in order to limit fraud and encourage workers to seek jobs.

While every state has an office dedicated to combating unemployment fraud, they generally do a pretty poor job of it. Improper unemployment payments—not all of which are attributable to fraud—have been over 10 percent in 14 of the past 17 years, according to a recent federal Department of Labor report. The pandemic and federal unemployment payments turned a leaky system into a firehose of fraud.

All those fraudulent unemployment claims might be messing up key economic indicators about the strength of the post-COVID recovery too. Citing a report from investment bank JPMorgan Chase, Axios reported Friday that jobless claims are becoming an unreliable signal. Prior to the pandemic, about 45 percent of jobless claims ended up being eligible for unemployment benefits, but that figure has dropped to 36 percent recently.

But unemployment claims remain one of the most commonly referenced economic indicators. On Thursday, the Department of Labor said 411,000 Americans had filed a claim in the past week—far, far lower than at the peak of the pandemic, but still above pre-pandemic norms.

Again, the federally boosted unemployment benefits might be playing a role. Expanded unemployment benefits are slowing the recovery by disincentivizing some workers from seeking jobs, according to a recent study from the San Francisco Federal Reserve.

But at least the scammers are keeping busy.