San Jose businesses struggle as state safety net unravels

California’s safety net is unraveling and San Jose residents and small business owners are at risk.

That’s because San Joseans are part of the 2.2 million people in California who have or will completely lose unemployment benefits this week.

The federal government ended four pandemic-related benefit programs to help Americans get through unemployment last week. That means 2.2 million out of 3 million Californians currently receiving some form of unemployment will completely lose their benefits, according to the state Employment Development Department—and another half-million Californians will stop receiving $300 additional unemployment checks from the federal government every week.

That also includes small business owners, independent contractors and gig workers who won’t be collecting checks from the government.

State lawmakers already exhausted federal relief funds that could have been redirected to unemployment, and the Legislature isn’t expected to extend them. On Saturday, the feds will end yet another program: a 13- to 20-week extension of unemployment benefits beyond the traditional 26-week cutoff.

On top of all that, California’s eviction moratorium is set to expire on Sept. 30.

Joel Castro, manager of Flames Eatery & Bar in downtown San Jose, had six workers on unemployment until two months ago.

“Some people like unemployment because they say they can earn more money than working. But lucky for us, everyone wants to work,” Castro told San José Spotlight. “But our big challenge is to bring customers back. There hasn’t been business like it was before (the pandemic), so we’ve had to cut people’s hours. And that’s why some of our employees went on unemployment. We didn’t have enough hours for everybody, but we had to stay open.”

Layoffs were a reality for downtown San Jose during the pandemic, with Team San Jose—which runs the convention center and other cultural facilities—losing 1,304 employees. Other losses were felt at the San Jose Marriott and Hilton San Jose—with 229 and 157 workers laid off, respectively—in addition to numerous other businesses.

There are some bright spots: Santa Clara County is seeing recovery at a faster pace than the state and the nation, which have unemployment rates of 8% and 6.1%, respectively. The unemployment rate is finally dropping after steadily rising during the pandemic. As of July, the unemployment rate in Santa Clara County was 50,600, or 4.9%.

That’s welcome news for small restaurants that have relied on part-time and temporary workers such as Ally Garcia, manager of Cinnaholic, a dessert restaurant in downtown San Jose. She witnessed business pick up through Doordash in the early days of the pandemic. None of her employees had to file for unemployment, but many left because of the virus.

“We had a lot of staff who had to return home,” Garcia told San José Spotlight. “We employ a lot of students here, especially a lot of San Jose State students. We lost a lot of staff who decided to move back home, so it was a little tough having to find new staff.”

Business owners hope the expiring unemployment benefits will help with hiring. But according to a report last week by the Wall Street Journal, states that already ended benefits only saw a modest bump in job growth.

“That tells us that it’s maybe not the benefits that are keeping people at home still,” Patrick Kallerman, vice president of research for the Bay Area Council Economic Institute, told San José Spotlight. “In my opinion, it’s likely just a whole host of other things related to the spread of COVID. Whether they’re getting it themselves, whether they have vulnerable family members, whether they’re caretakers. All those sorts of things are still weighing on the labor market. There are still a lot of folks holding back due to fear of the virus.”

Still, workers will be out of benefits, and businesses will be short-staffed. For Castro, that’s the most difficult part.

“It’s still difficult with less employees,” Castro said. “Everything has changed and everything is changing still.”

Contact Lloyd Alaban at [email protected] or follow @lloydalaban on Twitter.