So far, however, employment hasn’t grown substantially faster in the states that terminated benefits early, studies and government data have found.
Cutting off the benefits had minimal, if any, impact on pushing people back to work, experts said. But it did force the jobless to cut back their spending, which likely hurt local economies.
Historic expansion
Lawmakers also created two other measures to aid the jobless that are set to end later this week. The Pandemic Unemployment Assistance program provides payments for freelancers, the self-employed, independent contractors and certain people affected by the pandemic, while the Pandemic Emergency Unemployment Compensation program extends payments for those who’ve exhausted their regular state benefits.
Losing benefits
More than 2 million laid-off Americans stopped receiving unemployment benefits and another 1 million-plus people saw their weekly payments shrink by $300 in the states that ended the programs in June.
Stepner worked with a team of researchers from Columbia University, Harvard University and the University of Massachusetts at Amherst. Using data from Earnin, a financial services company, they examined anonymous banking records of more than 18,000 low-income workers who were receiving unemployment benefits in late April.
He expects a similar outcome after payments end nationwide.
“It’s a question of magnitude,” he said. “Will we see a boost in employment? Yes. Will that boost in employment be large? No, it was not large when these initial sets of states withdrew their benefits.”
Another analysis by Jed Kolko, chief economist at job site Indeed, found that while employment grew between May and July in the states that terminated benefits early, it also rebounded in states that continued the payments.
So employers may have to temper their expectations.
“We might not see much of an effect on job growth because we have seen similar job growth since May in both types of states,” said Kolko, who looked at federal data.
Another complication is that many of the people who have been helped by the pandemic programs may face higher hurdles finding new jobs.
For instance, those in the Pandemic Emergency Unemployment Compensation program typically have been out of work for more than six months, and the long-term unemployed often have more trouble landing new positions than those laid off more recently, said Fiona Greig, co-president of the JPMorgan Chase Institute, which has published several studies on unemployment benefits since the start of the pandemic.
Similarly, those enrolled in the Pandemic Unemployment Assistance program tend to be younger, lower income and more marginally attached to the labor force, and therefore may not be able to return to work as quickly, she said.
Businesses having trouble hiring
“Ending the enhanced benefits will be an inducement for some people who have been reluctant to return to the workforce to return,” said Neil Bradley, the chamber’s chief policy officer.
However, other factors are also contributing to the labor shortage, he said. Roughly a quarter of respondents said that Covid-19 concerns, child care and other family needs and a lack of available jobs in sectors that are still suffering were each reasons why unemployed Americans were not looking for work.
A decrease in spending
While the early termination of benefits may not have had much influence on job growth, it likely had a bigger impact on spending.
The jobless cut their spending by $145 a week, or 20%, after their payments were terminated early, Stepner found.
That has big implications for local economies, which were propped up by the pandemic compensation and other relief measures Congress enacted. The states that ended the programs early gave up $4 billion in federal benefits as of early August, which prompted spending to fall by $2 billion, he said.
“That’s money that would have been flowing to local businesses, who may turn around and hire workers,” Stepner said, noting that earnings only rose by $270 million.
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