Image source: US Department of Labor, Sept. 2, 2021
By Christopher Rugaber and Paul Wiseman
Millions of jobless Americans who have depended on federal unemployment aid as a financial lifeline are about to lose those benefits just as the delta variant of the coronavirus poses a renewed threat to the economy and the job market.
Two programs — one that provides jobless aid to self-employed and gig workers, the other to people who’ve been unemployed for more than six months — will expire Monday. As a result, 8.9 million people will lose those weekly benefit payments, according to an estimate by Oxford Economics.
An additional 2.1 million people will lose a $300-a-week federal supplemental unemployment payment, which also expires Monday. These recipients will, however, continue to receive state unemployment benefits.
The cutoffs come as employers have been steadily hiring and laying off fewer workers. The number of people applying for jobless aid dropped 14,000 last week to 340,000, the Labor Department said Thursday, to the lowest level since the pandemic struck in March of last year.
Still, the number of people who will lose financial support starting next week is much higher than during previous cutoffs of expanded unemployment aid. After the Great Recession in 2008-2009, for example, when jobless aid was extended to 99 weeks, that extension lasted through 2013. When that benefits program finally ended, just 1.3 million people were still receiving aid.
The current expanded jobless aid programs were created in the financial rescue legislation that was enacted after the pandemic erupted and was extended by President Joe Biden last March. Lawmakers generally expected that by September, with more Americans vaccinated and employers stepping up hiring, the pandemic would fade and the economy would fully recover.
While the economy is rebounding, economists worry that the delta variant may slow hiring and growth. When the government releases the August jobs report Friday, some analysts expect it to show a slowdown in hiring.
Next week’s cutoff of unemployment checks for millions will abruptly erase a vital source of income for many.
“We were a thriving middle-class family 18 months ago,” said Chenon Hussey of West Bend, Wisconsin. “We’re going to fall off the map” when the federal benefits end.
Hussey, 42, who works part time for a county government, is trying to revive a small motivational speaking business that was crushed by the pandemic. Her husband, a master welder, has been laid off three times during the health crisis.
The federal benefits, she said, have been “the bridge from absolute poverty for us.” Without them, Hussey said, their monthly income will drop by $2,800. They won’t be able to afford the intensive care that their daughter, who has developmental disabilities, needs. They may have to move her to a group home, “which is what we never wanted for her.’’
Their cars are paid off, but the mortgage remains a struggle.
“It’s going to take us a while to get through it,” she said. “We are positive in the fact that we’re both willing to do what we need to do.’’
Twenty-five states have already ended the $300 weekly supplement and nearly all of those have also stopped the two emergency federal programs, ending payments for about 3.5 million people, Oxford Economics estimates. Those early cutoffs occurred after some businesses complained in the spring and summer that they couldn’t find enough people to hire.
Nearly all the 25 states are run by Republican governors — except for Louisiana — and most asserted that the $300-a-week in supplemental federal aid was discouraging the unemployed from taking jobs. Posted job openings — a record 10.1 million in June — have been rising faster than applicants have lined up to fill them.
Yet research has found that the early cutoffs of federal jobless aid have led to only a small increase, at most, in hiring. A study by Kyle Coombs, an economist at Columbia University, and Arindrajit Dube, an economist at the University of Massachusetts, Amherst, found that in states that kept the federal benefit programs, 22% of people receiving benefits in April had found work by the end of July. In states that cutoff aid, that figure was nearly 26%, a modest increase.
Other research has found even less impact: In a report last week, economists Peter McCrory and Daniel Silver of J.P. Morgan found “zero correlation″ between job growth and state decisions to drop the federal unemployment aid, at least so far. They warned that the loss of income from a cutoff of unemployment checks “could itself lead to job losses, potentially offsetting any gain” from encouraging more people to go back to work.
Most economists cite other factors that have made it harder for businesses to fill jobs at the pay they are offering: Many of the unemployed don’t want to take jobs in service industries such as restaurants and hotels, out of fear they will contract COVID-19. In addition, many women have dropped out of the job market to care for children and have struggled to find or afford child care.
Andrew Stettner, a senior fellow at the Century Foundation, a think tank, estimates the expiration of the benefit programs will reduce aid payments by $5 billion a week, likely weakening spending.
“We are all tired of the pandemic, but that doesn’t mean we forgo taking the steps that we need to keep people afloat,” Stettner said.