GQP Governors Fail: Cutting Off Unemployment Benefits Early Did Not Increase Employment

The American Rescue Plan extended the CARES Act pandemic unemployment benefits to September 6. But virtually all “red state” governors ended the unemployment benefits early, in June and July, on the specious argument that you Lucky Duckies are lazy couch potato ne’er-do-wells who don’t want to return to work while living off that extra $300 week Pandemic Unemployment Assistance, and you are creating an “employee shortage.”

Governor: “I can’t get waiter service at my favorite restaurant, damnit!” (It never occurs to the governor that people do not want to return to a sub-minimum wage job working for tips. They are looking for something better – it is an employees’ job market right now. Pay people a decent wage and the so-called employee shortage would disappear).

Cutting off the pandemic unemployment benefits was supposed to be the stick that drives “lazy” people back to work.

Once again, proving that Republicans know absolutely nothing about economics, CNBC reports 26 states ended federal unemployment benefits early. Data suggests it’s not getting people back to work:

About half of U.S. states withdrew federal funds for the unemployed months early to encourage out-of-work residents to find a job. But mounting evidence shows that policy gambit hasn’t paid off.

Twenty-six states announced their intent to end federal pandemic-era benefits starting in May. They officially pulled out in waves over June and July.

In Arizona, eligible claimants received Federal Pandemic Unemployment Assistance (FPUC) through the week ending July 10, 2021.

UKG, a payroll and time-management firm, found that shifts among hourly workers in those states grew at about half the rate as states that continued the benefit — the opposite trend of what one might expect.

Specifically, in states that ended benefits, shifts grew 2.2% from May through July; they grew 4.1% in the others that kept federal aid intact, according to UKG’s analysis.

“Unemployment benefits were not the thing holding people back from going to work,” according to Dave Gilbertson, a vice president at UKG. “There are other elements out there, particularly in their personal lives, making it really difficult to go back to work.”

It doesn’t appear differences in state economies or labor markets influenced the dichotomy, since both groups were growing at similar rates earlier this year, Gilbertson said.

Similarly, employment fell 0.9% in states that ended federal benefits between mid-June and mid-July, but rose 2.3% in states that kept them, according to data published this week by Homebase, another payroll and time-management firm.

The analysis examined percent change in number of employees working relative to April 2021.

The UKG and Homebase figures are early indicators. It will likely take another month or two of job and other labor-market data before economists can make a more thorough assessment of how effective the state policies were, they say.

“It’s an early view, there’s no question,” Gilbertson said. “It takes a while for folks to be able to rearrange their personal lives to start a new job.

“But I feel it’s a pretty strong directional indicator.”

The high-frequency data aligns with other recent analyses.

Economists at Indeed, using proprietary job-search data, and Arindrajit Dube, an economics professor at the University of Massachusetts Amherst, who studied recent survey data published by the U.S. Census Bureau, also didn’t find evidence that state policies pushed people back to work.

″[Data] suggest there’s no clear evidence that [unemployment] programs going away early led to a significant increase in employment growth or job finding,” according to Nick Bunker, the economic research director for North America at the Indeed Hiring Lab.

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Some economists argue pandemic-related factors, not jobless benefits, are the primary reasons workers may not be returning to the workforce as quickly as anticipated.

For example, parents may still not have adequate childcare; those who can’t work from home may still be cautious for health reasons; workers may have relocated away from jobs, or changed industries, during the pandemic; and baby boomers may have retired early and don’t plan to return.

The delta variant threatens to further complicate the recovery. Many of the states that withdrew federal support also have lower rates of Covid vaccination, Bunker said.

“Especially now with the delta variant, it could be pushing the labor markets back in those states,” he said.

Nationally, fewer unemployed people flagged the pandemic as a reason for not searching urgently for work in July relative to June, according to an Indeed survey published Wednesday.

Jobless respondents ranked unemployment payments last among factors keeping them from searching for work urgently. They ranked behind financial cushion, have an employed spouse, household care responsibilities and Covid fears.

With the $300 supplement, almost half of jobless workers (48%) make as much or more money on unemployment benefits than their lost paychecks, according to a recent paper published by the JPMorgan Chase & Co. Institute.

Those extra funds had a small impact on job-finding but didn’t significantly hold back the job market through mid-May, according to economists Fiona Greig, Daniel Sullivan, Peter Ganong, Pascal Noel and Joseph Vavra, who authored the analysis.

More from CNBC. Millions will lose pandemic unemployment in September—many have already been cut off:

Roughly 7.5 million workers who’ve relied on pandemic-era unemployment benefits will be cut off from jobless aid altogether when they are set to expire on September 6, according to estimates from The Century Foundation, a left-leaning think tank.

As of mid-July, roughly 9.4 million people were drawing benefits from Pandemic Unemployment Assistance (PUA), which covers those not traditionally eligible for aid, including freelancers and gig workers, and Pandemic Unemployment Emergency Compensation (PEUC), which extends aid to those who’ve exhausted their state’s benefits period. Workers drawing from either of these programs make up more than 72% of Americans collecting unemployment insurance, according to the Department of Labor.

The programs, which support people who’d normally fall through the cracks of the unemployment system, were established in the March 2020 CARES Act and extended until Labor Day 2021 through the American Rescue Plan. When pandemic unemployment was last extended in March 2021, it kept an estimated 11.4 million people from falling off the “benefits cliff.”

Many cut off from aid early

While pandemic unemployment programs officially run until September, governors in 26 states withdrew early in June and July. The moves left some 1.6 million workers without any jobless aid over the last month, according to a statement from Andrew Stettner, a senior fellow at The Century Foundation.

Ending aid hasn’t spurred hiring

Critics of pandemic aid have said generous benefits, including a $600 weekly supplement that dropped to $300 per week last summer, have kept people from accepting new jobs that would jumpstart the economy. Many employers, particularly in leisure and hospitality, have had trouble filling a growing number of opening roles as consumer activity has picked up since the spring.

But Census Bureau data suggests recipients didn’t rush to find jobs in states that cut off pandemic aid early, according to research from Arindrajit Dube, an economics professor at the University of Massachusetts Amherst.

Previous research has suggested that financial assistance hasn’t kept people from taking jobs, but rather availability of paid work; workers’ individual health and safety concerns; and access to child care all play a large role in whether or not they can find suitable work during the pandemic.

Jobless workers are concerned about delta variant

Rising Covid cases due to the contagious delta variant make finding a suitable job even harder.

[E]ven if an extension is granted, they worry governors could end federal assistance on a state-by-state basis. “I think it could be more devastating than what people in Congress are prepared for,” Keeton says.

And more from CNBC. There’s an unemployment cliff coming. More than 7.5 million may fall off:

Millions of jobless Americans are poised to lose Covid-era income support in about a month’s time.

This impending “benefits cliff” appears different from others that loomed this past year, when Congress was able to keep aid flowing after eleventh-hour legislative deals.

There doesn’t seem to be an urgency among federal lawmakers to extend pandemic benefit programs past Labor Day, their official cutoff date.

“There’s almost nobody talking about extending the benefits,” said Andrew Stettner, a senior fellow at The Century Foundation, a progressive think tank.

Who’s impacted?

The cliff will impact Americans who are receiving benefits through a handful of temporary programs.

They include aid for the long-term unemployed, as well as the self-employed, gig workers, freelancers and others who are generally ineligible for state benefits.

More than 9 million people were receiving such assistance as of July 10, according to the Labor Department.

About 7.5 million will still be collecting benefits by the time they end Sept. 6, Stettner estimates. They’d lose their entitlement to any benefits at that time.

Others who are eligible for traditional state unemployment insurance can continue to receive those weekly payments past Labor Day. Roughly 3 million people are currently getting regular state benefits.

However, they’ll lose a $300 weekly supplement.

The average person would have gotten $341 a week without that supplement in June, according to Labor Department data. (Payments range widely among states — from $177 a week in Louisiana to $504 a week in Massachusetts, on average.)

[T]he CARES Act expansions of unemployment benefits were unprecedented in the history of the unemployment insurance program, which dates to the 1930s.

Congress has expanded payments in past recessions, too, to varying degrees.

During the Great Recession, for example, workers were able to collect up to 99 weeks of unemployment benefits — far more than the traditional 26 weeks (or less in some states). That aid ceased in December 2013, at which time 1.3 million workerslost benefits.

During the pandemic, workers were poised to lose extended benefits last December and again this past March, but Congress intervened in both cases, most recently with the American Rescue Plan.

“This is so many more people than have ever been cut off from something like this,” Stettner said of the looming cliff relative to past cutoffs.

A recovering economy

Of course, the economy has recovered more quickly than in past recessions. It’s now larger than it was before the pandemic, according to Commerce Department data released Thursday.

Hiring is also up over the past few months. The economy added 850,000 new jobs in June, after 583,000 in May and 269,000 in April. However, the U.S. has yet to recover almost 7 million lost jobs versus pre-pandemic levels.

Critics of expanded benefit programs believe they’ve led workers to stay home instead of looking for work, which has made it harder for businesses to fill openings and contributed to muted hiring. [See above. The data refutes this unsupported nonsense.]

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The extra funds had a small impact on job-finding among workers, but didn’t significantly hold back the job market, according to economists Fiona Greig, Daniel Sullivan, Peter Ganong, Pascal Noel and Joseph Vavra, who authored the analysis.

“We conclude that unemployment supplements have not been the key driver of the job-finding rate through mid-May 2021 and that U.S. policy was therefore successful in insuring income losses from unemployment with minimal impacts on employment,” they found.

And though it’s still early, evidence so far doesn’t suggest the state policies immediately pushed people back into the workforce.

Some economists argue pandemic-related factors, not benefits, are the primary reasons workers may not be returning to the workforce as quickly as anticipated.

For example, parents may still not have adequate child care; those who can’t work from home may still be cautious for health reasons; workers may have relocated away from jobs, or changed industries, during the pandemic.

At the same time, the delta variant threatens to complicate the recovery. The Covid strain is significantly more contagious than the original one and may make people sicker than other virus variants, according to a Centers for Disease Control and Prevention document reviewed by CNBC.

Why is Congress on recess when there is a Covid benefits cliff, the federal budget, and the federal debt ceiling all coming up before the end of September? Not to even mention the infrastructure bills, and the voting rights bills. Recess is over, get back to work!