Little evidence that ending additional unemployment has sent people back to work

A person reads a list of employers as they attend a career fair at SoFi Stadium on September 9, 2021, in Inglewood, California.

PATRICK T. FALLON | AFP | Getty Images

Little evidence remains that states have been successful in getting people back to work by ending federal unemployment benefits earlier, economists say.

Twenty-six states withdrew their unemployment aid during the pandemic in June or July. Their governors, mostly Republicans, believed that improving unemployment assistance offered an incentive to stay at home instead of working.

The data suggests other factors play a bigger role, economists say. They cite lingering health issues, childcare issues and increased savings among a host of issues sidelining workers, even amid record-breaking job openings.

Federal benefit programs officially ended on Labor Day in other states. The “unemployment cliff” has affected more than 8.5 million people, who have lost all of their benefits, Labor Department data released Thursday suggest.

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The low-key response of workers to the first cliff of unemployment (i.e. in states that pulled out early) suggests that the end of Labor Day will also not cause an increase in job growth. employment, according to economists.

“If it’s some kind of precursor, I’m not betting on the end of federal benefits [on Labor Day] being a real clear-cut inflection point, ”said AnnElizabeth Konkel, labor economist at the job site Indeed.

State economies differ (in terms of job mix and worker demographics, for example), making comparisons and forecasting difficult, she said.

‘Urgent problem’

Understanding how the cliff of unemployment will impact the US labor market is a “pressing matter,” according to a research note from JPMorgan Chase Bank released Thursday and authored by economist Peter McCrory.

For example, those who are unable to find a job or return to work may experience financial difficulties and reduce their expenses, which can negatively impact local economies.

Most of the people (7 of 8) who lost federal aid in June were not re-employed in early August, according to an article by researchers at Columbia University, Harvard University, University of Massachusetts Amherst and the University of Toronto last month. This led to an overall spending cut of nearly $ 2 billion, they found.

JPMorgan economists have also “failed to find significant effects” on employment in early-retirement states since mid-June, McCrory wrote. He looked at data such as monthly state employment measures and weekly jobless claims, as well as alternative measures such as restaurants and Google job searches.

“In fact, we find that the loss of benefits is associated with a modest decline in job growth, income growth and labor force participation,” McCrory wrote.

While an “influx” of workers into the labor market has yet to materialize in these states, it is still too early to understand whether the impact will be similar in states where federal benefits ended on September 6. , according to Daniel Zhao, a senior economist at the Glassdoor job site. (September 6 was the official expiration of the US bailout, which Congress did not extend.)

There is reason to believe the impact could be more pronounced in the remaining half of the states, he said. On the one hand, the Labor Day cliff (which hit large states like California and New York) hit a greater volume of workers than that of the summer, which may have helped spotting more easily the impact on employment in the available data, he said.

But the delta variant of Covid (and its associated spike in cases) can make the unemployed nervous and cause employers to struggle to find people for vacancies, especially for in-person work, economists have said. High workloads can also impact parents’ ability to return to work due to school closures or student quarantines, for example.

Americans are still sitting on high savings, perhaps in part because of improved benefits, giving the unemployed more time to find the best-suited job, Zhao said. (Other government support and cuts to in-person activities may also have helped bolster economies during the pandemic.)

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