An early end to federal unemployment pay is not getting people to work

Job seekers speak to recruiters at a Job News USA careers fair in Louisville, Kentucky on June 23, 2021.

Luke Sharrett / Bloomberg via Getty Images

About half of the US states withdrew federal funds for the unemployed months early to encourage unemployed residents to find work. But more and more evidence shows that the political move has not yet paid off.

Twenty-six states announced their intention to end federal services from the pandemic-era in May. In June and July they officially took off in waves.

UKG, a payroll and time management company, found that the shifts among hourly workers in these states were growing about half as fast as in the states that continued the utility – the opposite trend from what might be expected.

In particular, in states where benefits ceased, shifts increased 2.2 percent from May to July; In the other countries that kept federal aid intact, they rose by 4.1% according to the UKG analysis.

“Unemployment benefits haven’t stopped people from going to work,” said Dave Gilbertson, UKG vice president. “There are other elements out there, especially in her personal life, that make it really difficult to get back to work.”

It doesn’t appear that differences in state economies or labor markets have affected the dichotomy, as both groups grew at similar rates earlier this year, Gilbertson said.

Similarly, employment fell 0.9% in the states that ended government benefits between mid-June and mid-July, but rose 2.3% in the states where they were maintained, the data said released this week by Homebase, another payroll and time management company.

The analysis examined the percentage change in the number of employees compared to April 2021.

The UKG and Homebase figures are leading indicators. It will likely be a month or two with jobs and other labor market data before economists can make a more thorough assessment of the effectiveness of government policies, they say.

“It’s an early view, not a question,” Gilbertson said. “It takes a while for people to be able to rearrange their personal lives in order to start a new job.

“But I think it’s a pretty strong indicator of direction.”

The high frequency data is consistent with other recent analyzes.

Indeed economists using proprietary job search data and Arindrajit Dube, an economics professor at the University of Massachusetts Amherst who examined survey data recently released by the US Census Bureau, also found no evidence that state policies were pushing people back.

“[Data] suggest that there is no clear evidence of this [unemployment] Programs that were stopped early resulted in significant increases in job growth or job searches, “said Nick Bunker, North American economic research director for Indeed Hiring Lab.

Federal benefits

The federal programs in question were created by the CARES Act in March 2020 when millions of people turned to the unemployment system amid mass layoffs.

They increased the level of weekly benefits (currently by $ 300 per week) and offered assistance to workers who are normally not eligible, such as the long-term unemployed and gig workers, self-employed, part-time workers, and freelancers.

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After the April job report, serious discussions began about labor shortages – and the role of extended benefits in it. The US economy created 269,000 new jobs this month, about a quarter of the forecasts made by economists.

Montana was the first of the 26 states to announce its withdrawal. The American Rescue Plan provides federal aid through September 6th.

Instead of extended benefits, the governor of Montana, Greg Gianforte, offered residents a one-time re-entry bonus. A handful of other states also offered such bonuses.

“The enormous expansion of federal unemployment benefits is now doing more harm than good,” said Gianforte on May 4th. “We have to create an incentive for Montaner to get back into working life.”

Employment growth in the US has increased from May to 850,000 in June. The Bureau of Labor Statistics released its July report on Friday; Economists expect 845,000 new jobs.

Some economists argue that pandemic-related factors, rather than unemployment benefits, are the main reason workers may not return to the labor market as quickly as expected.

For example, parents may still not have adequate childcare; those who cannot work from home can still be cautious for health reasons; Workers may have moved from their jobs or changed industries during the pandemic; and baby boomers may have retired early and don’t plan on returning.

The delta variant threatens to make recovery even more difficult. Many of the states that have withdrawn federal support also have lower Covid vaccination rates, Bunker said.

“Right now with the Delta variant, it could push back the labor markets in these states,” he said.

According to an Indeed poll published on Wednesday, fewer unemployed nationwide cited the pandemic as a reason for not looking for work urgently in July compared to June.

Unemployed respondents ranked unemployment benefit last among the factors preventing them from urgently looking for work. You rank behind the financial cushion, have a working spouse, household chores and Covid fears.

With the $ 300 addition, nearly half of the unemployed (48%) make as much or more money on unemployment benefits than their lost wages, according to a paper recently released by the JPMorgan Chase & Co. Institute.

According to economists Fiona Greig, Daniel Sullivan, Peter Ganong, Pascal Noel and Joseph Vavra, who wrote the analysis, these additional funds had little impact on job search but did not significantly hamper the job market until mid-May.

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