More than 9 million Americans are set to lose their unemployment benefits and millions more will see their weekly incomes plummet as a host of federal pandemic jobless aid programs expire next week.
Three programs covering a combined 12.1 million people will end on Monday without action from the White House or Congress.
Twenty-six states pulled out of at least some of those programs earlier this summer as businesses struggled to fill a record-breaking 9 million job openings.
But there are still 5.4 million gig workers, contractors and others not covered by traditional unemployment insurance who will lose their weekly benefits early next week. Another 3.9 million Americans receiving extended aid will see those payments disappear on Monday as well.
And a separate 3.9 million Americans will no longer receive a $300 weekly supplement to other job aid programs, leaving them with substantially less money.
On top of that, the August jobs report released on Friday showed a significant slowdown in the rate of hiring, indicating a tougher job market in September.
President BidenJoe BidenUN meeting with US, France canceled over scheduling issue Schumer moves to break GOP blockade on Biden's State picks GOP Rep. Cawthorn likens vaccine mandates to 'modern-day segregation' MORE, moderate Democratic lawmakers and virtually all Republicans have argued that it’s time for the additional support to expire after several months of rapid job growth, up until August, and inflation lingering at uncomfortable heights. Recent studies have also shown a noticeable uptick in job growth in states that pulled out of those unemployment insurance (UI) programs but with limited impact on labor force participation.
“The question is, is expanded UI substantially holding back job growth? And I do think that it is,” said Adam Ozimek, chief economist at Upwork.
“I think that the end of UI expansion will accelerate job growth and get people back to work, but it won’t end the economic damages from the pandemic,” he added.
While economists have quarreled for months over how much the federal programs have held back job gains, they widely agree that it’s not the only factor keeping potential workers on the sidelines. Roughly 5.6 million Americans said they were unable to work because their employer closed or lost business due to the pandemic, and another 1.5 million said they weren’t even able to look for a job because of a pandemic-related restraint, according to the August jobs report released by the Labor Department on Friday.
The steep plunge in last month’s job gains, driven almost entirely by surging COVID-19 cases, has also raised alarms among those who see little benefit to pulling back aid.
“It's not because we're seeing some sort of change in how people are doing. These benefits are expiring now because they are tied to an arbitrary political deadline,” said Rakeen Mabud, chief economist at Groundwork Collaborative, a progressive economic research and activism nonprofit.
“The fact that we are collectively choosing to play with people's lives and well-beings in this way is really frankly sad,” she continued.
The Labor Day expiration was part of a deal to cement support from moderate Democrats for an extension of federal jobless aid through the $1.9 trillion coronavirus relief bill passed and signed into law in March. At the time, the economy appeared on the verge of massive growth, with COVID-19 vaccines widely available by the start of April and a summer full of pre-pandemic activities likely to ignite the labor market.
After back-to-back lackluster jobs reports in March and April dashed some of those hopes, several dozen Republican governors pulled their states out of the federal unemployment programs, arguing that the new jobless aid was slowing the recovery. But economists who’ve studied the impact of those decisions say they had mixed results.
Fiona Greig, co-president of the JPMorgan Chase Institute, said removal of the $300 supplement in those states led to a 0.5 percent increase in employment, according to research she conducted with a team of economists.
"The marginal impact is detectable but not that big,” Greig said, adding that the loss of weekly income had a much larger impact on those households.
"We're talking about a big spending loss on everyday spending among the people who don't go back to work in exchange for a small, incremental bump in the people who do go back to work," she added.
Another paper from a team of economists at Columbia University, the University of Massachusetts Amherst, Harvard University and the University of Toronto found a larger increase when studying the impact of removing two of the three main programs.
The paper found a 4.4 percentage point increase in employment among workers who were receiving jobless aid in April in states that pulled the two programs. Those workers still experienced steep drops in income, however, leading to “a large immediate decline in consumption.”
Economists at Goldman Sachs highlighted a similar dynamic in an August study: Employment increased in states that pulled federal benefits, but labor force participation stayed flat.
“This suggests that many workers are staying out for non-financial reasons such as concern about Covid and may be slow to return to the labor force even after UI benefits end,” they wrote.
The Goldman team projected that the removal of federal benefits nationwide would create another 1.5 million jobs before the end of 2021 and primarily as workers who’ve lost all of their benefits find low-paid leisure and hospitality jobs.
Even so, supporters of an extension counter that rising COVID-19 cases, the lapse of the federal eviction ban, and the end of the summer travel boom could still lock out millions from the labor market.
“Letting these benefits expire under the current circumstances and the current uncertainty that we're experiencing is tantamount to forcing people to fall through the cracks,” Mabud said.
“It's not just letting people fall through the cracks,” she added.