A person reads a list of employers as they attend a job fair at SoFi Stadium on Sept. 9, 2021, in Inglewood, California.
PATRICK T. FALLON | AFP | Getty Images
There remains little evidence that states successfully nudged people back to work by ending federal unemployment benefits early, according to economists.
Twenty-six states withdrew pandemic-era jobless support in June or July. Their governors, predominantly Republican, believed enhanced jobless aid offered an incentive to stay home instead of work.
Data suggests other factors are playing a larger role, according to economists. They cite ongoing health concerns, child-care issues and expanded savings among a host of issues sidelining workers even amid record job openings.
Federal benefit programs officially ended on Labor Day in the remaining states. This “unemployment cliff” impacted more than 8.5 million people, who lost all their benefits, Labor Department data issued Thursday suggests.
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Workers’ muted response to the first unemployment cliff (i.e., in the states that withdrew early) suggests the Labor Day end also won’t provoke a surge of job growth, according to economists.
“If that’s any sort of precursor, I’m not betting on the end of the federal benefits [on Labor Day] being a real clear and sharp inflection point,” AnnElizabeth Konkel, a labor economist at job site Indeed, said.
State economies differ (in terms of job mix and worker demographics, for example), making comparisons and predictions difficult, she said.
Understanding how the unemployment cliff will impact the U.S. labor market is a “pressing issue,” according to a JPMorgan Chase Bank research note published Thursday and authored by economist Peter McCrory.
For example, those unable to find a job or return to work may struggle financially and pull back on spending, perhaps negatively impacting local economies.
Most people (7 in 8) who lost federal aid in June were not reemployed by early August, according to a paper authored by researchers at Columbia University, Harvard University, the University of Massachusetts Amherst and the University of Toronto last month. That led to a nearly $2 billion aggregate spending cut, they found.
JPMorgan economists have also “failed to find large effects” on jobs among early withdrawal states since mid-June, McCrory wrote. He examined data like monthly state employment metrics and weekly claims for unemployment benefits, as well as alternative measures like restaurant dining and Google job searches.
“In fact, we find that the loss of benefits is associated with a modest decline in employment growth, earnings growth, and labor force participation,” McCrory wrote.