U.S. Unemployment Cliff Coming, More Than 7mn May Fall Off

Date: 01 August 2021 - 22:14

News ID: ۹۲۹۰۴

NEW YORK (CNBC) -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.
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.)
State benefits replaced about 38% of pre-layoff wages for workers in the first quarter of 2021, according to the Labor Department.
The CARES Act expansions of unemployment benefits were unprecedented in the history of the unemployment insurance program, which dates to the 1930s.
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 workers lost 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.
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.
There was about one unemployed person for every job opening in May, according to the Bureau of Labor Statistics.
Twenty-six states ended their participation in federal unemployment programs over June and July, to try to encourage recipients to return to work — effectively moving up the benefits cliff for residents by about two to three months.
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.
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.