Amid reports of labor shortages and fears of economic overheating thanks to what some view as excessive government stimulus spending, a total of 26 states are now planning to end the $300 federal unemployment supplement in order to spur hiring—here’s what analysts from Goldman Sachs expect to happen once payments stop.
Key Facts
Goldman’s analysts point out that since 25 of the states ending the benefit early only account for 29% of pandemic job losses, it’s likely that the pressures on the labor market—worker shortages and a depressed labor force participation rate—will continue until the benefits expire in every state at the beginning of September.
The analysts note that it’s too soon to say how the early end of benefits will affect official employment statistics—that insight will likely be contained in the July jobs report the Labor Department will publish in August.
That said, claims for regular state unemployment insurance benefits have fallen faster in states that have announced they will end the supplement early—the analysts say this is a “hint” that hiring will pick up once the benefits are phased out, but note that other data like the volume of job postings don’t yet support that conclusion.
The analysts say their “best guess” is that the expiring benefits will “provide a significant tailwind to hiring in the coming months,” spurring growth of more than 150,000 jobs in July and more than 400,000 jobs in September, though they note that the prediction is still uncertain.
Based on previous academic studies, the analysts estimate that a typical worker receiving regular state benefits will see those benefits drop by 50% once the $300 supplement expires in their state, and the duration of their unemployment would fall roughly 25%.
Crucial Quote
“The temporary boost in unemployment benefits . . . helped people who lost their jobs through no fault of their own and are still maybe in the process of getting vaccinated, but it’s going to expire in 90 days,” President Biden said during prepared remarks after the release of the May jobs report last week. “That makes sense.”
Big Number
$12 billion. That’s how much local economies in the 24 red states that had announced an early termination of the $300 federal supplement as of June 2 are expected to lose as a result of ending the benefit early, according to a report from Congress’ Joint Economic Committee.
Surprising Fact
On Thursday, Louisiana became the first state with a Democratic governor to announce the early expiration of the $300 supplement. The other 25 states have Republican governors.
Key Background
An emergency federal unemployment insurance supplement was first authorized in the amount of $600 per week as part of the CARES Act last year. A new supplement of $300 was authorized by executive order under President Trump after the first supplement lapsed. The $300 supplement was extended once by Congress as part of a stimulus bill last December, and again by Congress as part of President Biden’s $1.9 trillion American Rescue Plan.
Further Reading
Biden: It ‘Makes Sense’ That $300 Unemployment Will End In September (Forbes)
California And Florida Are Sending Out More Stimulus Checks. Could Your State Be Next? (Forbes)
IRS Releases Child Tax Credit Payment Dates—Here’s When Families Can Expect Relief (Forbes)
Source: Here’s What Could Happen When $300 Unemployment Expires, According To Goldman Sachs
I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.
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Critics:
Several coronavirus relief bills have been considered by the federal government of the United States:
- Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, enacted March 6, 2020; $8.8 billion
- Families First Coronavirus Response Act, enacted March 18, 2020; $104 billion
- CARES Act, enacted March 27, 2020; $2.2 trillion
- HEROES Act, passed by the House of Representatives on May 15, 2020 but never enacted into law; $3 trillion
- Consolidated Appropriations Act, 2021, enacted December 27, 2020; included $900 billion in COVID-19 relief
- American Rescue Plan Act of 2021, enacted March 11, 2021; $1.9 trillion
The American Rescue Plan Act of 2021, also called the COVID-19 Stimulus Package or American Rescue Plan, is a $1.9 trillion economic stimulus bill passed by the 117th United States Congress and signed into law by President Joe Biden on March 11, 2021, to speed up the United States’ recovery from the economic and health effects of the COVID-19 pandemic and the ongoing recession.First proposed on January 14, 2021, the package builds upon many of the measures in the CARES Act from March 2020 and in the Consolidated Appropriations Act, 2021, from December.
Beginning on February 2, 2021, Democrats in the United States Senate started to open debates on a budget resolution that would allow them to pass the stimulus package without support from Republicans through the process of reconciliation. The House of Representatives voted 218–212 to approve its version of the budget resolution.
A vote-a-rama session started two days later after the resolution was approved, and the Senate introduced amendments in the relief package. The day after, Vice President Kamala Harris cast her first tie-breaking vote as vice president in order to give the Senate’s approval to start the reconciliation process, with the House following suit by voting 219–209 to agree to the Senate version of the resolution.
Prior to the American Rescue Plan, the CARES Act from March and in the Consolidated Appropriations Act, 2021, from December were both signed into law by then-president Donald Trump. Trump previously expressed support for a direct payments of $2,000 along with Joe Biden and the Democrats. Even though Trump called for Congress to pass a bill increasing the direct payments from $600 to $2,000, then-Senate Majority Leader Mitch McConnell blocked the bill.
Additionally, the House voted on the HEROES Act on May 15, 2020, which would operate as a $3 trillion relief package, but it wasn’t considered by the Senate as Republicans said that it would be “dead on arrival”.Prior to the Georgia Senate runoffs, Biden said that the direct payments of $2,000 would be passed only if Democratic candidates Jon Ossoff and Raphael Warnock won; the promise of comprehensive Covid-19 relief legislation was reported as a factor in their eventual victories.On January 14, prior to being inaugurated as president, Biden announced the $1.9 trillion stimulus package.
See also
- List of COVID-19 pandemic legislation
- Build Back Better Plan
- American Families Plan
- COVID-19 pandemic in the United States
- Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020
- Families First Coronavirus Response Act
- Coronavirus Aid, Relief, and Economic Security Act (CARES Act) – includes $1200 stimulus checks
- Paycheck Protection Program and Health Care Enhancement Act
- Paycheck Protection Program Flexibility Act of 2020
- A bill to extend the authority for commitments for the paycheck protection program
- Consolidated Appropriations Act, 2021 – includes $600 stimulus checks