There is little evidence that the end of excessive unemployment has sent people back to work.

There is little evidence that the end of excessive unemployment has sent people back to work.

A man reads a list of employers as he attends a career fair at Sophie Stadium on September 9, 2021 in Inglewood, California.

Patrick T. Fallon | AFP | Getty Images

According to economists, there is little evidence that states have been successful in getting people back to work by eliminating federal unemployment benefits early.

Twenty-six states withdrew their unemployment aid during the pandemic in June or July. Their governors, mostly Republicans, believed that the increase in unemployment assistance offered incentives to stay home rather than work.

According to economists, the data suggests other factors play a more important role. They cite lingering health issues, childcare issues and increased savings among the many issues that have sidelined workers, even amid record-breaking job vacancies.

Federal benefit programs officially ended on Labor Day in the rest of the states. Labor Department data released Thursday showed the “unemployment cliff” has hit more than 8.5 million people who have lost all benefits.

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According to economists, the unspoken response of workers to the first cliff of unemployment (i.e. states that pulled back early) suggests that even the end of Labor Day will not boost job growth.

“If it’s a precursor, I’m not betting on the end of federal benefits [on Labor Day] To have a real clear-cut inflection point, ”said Ann Elizabeth Konkel, Field Labor Economist, Indeed.

Since state economies differ (in terms of job mix and worker demographics, for example), it’s difficult to compare and forecast, she said.

“urgent problem”

Understanding how the unemployment cliff will affect the US labor market is an “urgent matter,” according to a JPMorgan Chase Bank research note released Thursday and written by economist Peter McCrory.

For example, those who are unable to find a job or return to work may experience financial difficulties and reduce their expenses, which can negatively impact local economies.

Most of the people who lost federal aid in June weren’t rehired until early August, according to an article written last month by researchers at Columbia University, Harvard University, from the University of Massachusetts Amherst and the University of Toronto. They found that the total spending cuts were about $ 2 billion.

JPMorgan economists have also “failed to find a major impact” on jobs in early retirement states since mid-June, McCrory wrote. They looked at data such as monthly state employment measures and weekly jobless claims, as well as alternative measures such as restaurant meals and Google job searches.

“Indeed, we are finding that the loss of benefits is associated with modest declines in job growth, income growth and labor force participation,” McCrory wrote.

While the “influx” of workers into the labor market in these states has yet to materialize, it is still too early to understand whether the impact will be similar in states where federal benefits ended on the 6th. September, according to Daniel Zhao, senior economist. on the Glassdoor site. (September 6 was the official end of the US bailout, which was not extended by Congress.)

He said there was reason to believe the impact could be more pronounced in the remaining half of the states. On the one hand, the Labor Day cliff (which hit large states such as California and New York) hit more workers than in the summer, which may have returned the effects on jobs easier to find in the available data, he said.

But the delta version of Covid (and the associated spike in cases) could haunt the unemployed and cause employers to struggle to find workers for open positions, especially for in-person work, economists have said. noted. For example, high workloads due to school closures or student quarantine can also affect a parent’s ability to return to work.

Zhao said Americans are still sitting on increased savings, perhaps in part because of increased benefits, which give the unemployed more time to find the most suitable jobs. (Other government support and reductions in in-person activities may also have saved money during the pandemic.)

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