- JPMorgan Chase Institute study determines that $600 a week supplemental unemployment has helped keep consumer spending levels healthy during COVID-19 pandemic
- Warning that aggregate spending could drop 4.3 percent if at least some of the benefits are replaced
- Congress still working on unemployment deal following expiration of enhanced benefits last week
Supplemental unemployment benefits have been an important part of preserving consumer spending levels during the COVID-19 pandemic, according to a recent report by JPMorgan Chase. Researchers determined that while people typically reduce their spending once they go on unemployment insurance, the extra $600 a week provided by the federal government led to an increase in consumer spending among the unemployed. Consumer spending among those who maintained their employment during the pandemic has decreased.
The report concludes that the supplemental benefits helped prop up the U.S. economy as a whole by giving unemployed workers more stability and spending power. Other relief actions during the pandemic, including $1,200 stimulus payments and breaks on mortgage payments or other loans, also likely helped minimize the economic burden on the jobless and kept them from taking on additional credit card debt..
The $600 a week supplemental unemployment benefits expired at the end of July as Democrats and Republicans were unable to come up with an agreement on this matter. A bill proposed by House Democrats in May advocated for extending the supplemental insurance. Senate Republicans have called for the benefits to be reduced and then capped, arguing that they may be a disincentive to getting people back to work.
The report warns that aggregate spending in the United States could experience a 4.3 percent drop, a steeper decline than occurred during the Great Depression, unless Congress restores at least some of the supplemental unemployment benefits. Meanwhile, the latest jobs report indicates that the U.S. added 1.76 million jobs in July and the unemployment rate fell from 11.2 percent to 10.2 percent, indicating a slower recovery in the economy and rehiring as coronavirus cases spiked in several states during the summer.