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States That Ended Supplemental Unemployment Early Saw Employment Bump, Major Spending Drop

  • States that ended a $300-a-week supplemental unemployment benefit from the federal government saw a 4.4-point increase in employment
  • However, the majority of unemployment recipients remained out of work and spending dropped considerably
  • Researchers suggest the effect could be repeated on a greater scale when supplemental benefits end on Sept. 6

Summary by Dirk Langeveld

The termination of federal supplemental unemployment benefits early had the intended effect of boosting hiring, according to recent research. However, the vast majority of recipients were unable to find a job during the study’s covered period and the decision was also associated with a major drop in spending.

Researchers at Columbia University, Harvard University, the University of Massachusetts Amherst and the University of Toronto used the financial services company Earnin to track 18,648 people receiving unemployment benefits. The study compared those receiving benefits in 19 states that cut the extra $300-a-week benefit with those in 23 states that retained benefits.

  • States that cut supplemental benefits earlier saw their employment increase 4.4 percentage points compared to states that retained them
  • However, just one in eight people on unemployment in the states that cut benefits earlier were able to find a job during the study’s research period of June to early August
  • In states where supplemental benefits ended early, the average benefits for unemployed workers fell $278 a week through the first week of August while the typical earnings increased by only $14 a week
  • Beneficiaries typically curtailed their spending by $145 a week, resulting in $2 billion in reduced spending in states that ended supplemental benefits early
  • Researchers say the drop in spending could have had a negative impact on local economies and employment due to layoffs or hires occasioned by diminished demand
  • The study suggests that the expiration of supplemental benefits on Sept. 6 could result in 500,000 new jobs in September and October, but also 4 million people losing their benefits and a potential spending decrease of $8 billion

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