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Amid reports of labor shortages and fears of economic overheating due to what some consider to be excessive government stimulus spending, a total of 26 states now plan to halt the $300 federal unemployment benefit to encourage hiring, which Goldman Sachs analysts expect. that ever will happen payments stop.
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Key facts
Goldmans analysts point out that since 25 of the states that end benefit early are responsible for only 29% of job losses from the pandemic, pressures on labor market shortages and low employment rates are likely to continue until benefits in each state hit. early September.
The analysts note that it is too early to say how the early end of benefits will affect official employment statistics. This insight will likely feed into the July jobs report that the Department of Labor will publish in August.
That said, claims for regular state unemployment benefits have fallen more quickly in states that have announced they will end the benefit early. The analysts say this is a hint that hiring will increase once benefits are phased out, but keep in mind that other data, such as the volume of job openings, does not support that conclusion yet.
The analysts say their best bet is that declining benefits will significantly boost hiring in the coming months, fueling growth of more than 150,000 jobs in July and more than 400,000 jobs in September. though they note that the forecast is still uncertain.
Based on previous academic studies, the analysts estimate that a typical worker who receives regular benefits would see those benefits drop by 50% once the $300 allowance expires in their state, and their unemployment duration would drop by about 25%. .
Crucial Quote
The temporary increase in unemployment benefits. . . has helped people who have lost their jobs through no fault of their own and who may yet have yet to get vaccinated, but it will expire in 90 days, President Biden said during prepared remarks after the release of the May jobs report last week. That makes sense.
large number
$12 billion. That’s how much local economies in the 24 red states that announced an early termination of the $300 federal surcharge effective June 2 are expected to lose as a result of the early termination of the benefit, according to a report by the Joint Economic Committee of the United States. the Congres.
Surprising fact
On Thursday, Louisiana became the first state with a Democratic governor to announce the early expiration of the $300 surcharge. The other 25 states have Republican governors.
key background
Last year, as part of the CARES Act, a federal unemployment insurance benefit was first approved at a cost of $600 per week. A new $300 surcharge was approved by an executive order under President Trump after the first surcharge expired. The $300 surcharge was extended once by Congress in December last year as part of a stimulus bill, and again by Congress as part of President Biden’s $1.9 trillion US bailout plan.
Read further
Louisiana’s John Bel Edwards Becomes First Democratic Governor To Cut Federal Unemployment Benefits From $300 A Week (Forbes)
Biden: Makes sense that the $300 unemployment rate will end in September (Forbes)
California and Florida send more stimulus checks. Could your state be next? (Forbes)
IRS Releases Payment Dates For Child Tax Credit Here Are When Families Can Expect Relief (Forbes)
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