End to federal unemployment benefits leaves many uncertain and scared

A woman waits in a line outside a temporary unemployment office in Frankfort, Kentucky in June.

Bryan Woolston | Reuters

Pandemic unemployment benefits

The federal government expanded the safety net for the jobless to a historic degree last year, when the U.S. was in the throes of its most rapid economic downturn in history. The CARES Act, passed in March 2020, raised weekly jobless benefits by $600 a week (and later, $300 a week), offered aid to workers typically ineligible for traditional state benefits, such as self-employed, gig workers and part-timers, and extended how long people could collect aid. 

Congress twice extended the programs, last December and again this March, but opted not to do so a third time. 

That means about 9 million people are poised to lose those benefits by Labor Day, according to an estimate from The Century Foundation. Another 3 million or so will see their weekly benefits reduced.

Families are scared of what comes next. 

“It is going to leave some folks in a bad situation,” Sylvia Allegretto, an economist and co-chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley, said of this weekend’s unemployment cliff. 

“The economy, for many reasons, has not been fully recovered and won’t be for quite a while given this unfortunate but massive surge in Covid we’re seeing across the country,” she added. 

The delta variant has added pressure to an already uneven economic recovery. The U.S. added 235,000 jobs in August, a marked slowdown from the roughly 1 million in both June and July. 

Disincentive to work?

Of course, some economists believe the programs should end now, arguing that enhanced federal benefits offer an incentive to stay home rather than look for work. White House officials also recently signaled that federal benefits should cease as planned in most states.

There were a record 10 million job openings in June, which exceeds the number of officially unemployed individuals. That dynamic has led some economists to question why those who are out of work aren’t rushing in to take available jobs.

“It’s hard to justify having a program that’s encouraging people not to work at the same time employers are struggling to keep their business [going],” said Rachel Greszler, a research fellow in economics, budget and entitlements at the Heritage Foundation, a right-leaning think tank.

About half of U.S. states, primarily led by Republican governors, withdrew from most or all of the federal programs in June or July to encourage people to jump back into the labor market. 

“I think it’s [a] misjudgment,” said Aaron Davison, a 28-year-old unemployed Orlando resident. “I was grateful for my job.”

Florida ended a $300-a-week federal supplement to benefits in June; the remaining programs lapse this weekend.

Davison, who had been a turnstile attendant at the Universal Studios Florida theme park, has been using unemployment benefits to help support his parents, with whom he lives and who are unable to work due to medical issues. Though he’s been actively applying for jobs for several weeks, he hasn’t landed anything yet. 

Without work or unemployment benefits, he expects to rely on money raised from a GoFundMe page to help make ends meet.

“[An] extension could have saved families from financial ruin,” Davison said.

Treasury Secretary Janet Yellen and Labor Secretary Marty Walsh urged states with high unemployment rates to continue issuing aid to gig workers and the long-term unemployed using federal funds allocated by the American Rescue Plan.

It appears few if any plan to do so, though. The U.S. Department of the Treasury declined comment. The U.S. Department of Labor isn’t tracking state decisions because it doesn’t oversee use of those federal funds, a spokeswoman said.

Some economists are concerned that cutting off benefits too soon, while people are struggling to find jobs, could further slow the economic recovery. 

For example, unemployed workers were more likely to find jobs in states that ended federal benefits in June relative to those that didn’t, according to a recent paper written by researchers at Columbia University, Harvard University, the University of Massachusetts Amherst and the University of Toronto.

But about 7 in 8 benefit recipients in those states were still not re-employed by early August, leading to a roughly $2 billion aggregate decrease in household spending.

Tammy Dotson, 52, has had to cut spending after officials in South Carolina withdrew federal benefits in June. Dotson, who fixed up rental houses before the pandemic, is having a hard time drumming up business, which she attributes to Covid-related fears about in-person work. 

“We’re struggling to pay our bills,” said Dotson, who was self-employed. “What about the [people] who can’t go back to work, or something is stopping them so they can’t seek work?” she asked. 

Factors beyond benefits

Factors beyond enhanced unemployment benefits may be playing a larger role in keeping many Americans from returning to work, according to labor economists. Some, for example, have reassessed their job flexibility and careers after months out of work. 

Danielle Miess, 30, a former travel agent in Philadelphia, doesn’t want to return to a 9-to-5 job. She plans to rely on freelance work including housesitting, pet sitting, selling clothing and vacation planning to pay her bills when her unemployment benefits end. 

If she can’t make enough money to cover her expenses that way, she could also drive for Instacart, she said.

“I think I have enough backups that I should be OK,” she said. 

Danielle Miess, 30, decided that she doesn’t want to return to a traditional day job post-pandemic.

Danielle Miess

Others may still be on the sidelines due to the ongoing public health risk, childcare constraints and insufficient pay or benefits, according to Fiona Greig, co-president of the JPMorgan Chase Institute. 

Chenon Hussey, 42, got pandemic unemployment benefits after the pandemic dried up work for her small motivational speaking business in West Bend, Wisconsin. A few months ago, she found part-time work as a mental health counselor for a county government, but her hours aren’t consistent week to week. 

Hussey and her husband have four children living at home, a 6-year-old and three teenage daughters, one with developmental disabilities. They are worried that they may have to move their special needs child to a group home if they can’t continue to pay out of pocket for the intensive care she requires. 

Chenon Hussey, left, and her husband are worried about providing for their family, including one child with special needs, once federal unemployment insurance benefits end.

bgraves photography

“We don’t know what we’re going to do,” said Hussey, who also co founded Wisconsin Unemployment Action Group during the pandemic.

Her husband, a master welder, also lost his job during the pandemic but was able to draw on state unemployment. Still, his weekly checks will decrease by $300 when benefits end this weekend. He’s been applying to jobs but hasn’t found anything suitable yet, according to Hussey. 

“Every job that he has applied for has been a $20-an-hour pay cut,” Hussey said. “That isn’t worth it.

“That would cost our family more than it would gain.” 

Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.

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