Has the widespread unemployment benefits discouraged many workers from returning to work? A big drop in people seeking or receiving benefits in the past two weeks after the end of a $ 600 federal grant suggests that the answer may be yes.
Early unemployment fell to 963,000 in early August, down nearly 500,000 from two weeks earlier. New applications were flat from June to mid-July for the most part flat at around 1.5 million per week.
The number of adult benefit benefits, meanwhile, tumbled by 1.5 million in the last two weeks of July to 15.49 million just when the benefit expired. That is the lowest level for these so-called persistent claims since early April.
To read:Unemployed claims fall below 1 million for the first time since the onset of coronavirus pandemic
Some economists say it is no coincidence that new and ongoing applications for benefits began to tumble right around July 31 of the federal scholarship.
‘This is not rocket science, people. If you pay people more to sit at home than to work back, then they sit at home, ”said chief economist Stephen Stanley of Amherst Pierpont Securities. “If you do not do that, if they are offered a job, they will go back to work.”
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Economists who often have contact with business people say they have repeatedly said that generous benefits make it harder for companies to rent or rehire.
“I hear it all the time from business people,” said Gus Faucher, chief economist at PNC Financial Services. “They tried to call people back and implicitly asked people as straightforward, ‘Why should I go back to work when I make more out of unemployment?'”
However, economists for the most part in the academy and the Federal Reserve claim that the problem is negative. A handful of studies, including one by Yale, claim that the federal scholarship has had almost no impact on whether people go back to work.
One million people who returned to work in May and June, the study showed, did so despite a high level of benefits.
‘We find no evidence that is high [unemployment insurance] replacement rates meant job losses or delayed rehearsals, ”said the Yale study.
Mary Daly, president of the San Francisco Federal Reserve, also denied on Tuesday the role of the federal scholarship on unemployment in a “digital town hall.” While she also heard many anecdotes from business leaders, she said the number of people refusing to work is probably too low to make much of a difference.
The answer is not an academic exercise as an internal debate among economists with little influence on public policy. The federal scholarship was not renewed in part because Republicans claimed it kept workers from returning to their jobs.
In the early stages of the pandemic, Congress and the White House agreed to pay an extra $ 600 a week to the unemployed on top of what they would normally receive from their unemployment programs. State benefits ranged from a low of $ 235 per week in Mississippi to a high of $ 713 in New Jersey.
The new law also created self-employed workers like Uber
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drivers and freelance writers are eligible for the first time to collect benefits.
The combined state and federal payments resulted in millions of full-time workers losing their jobs receiving $ 800 or more per week. A University of Chicago study found that two-thirds of the tens of millions of people fired during the pandemic earned more money from unemployment than they did from their old jobs.
The latest drip in new jobless claims could encourage conservatives to dig into their heels.
It provides “fuel for the argument that the enhanced benefits provided an incentive for people to stay away from returning to work if they had the option,” said currency economist Thomas Simons at Jefferies LLC. “The data from the past two weeks will not help the arguments of lawmakers struggling to extend the expired benefits.”
President Donald Trump has temporarily ordered a reduced federal payment of $ 300 a week amid an ongoing standoff between Democrats and Republicans over the next incentive package.
Democrats are pushing for a full $ 600 scholarship extension, saying people need the money and should not be forced to work back if they feel unsafe, especially those with pre-existing circumstances.
Whatever the outcome, economists agree on one thing: Washington must act hard. They say the disaster is likely to hurt the economy soon if a compromise is not reached. Some added federal benefits are better for the economy and millions of unemployed than none at all.
“We know that the economy is a lot smaller than it was six months ago. Companies need fewer workers than they needed six months ago, ‘said Faucher. “Removing the benefits will not solve the problem. We could miss the recovery. ”
He suggested an even more generous, if smaller, federal grant of $ 400 a month as a way to bridge the gap in Washington. But neither party jumps.
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