FILE PHOTO: People line up outside the Kentucky Career Center before it opens to find help with their unemployment claims in Frankfort, Kentucky, USA, June 18, 2020. REUTERS / Bryan Woolston
(Reuters) – Americans who received higher unemployment benefits due to the coronavirus pandemic spent more than when they worked, a study published on Thursday said, adding to concerns about a sharp drop in spending when emergency benefits expire. .
The weekly supplement of $ 600 added to unemployment benefits as part of the CARES Act helped unemployed households spend 10% more after receiving benefits than before the pandemic, according to research by the JPMorgan Chase Institute.
The researchers analyzed the transactions of 61,000 households that received unemployment benefits between March and May. According to the study, spending decreased for all households as the virus spread and caused businesses to close, but then increased when households began receiving unemployment benefits.
That contrasts with a typical recession, when households receiving unemployment benefits generally cut spending by 7% because regular unemployment benefits equal only a fraction of a person’s previous income, according to research.
The analysis highlighted how additional unemployment benefits are helping to shore up the US economy and consumer spending after the pandemic led to a rise in unemployment across the country.
It is estimated that more than 30 million Americans are receiving unemployment benefits, and could be pushed off a precipice of income when the supplemental benefits, which expire in late July, are withdrawn.
“Our estimates suggest that maturity will result in large spending cuts, with potentially negative effects on both households and macroeconomic activity,” the researchers wrote.
The data also reflected the financial pain faced by households that found long delays in collecting benefits after states across the country were overwhelmed by applications.
Households that had to wait several weeks for their first unemployment check to arrive cut spending by about 20%, according to the study. The expense was recovered after the checks arrived.
Report by Jonnelle Marte; editing by Richard Pullin
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