State cutoffs of jobless benefits had little effect on unemployment

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Only eight of the 26 states that ended federal jobless benefits early saw a statistically significant drop in unemployment in July, according to Bureau of Labor Statistics data out Friday.

Nine states and the District of Columbia that did not end the benefits also saw statistically significant drops in unemployment, muddying the waters as economists, policymakers and labor advocates are searching for any indication of the ramifications of some governors' decision to cut off emergency unemployment insurance before its Sept. 6 expiration date.

The governors who made the move, largely in Republican-controlled states, cited employer complaints of worker shortages, some of which they attributed to generous unemployment benefits.

Georgia, Louisiana, Texas and West Virginia experienced a 0.3 percent drop in unemployment, while Nebraska, Oklahoma, Tennessee and Wyoming all saw a 0.2 percent decline. All except Louisiana and Tennessee cut off emergency unemployment insurance in June. (Louisiana ended benefits July 31, while Tennessee ended them July 3.)

With the exception of Louisiana, Texas and Wyoming, all states’ unemployment rates are below the national average of 5.4 percent.

Some economists have cautioned not to read too much into the numbers since the survey was taken with the economy still in flux and the data will eventually be revised.

Covid-19 relief legislation enacted in March 2020, the CARES Act, created a trio of unemployment insurance programs — Federal Pandemic Unemployment Compensation, Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation — that gave jobless workers an extra $300 a week, extended benefits to those like gig workers who were not traditionally eligible, and lengthened the duration of state unemployment insurance, respectively.

The left-leaning Century Foundation estimated the national Sept. 6 end date would leave 7.5 million workers without any kind of benefits.

Legal aid organizations — often with the help of national advocates — in several states have filed lawsuits arguing that their governors’ decision to cut off the federal programs violates state law. Groups representing workers in Indiana, Maryland, Oklahoma and Arkansas have secured injunctions to restore the benefit programs while the lawsuits play out in court.

Despite an uptick in Covid-19 cases — and the resulting restrictions — the White House and Congress are not exploring extending the federal unemployment insurance.

The decision was solidified Thursday by a letter sent to Congress by the Treasury and Labor secretaries — though they also suggested that states where unemployment remains high could use other emergency federal aid to continue the programs.

The premature cut-off will have a disproportionate impact on Black and Latino workers and, some economists say, could have lasting economic repercussions for them. Of the 17.4 million workers who applied for and received unemployment benefits between January and May, a disproportionate 21.5 percent were Latino and 18.4 percent were Black, Census data shows. That’s greater than their respective shares of the overall workforce: About 18 percent of employees in 2020 were Latino while 12 percent were Black, according to the Bureau of Labor Statistics.

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