Will cutting off federal unemployment benefits shake up the job market?
Economists on Wall Street and Washington will analyze employment data on Friday to see if workers are being reintroduced to the workforce as federal unemployment insurance benefits are cut.
This will be the first employment report that could reflect an increase in labor supply and hiring due to the loss of benefits, as around half of states had ended a supplement. federal $ 300 per week at the time of data collection. That money expires federally on September 6, but some states – all but one Republican-led – began cutting federally-funded support in mid-June, when the market investigation ended. work this month.
Friday’s report will only offer high-level numbers, industry figures and data on demographic groups, so analysts may have to wait for the state-by-state data release in mid-August to compare. the places that cut the extra $ 300 with those withhold it.
Many companies have criticized generous unemployment benefits for inducing workers to stay out of work. This is why many states ended the benefit earlier. The Biden administration was loath to say the added benefit discouraged work, but let it expire. The infrastructure plan envisioned by the Senate would be financed in part by unused appropriations for unemployment benefits.
But it is not known to what extent the cut in aid will encourage people to return to the job market. It has been difficult to judge from up-to-date data – like jobless claims – whether more workers are looking for positions when aid ends.
“So far, the claims data does not show overwhelmingly clear evidence that there is a significant labor market response when states terminate unemployment insurance programs linked to the pandemic,” JP Morgan’s Daniel Silver wrote in a recent note. He added that in some places, cutting federal aid, outstanding claims had declined “more noticeably” than elsewhere.
Goldman Sachs analysts found little difference in June’s employment data between states that ended federal unemployment benefits prematurely and those that did not. While cuts to federal benefits by some states had just started when the June survey was conducted, the potential loss of earnings may have pushed workers to seek employment.
“While workers in these states knew the policy was ending soon and could have reacted preemptively, the full effect of the expiration on official employment measures is unlikely to be fully visible until the July report.” , wrote Ronnie Walker, a Goldman economist, in a July 17 research note. At the time, Goldman believed the cut could add up to 150,000 jobs to data released Friday, based on early state-level figures.
Some economists are skeptical that the loss of benefits will greatly affect the labor market.
Deutsche Bank analysts said the role of unemployment insurance benefits in discouraging people from returning to work appears limited.
“There is limited evidence that unemployment insurance benefits have been a major factor weighing on employment,” wrote Matthew Luzzetti and colleagues in a recent analysis. They pointed out that job growth had been strong in low-wage sectors where employers were expected to compete for the advantage, and that these sectors had similar trends in job vacancies versus new hires that d other sectors had shown.
Mr Luzzetti said in an email he did not expect the early cut of federal benefits in some states to have a significant effect on employment figures in July.
And Luke Tilley, chief economist at Wilmington Trust, wrote in a research note that employment figures released by payroll and data company ADP on Wednesday – which showed disappointing job growth – suggested that “the expiration of federal unemployment insurance benefits (which has now occurred in nearly 50 percent of states) will not be an immediate panacea for labor shortages.”
While ADP figures often lag behind monthly Labor Department figures, and may be particularly so this time around due to seasonal adjustments, they can point a direction.
Still, many economists will be watching hiring categories like recreation and hospitality this month for any signs that people are returning to work when benefits end.
Luke Pardue, an economist at the Gusto Payroll Platform, found in a recent analysis of company data that hiring at small service companies had not been made overall easier in states that ended federal benefits early – although it may have leaned toward older workers and away from teenagers.
#cutting #federal #unemployment #benefits #shake #job #market