- Over half of the states in the US have ended federal benefits ahead of their September expiration.
- Many governors cited the enhanced benefits as keeping workers out of the labor force.
- But a JPMorgan note says there’s little sign that cutting off benefits brought workers back.
Over half of the states in the US have opted out of federal unemployment benefits early, citing the programs as potentially fueling the current labor shortage.
But that doesn’t seem to quite be the case. A Friday note from JPMorgan researchers Peter B McCrory and Jesse Edgerton looks at the impact on unemployment claims and spending following states officially opting out of their benefits.
They find that there’s “little sign of any differential improvement in unemployment claims or in several spending and activity measures in these states.” There’s perhaps a little jolt in spending on restaurants — which could be chalked up to workers returning to staff up eateries — but even that estimation might still be closer to no effect.
A previous note from JPMorgan said the decision to cut off unemployment benefits ahead of their scheduled expiration in September was “tied to politics, not economics.”
The role that unemployment benefits ending has played in getting more people to work is murky. For instance, The Wall Street Journal reported in late June that the number of UI recipients was falling in states that opted out early, but Insider’s Ayelet Sheffey reported that May saw strong job growth while enhanced benefits were still in place. June also saw major payroll additions, but the unemployment rate actually went up that month. All in all, the broader impact on the labor situation is still a bit of a question mark.
On the other side of the equation are the 4 million Americans who will see some or all of their benefits cut off early. Two federal programs extended who’s eligible for unemployment benefits — notably gig workers into the fold — and extended how many weeks workers were eligible to receive benefits. In many states, those programs are winding down completely this summer, leaving workers without any UI income. Workers have previously told Insider that the loss of those benefits will result in them losing their homes, or exposing themselves to risky work environments.
But some jobless Americans have struck back against benefits from being ended by filing lawsuits in several states. They’re already seeing some early wins, with judges deciding that benefits should be temporarily reinstated in Indiana and Maryland while the lawsuits proceed.
“I think it certainly has the potential to start more cases,” Andrew Stettner, a senior fellow and jobless-policy expert at the left-leaning Century Foundation, previously told Insider. “The legal argument made in Indiana was based on a set of components that were not unique to Indiana law.”