Exactly half of the country’s states have announced plans to opt out of the expanded federal unemployment program early, given recent economic growth and fears of a labor shortage.
Maryland became the 25th state to announce an early demise to the supercharged benefits program this week. The program gives the unemployed $300 per week on top of whatever states already provide. The expanded benefits were intended to help those sidelined by the pandemic, although some worry that it has incentivized remaining unemployed.
The sunset date for the entire federal program is Sept. 6, Labor Day. States are required to let residents know about when the benefits are ending in advance, so different states, all of which are led by Republican governors, have different dates for when the federal program will be phased out:
June 12: Alaska, Iowa, Mississippi, and Missouri.
June 19: Alabama, Idaho, Nebraska, New Hampshire, North Dakota, West Virginia, and Wyoming.
June 26: Arkansas, Florida, Georgia, Ohio, Oklahoma, South Dakota, Texas, and Utah.
Montana will end the benefits on June 27, South Carolina on June 30, Maryland and Tennessee on July 3, Arizona on July 10, and Indiana on July 19.
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The expanded benefits are generous when stacked on top of state unemployment payments, which averaged $387 per week prior to the pandemic.
That means that, on average, unemployed people in the United States are now netting $687 per week. When compared to a job with a 40-hour workweek, the $687-per-week income equates to a $17.17 hourly wage — a figure more than double that of the federal minimum wage.
Republican governors and some economists think that the high rate of unemployment pay has discouraged workers from taking certain jobs, especially low-wage positions, given that they can make more collecting unemployment.
Even Larry Summers, a Democrat who served as treasury secretary under President Bill Clinton and the director of the National Economic Council under President Barack Obama, has said that the “current reality” is that there is a labor shortage and that some places should consider ending the program early.
Many of the states announced plans to end the program after cessation was endorsed by the U.S. Chamber of Commerce, which is the world’s largest business federation. The Chamber announced its position in early May after a brutal April jobs report.
The April report was a major disappointment, with the economy adding just 266,000 jobs — far short of forecasters’ predictions of nearly 1 million jobs. The unemployment rate also rose slightly to 6.1%, according to the Bureau of Labor Statistics. May’s jobs report is highly anticipated and set to be released on Friday.
“We need a comprehensive approach to dealing with our workforce issues and the very real threat unfilled positions poses to our economic recovery from the pandemic,” the Chamber said in a statement after noting the “disappointing” April jobs report. “One step policymakers should take now is ending the $300 weekly supplemental unemployment benefit.”
While it’s yet unclear what exact impact the 25 states’ decision to opt out of the program is having on the jobs market, a recent study by employment website Indeed found that job search activity rose, relative to the national trend, in the states that are ending the expanded unemployment program. The study found that a state’s share of national clicks, on average, was up between 3% and 4% from the day of the announcement to three days later.
New jobless claims dropped below 400,000 last week for the first time since the start of the health crisis, the Labor Department announced on Thursday. Some 385,000 people filed for unemployment, slightly beating economists’ predictions of 390,000 doing so.
Still, some Democratic lawmakers are displeased that Republican states are planning to opt out of the program. Sen. Ron Wyden, the chairman of the powerful Senate Finance Committee, told Politico this week that he would “do whatever it takes” to keep the benefits in place. He said Democrats in the Senate are “talking to the Labor Department constantly” about next steps.
“We originally thought they had the authority to make sure that the people would get their benefits. Now, they say they don’t. If it takes changing the law, I’ll change the law,” the Oregon Democrat said.
In addition to just opting out, some states such as Oklahoma and New Hampshire are offering bonuses to people who get a job and leave the unemployment program. For example, Montana is offering $1,200 bonuses for residents who return to work.
In the executive branch, the White House has pushed back on Republicans’ argument that the federal benefits program is harming the labor market. President Joe Biden said that “we don’t see much evidence” that workers are opting to collect unemployment rather than find jobs.
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“I think the people who claim Americans won’t work, even if they find a good and fair opportunity underestimate the American people,” he said during a recent speech. “So, we’ll insist that the law is followed with respect to benefits, but we’re not going to turn our backs on our fellow Americans.”
