The jobs report for September is expected to see a boost from the expanded unemployment benefits program expiring.
While most Republican states phased out the supercharged federal unemployment insurance program early, many states kept it going until Labor Day. Goldman Sachs predicts some 1.3 million jobs will be added by the end of the year as a direct result of the program’s cessation.
“Our examination of the July and August individual-level employment data — when 25 states opted out of federal benefit programs early — showed that UI-benefit expiration significantly boosted the job-finding rate for unemployed workers, although it was not associated with an increase in the labor force participation rate,” Goldman Sachs concluded in a report this week.
The financial services giant noted that in addition to expiring unemployment benefits, several other factors are at play and make up a “perfect storm” for labor shortages. Among them are early retirements, an aging population, other labor force exits, a decline in immigration, and increases in self-employment during the pandemic.
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“Combined, these factors had lowered the pool of prospective employees by over 8 [million] through August, of which 5.6 [million] will persist after federal UI benefits expired in September,” the report read.
Rep. Kevin Brady, the ranking member of the House Ways and Means Committee, predicted that this month’s jobs report, to be released Friday, will see a boost from the benefits program’s expiration. Despite the bump, he said he thinks that it will be less than President Joe Biden is hoping for.
“I predict the president will continue to fall far short of his jobs promises,” the Texas Republican said during a call with reporters, referring to goals that Biden set earlier this year.
The benefits were controversial, with many Democrats pushing for them to be continued while Republicans blasted them as holding back the economy as the pandemic wanes. Republicans have pointed out that many recipients of the benefits were making more collecting government checks than working.
The supercharged benefits program gave unemployed people $300 per week on top of whatever their state already provided. The national average of statewide unemployment insurance before the pandemic was $387 per week, meaning unemployed people in America are now netting $687 on average with the $300 expansion — that equates to a $17.17 hourly wage, more than double the federal minimum wage.
The Goldman Sachs report found that of the 5.3 million people receiving benefits at the time the program sunset in September, about 2.7 million earned more from the expanded program than they earned from their previous job.
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The September jobs report is highly anticipated, given the program’s expiration. Consensus estimates are that 473,000 jobs were added last month and that the unemployment rate will decline from 5.2% to 5.1%.
The August jobs report fell far short of forecasters’ expectations. The economy added just 235,000 new jobs last month, well below the 750,000 that were expected.
