People began searching for jobs more in states that decided to opt out of the federal government’s expanded unemployment benefits, early research has found.
Jed Kolko, the chief economist for the employment website Indeed, found that job search activity rose, relative to the national trend, in the roughly two dozen states that have announced they are ending the expanded unemployment benefits program early, a sign that cessation of the program might begin to mend what many economists are characterizing as a labor shortage.
“A state’s share of national clicks on job postings was nearly 5% higher on announcement day, relative to a baseline of the last two weeks of April,” according to Kolko’s findings. “This increase was temporary, vanishing by the eighth day after the announcement. In the second week after the announcement, the state’s share of national clicks was no higher than it was during the late-April baseline.”
Indeed found that search activity grew in the days after states made the announcement about ending the programs and increased across several sectors. 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. Tourism, hospitality, sales, and marketing saw the greatest increases, although search activity also rose among career paths not typically associated with lower wages, such as banking, finance, and the medical field.
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As it stands, the federal government’s supplemental pandemic unemployment program provides people $300 per week in federal payments in addition to whatever amount of funding they are receiving in state unemployment benefits.
The national average of statewide unemployment insurance prior to the pandemic was $387 per week, meaning that unemployed people in America are now netting $687 per week on average. 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.
Weekly BenefitsKolko told the Washington Examiner during a Thursday interview that the big takeaway from the findings is that increased searches for jobs following state announcements were “modest and temporary.” He said that it is possible that Indeed might see another uptick in job searches around the time when unemployment benefits are set to sunset, which is in June and July, depending on the state.
“It depends how aware people are for starters, but I think even more importantly it depends on how much else is going on with the labor market and the pandemic that might also affect peoples’ search behaviors,” he said.
For example, the expanded benefits are set to end right around when schools are getting out for the summer, rates of vaccination and hesitancy about returning to work because of the pandemic could have an impact, and some economists have theorized that child care responsibilities have also contributed to a labor shortage, although recent research suggests a minimal impact on that front.
Search ActivityEconomists have mixed views about how the $300 payments are affecting labor. The number of job openings hit the highest level on record in March, 8.1 million, the Bureau of Labor Statistics reported, up 40% on the year. Hires, though, were up only 17%.
Even with the glut of openings, April’s jobs 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 also rate rose slightly to 6.1%.
It is unclear what effect the Republican governors who decided to opt out of the program will have on unemployment. The number of new applications for unemployment benefits dropped 38,000 last week to 407,000, the Labor Department reported on Thursday. That number fell below the expectations of forecasters and is also a decline from the week before.
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Joel Griffith, a research fellow at the Heritage Foundation, told the Washington Examiner that he thinks the expanded unemployment benefits are having a “huge impact” on hiring and jobless claims.
“The numbers that are coming out of small businesses — more than 40% of these independent-business owners, according to NFIB, are reporting that they cannot find enough people to staff the positions,” he said in reference to the National Federation of Independent Business, which recently found that 42% of owners reported that they could not fill open job positions, a figure that is up from 32% in December, when the pandemic was still in full swing.
“A big part of that problem really lies at the hands of the government, which for so long kept businesses closed under penalty of fine and imprisonment, and now they’re saying, ‘OK, you can reopen, but you’re going to have to compete with us to actually hire workers because we’re going to pay people more than you can pay them. We’re going to pay them more just to sit at home,’” Griffith said.
On the flip side, Stephanie Aaronson, a vice president and the director of economic studies at the Brookings Institution, told the Washington Examiner that she would be surprised if states’ decisions to opt out of the benefits had a big impact on initial jobless claims.
“Where we’re more likely to see an impact is on the continuing claims for the insured unemployment because the whole point of this exercise is to encourage people to find jobs, and if unemployment benefits end sooner because people aren’t eligible for the emergency benefits or the amounts are lower, that could encourage some people to go back into the labor force, and so we could see the insured unemployment numbers start to come down,” she said.
Aaronson noted that those numbers are coming down anyway because the economy on aggregate is improving and said that in states where the unemployment rate is already low — Nebraska, New Hampshire, South Dakota, and Utah all have 2.8% unemployment rates — a change in the unemployment insurance benefits isn’t likely to have a substantial effect.
Additionally, Aaronson, a former economist at the Federal Reserve, asserted that research suggests that extended federal unemployment insurance benefits don’t do much to contribute to high unemployment rates, although she did say it can discourage people from looking for jobs.
While Republicans on Capitol Hill have asserted that the expanded unemployment benefits, which are set to sunset in September for the states that don’t end them early, have caused damage to the labor market, the White House has pushed back on that notion.
Earlier this month, President Joe Biden said that “we don’t see much evidence” that people are opting to collect unemployment rather than find jobs. The president also said that “no one should be allowed to game the system” and insisted that those who get offered a job must accept it.
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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 speech about the economy. “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.”
