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Cutting Unemployment Benefits Early Appears to Slow Job Growth

Ending pandemic unemployment benefits early was supposed to make people go back to work faster, said Kristi Noem and other mostly Republican pandemic deniers.   Early hiring data indicated Noem et al’s scapegoating was economically incorrect. So does state payroll data for July. States that cut unemployment benefits in June saw little change in job growth from June to July, while states still issuing enhanced UI saw a bigger jump in job growth and stronger growth than the stingy states:

Adam Kamins, "Covid-19 Surges Matter, UI Cuts Don't, So Far," Moody's Analytics: Weekly Market Outlook, 2021.08.26, p. 4.
Adam Kamins, “Covid-19 Surges Matter, UI Cuts Don’t, So Far,” Moody’s Analytics: Weekly Market Outlook, 2021.08.26, p. 4.

…The simplest view can be seen when comparing job growth in states that ended programs early against those that did not. The former group experienced aggregate gains that were about 10 basis points lower than those that made no changes. Although this gap is not large enough to reflect a meaningful difference, the fact that growth was weaker in states that cut benefits makes it clear that the hoped-for flood of worker re-entries into the labor force has not materialized.

…Though this could have reflected an anticipation of a policy change, there is little anecdotal evidence that behavior meaningfully changed following initial announcements. Further, the acceleration in job gains across the nation from June to July suggests that there was no onetime spark around the time of implementation. In fact, the first four states to cut benefits—Alaska, Iowa, Mississippi, and Missouri—were generally middling to below-average performers in June.

All told, these results suggest a negative relationship between cutting UI benefits and job growth [Adam Kamins, “Covid-19 Surges Matter, UI Cuts Don’t, So Far,” Moody’s Analytics: Weekly Market Outlook, 2021.08.26, p. 4].

The four states with the fastest job growth in July and seven of the top ten kept the extra UI payments in place. This economic experiment ends this week, when the extra unemployment benefits approved by Congress to get people through the pandemic end on September 4. But we are emerging from this experiment with a couple months’ worth of data showing that when Kristi Noem makes economic recommendations, we should do the opposite.

15 Comments

  1. O 2021-08-30

    I would interpret that data to say that there are some states that are better to work in; those are the states that would keep unemployment benefits longer (because they care about the well being of their work force). States where workers are treated poorly have slower employment rates because they are terrible to work in. The unemployment benefit addition would be the tip of the iceberg of how employees are treated overall in any given state.

  2. bearcreekbat 2021-08-30

    Stagnant or reduced job growth makes perfect sense. The legal requirements for participants in the unemployment insurance program are specifically designed to get people back to work, i.e. increase job growth. Participants in the UI program are required to make an active ongoing job search, and are normally provided with referrals to relevant job openings from the UI office. Kick them off the UI program and such actions and referrals are no longer required. Individuals that are actively looking for work and have the benefit of referrals to job openings that are consistent with their skills are logically more likely to find work, hence job growth will be greater. Removing these two factors will yield the opposite result.

  3. ABC 2021-08-30

    UE benefits are a federal tax that employers pay while you work. Lots of hours worked, you get more UE paid in. It is a benefit you get when you work.

    So Taliban Christi cuts the federal pandemic UE benefit to 0. No wonder job growth is slower here.

    Reps have been power 42 years here longer than Afghanistan’s Taliban. SD Taliban believe workers are lazy, don’t give them benefits. Democratic Party has been losing 42 years now, they are the Republicans dancing partner in Dancing with Stars South Dakota Taliban edition. Democrats are very good at losing, experts actually.

    You think Democrats would have an honest dialogue, saying to themselves, hey, we are not winning elections. We have as much chance of winning as the Harding County Wild Eyed Socialists do. So we can create a break off Party. Call em Democrats 2.0 or something unlike Democratic Party. We won’t be splitting our vote because we lose with our vote all the time anyway. The Democratic 2.0 party would have just as much chance of winning Governor as would our old Party. At least we wouldn’t have to listen to the same old boring lose at all costs backslapping come to my Party and celebrate me while we lose more elections at out of touch Sioux Falls Headquarters.

    This is called creative disruption in Silicon Valley. Think Uber or Lyft. It works!

    The Democratic Party in SD doesn’t work.

    Since Democratic Party here won’t disrupt themselves and innovate and win,
    We will have to do it ourselves!

    Progressives, we are called.

    Why back a 42 year loser?

    We need new ideas, new victories. We can!

  4. O 2021-08-30

    I wold add to my comments that I will bet that the states continuing the enhanced unemployment benefit is ALSO taking other steps to encourage positive reentering of the job market: better wages, day care . . . Whereas those cutting the benefits are doing NOTHING and jsut trying to force “those lazy bums” back into filling bad jobs to get business profitability back.

  5. cibvet 2021-08-30

    The thing is that the misinformation campaign worked for the repubs. Haven’t met anyone yet that will not repeat the same old line about people won’t work because they make to much money on unemployment.
    If you ask them who they know that is doing this, they don’t know anyone. Just a repeat of what they hear on tv.

  6. John Dale 2021-08-30

    I made the case last week for why Dusty Johnson is wrong to attack those receiving benefits from the state when the economy is in flux because of automation, and because paying people a “freedom dividend” doesn’t mean the government will subsume the means of production.

    Quite the opposite.

    Having UBI would also have the effect of allowing workers to treat their skills like a commodity, and to decide which firms (or none of them) get to benefit from those talents.

    Yes, there are problems with the idea, but I see no moral difference between state sponsored benefits and family sponsored benefits if the work performed in each case is equal. For instance, a lot of people are getting corporate welfare from the MRNA shots being paid for by the government. The shots are not working as expected, but Pfizer and other firms’ stockholders and employees are still getting paid. The soiled revenues pass right through to power companies, Internet services companies, water companies, land lords, refrigeration and construction contractors, plumbers, and on-and-on.

  7. jerry 2021-08-30

    John Dale is vaccinated.

  8. Mark Anderson 2021-08-30

    Oh John, the shots are working better than expected, you wonder why commentors refer to you, well when you lie like a rug, its just so easy to wipe your feet.

  9. Francis Schaffer 2021-08-30

    A thing once read cannot be unread.

  10. Dicta 2021-08-30

    Yes, the vaccines do work, you lying sack of excrement.

  11. jerry 2021-08-30

    Last American service personnel are out of Afghanistan. Let’s hope that the military will now draw down to at least half it’s current size so that those who have served will be able to get to work on the civilian side of things as a reward for jobs well done. Of course, they will get unemployment insurance. Booyah!

  12. grudznick 2021-08-30

    grudznick knows people who won’t work because they’re loafing about on the dole, Mr. cibvet. I should not name them here, but there are several. They admit it freely to members of the Conservatives with Common Sense.

  13. Porter Lansing 2021-08-30

    South Dakota Contrary vs Colorado Cares

    Today my Governor, Jared Polis spoke in favor of eliminating our state income tax, completely.

    Y’all can live where mean people rule or you can come to where every opportunity is available for success.

  14. cibvet 2021-08-31

    My guess that is the so called conservatives with common sense are the one on the dole gruz. Besides, the name you keep calling yourself is one large oxymoron.

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