A cliff of unemployment is coming. More than 7.5 million could fall

Millions of unemployed Americans are set to lose Covid-era income support in about a month.

This looming “cliff of benefits” looks different from others that loomed last year, when Congress was able to keep aid going after last-minute legislative deals.

There does not appear to be any urgency among federal lawmakers to extend pandemic benefit programs past Labor Day, their official deadline.

“There’s hardly anyone talking about expanding the benefits,” said Andrew Stettner, senior researcher at the Century Foundation, a progressive think tank.

The Cliff will impact Americans who receive benefits through a handful of temporary programs.

They include support for the long-term unemployed, as well as for the self-employed, concert workers, the self-employed and others who are generally not eligible for state benefits.

More than 9 million people were receiving such assistance as of July 10, according to the Ministry of Labor.

About 7.5 million people will still receive benefits by the end of September 6, Stettner estimates. They would then lose their entitlement to benefits.

Others who are eligible for traditional state unemployment insurance may continue to receive these weekly payments after Labor Day. About 3 million people currently receive regular state benefits.

However, they will lose a weekly supplement of $ 300.

The average person would have received $ 341 per week without the supplement in June, according to data from the Department of Labor. (Payments vary widely by state – from $ 177 per week in Louisiana to $ 504 per week in Massachusetts, on average.)

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State benefits replaced around 38% of pre-layoff wages for workers in the first quarter of 2021, according to the Ministry of Labor.

The expansion of unemployment benefits under the CARES Act was unprecedented in the history of the unemployment insurance program, which dates back to the 1930s.

Congress has also increased payments in past recessions, to varying degrees.

During the Great Recession, for example, workers were able to collect up to 99 weeks of unemployment benefits – far more than the traditional 26 weeks (or less in some states). This aid ended in December 2013, when 1.3 million workers lost their benefits.

During the pandemic, workers were on the verge of losing their extended benefits last December and again last March, but Congress intervened in both cases, most recently with the American Rescue Plan.

“It’s so many more people than ever have been cut off from something like this,” Stettner said of the looming cliff face compared to past cuts.

Of course, the economy has recovered faster than in previous recessions. It is now larger than before the pandemic, according to Commerce Department data released Thursday.

Hiring has also increased in recent months. The economy created 850,000 new jobs in June, after 583,000 in May and 269,000 in April. However, the United States has yet to recover nearly 7 million lost jobs from pre-pandemic levels.

Critics of the extended benefit programs believe they have caused workers to stay home instead of looking for work, making it harder for companies to fill vacancies and helping to reduce labor costs. hiring.

There was about one unemployed person for every job opening in May, according to the Bureau of Labor Statistics.

Twenty-six states ended their participation in federal unemployment programs in June and July, in an attempt to encourage recipients to return to work, thus raising the benefit cliff for residents by about two to three months.

“Businesses across the state continue to say they would grow and grow without the shortage of workers,” Marcia Hultman, secretary of the South Dakota Department of Labor and Regulation, said in May. “The end of these programs is a necessary step towards people’s recovery, growth and return to work. “

With the extra $ 300, nearly half of the unemployed (48%) earn as much or more money on unemployment benefits than their lost paychecks, according to a recent article published by the JPMorgan Chase & Co. Institute.

The additional funds had little impact on job search among workers, but did not significantly dampen the labor market, according to economists Fiona Greig, Daniel Sullivan, Peter Ganong, Pascal Noel and Joseph Vavra, authors of analysis.

“We conclude that unemployment supplements were not the main driver of the job search rate until mid-May 2021 and that US policy therefore succeeded in insuring the loss of earnings due to unemployment with minimal impacts on employment, ”they concluded.

And while it’s still early days, the evidence so far does not suggest that state policies immediately pushed people back into the workforce.

Some economists argue that factors related to the pandemic, not the benefits, are the main reasons workers may not return to the workforce as quickly as expected.

For example, parents may still not have adequate child care; those who cannot work from home can still be cautious for health reasons; workers may have quit their jobs or changed industries during the pandemic.

At the same time, the delta variant threatens to complicate the recovery. The Covid strain is significantly more contagious than the original strain and can make people sicker than other viral variants, according to a document from the Centers for Disease Control and Prevention reviewed by CNBC.

There was a seven-day average of more than 62,000 new cases of Covid as of Thursday, down from around 47,000 a week earlier, according to CDC data. The overwhelming number of hospitalizations and deaths occurs among the unvaccinated. But it appears that people vaccinated with breakthrough cases can still pass the virus on to others, according to the CDC.