UPDATE 8:31 a.m.
New unemployment claims fell to 1.3 million last week, the Labor Department reported.
The number of people seeking aid — still at historically high levels — has been slowly declining after an initial spike when the coronavirus pandemic jolted the economy in March. Nearly 18 million American workers are receiving jobless benefits.
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Laid-off workers in key 2020 battleground states — some of the country’s most sought-after voters — may be hurt the most when the $600-a-week boost in unemployment benefits expires at the end of this month.
Pennsylvania, Michigan and Florida — all of which Donald Trump barely won in the 2016 presidential race — have some of the highest numbers of unemployed workers in the country, and they’ll see a reduction of more than $3 billion per week in income once the enhanced aid runs out, according to one estimate.
Jobless workers in every state will see their weekly benefit checks drop by at least 50 percent, depending on the recipients’ incomes and different rules in each state. But those in many swing states like North Carolina, Arizona and Georgia, as well as Michigan and Florida, will see even greater losses — from 64 percent to as high as 72 percent, Century Foundation fellow Andrew Stettner found.
The special vulnerability of these states to the coronavirus-induced recession is likely to influence the election-year debate in Washington over whether to extend the unprecedented benefits as part of the next pandemic-relief package, a move that Senate Majority Leader Mitch McConnell and other Republicans have so far strongly resisted.
With historically high numbers of workers still filing new claims for unemployment benefits — 1.3 million new jobless claims were filed in state programs alone last week — Democrats argue that the additional aid is being cut off too early.
“It would be devastating” if Congress doesn’t act, Rep. Dan Kildee (D-Mich.) told POLITICO. “This benefit is the difference between surviving and not surviving for 20 percent of Michigan’s population.”
Nearly 32 million Americans relied on unemployment aid to meet their spending needs in the last week of June, according to a Census Bureau survey released Wednesday.
But Stephen Moore, a conservative economist and outside adviser to Trump, said extending the enhanced aid would do more harm than good to the economy.
“It’s one of the dumbest things you can possibly do,” he said. “The unemployment benefits would be political kryptonite for Trump and kryptonite for the economy,” said Moore, who estimates that a six-month extension of the benefits could cost 10 million jobs.
Republicans and conservative groups contend that the program provides a disincentive to return to work, because the additional $600 weekly benefit allows many individuals to earn more on unemployment than they would in their paycheck.
“It just never makes sense to pay somebody more to be unemployed than it does to have a job,” said Rachel Greszler, a senior policy analyst at the Heritage Foundation.
Yet some experts warn that without the extra help, laid-off workers will have less cash to use for bills, groceries and other needs. Less economic activity will be a drag on the recovery and will lead to more job loss, they say.
“A community that you might not expect to be hit are the people who aren’t even on [unemployment insurance], but will just lose their jobs, because the spending that those UI recipients did was on goods and services that those people provided,” said Heidi Shierholz, a former DOL economist now with the left-leaning Economic Policy Institute.
Allowing the benefit to expire will sap an estimated $15 billion per week from the economy, Century’s Stettner predicts, putting a financial squeeze on both Democratic and Republican-leaning districts just months before the elections.
“We have shielded ourselves from how damaging all these layoffs could have been by providing this aggressive effort around unemployment benefits,” he said. He argues that because the $600 federally funded additional benefit allowed Americans to maintain their prepandemic income, that “makes the economy look a lot better than it is.”
States with a larger share of unemployed workers will feel the brunt of financial losses: California, Pennsylvania, New York, Michigan, Texas, Florida, Massachusetts, New Jersey, Arizona, Ohio and Illinois have the highest number of workers on unemployment rolls, he says.
Most Americans support extending the additional aid past the July deadline, according to a Peterson Foundation-FT poll of 1000 likely voters. Some 66 percent say they would support extending the additional payment, with 82 percent of Democrats and 48 percent of Republicans backing the move.
Republicans opposed to extending the aid point to recent positive economic reports that suggest the labor market may be recovering.
Layoffs in May fell to 1.8 million, the DOL reported Tuesday, reaching pre-coronavirus levels and a significant drop from the 9.9 million seen in April. The unemployment rate also dropped to 11.1 percent in June from 13.3 percent the month before.
But the number of workers newly applying for regular jobless benefits has been only slightly declining in recent weeks and remains at historically high rates.
And while new claims in regular state programs fell last week, the number of new claims in the temporary Pandemic Unemployment Assistance program created for those ineligible for traditional unemployment benefits — like gig workers and the self-employed — rose by 42,000 to a little over 1 million, the Labor Department reported Thursday.
The nonpartisan Congressional Budget Office’s most recent forecast projects that unemployment will continue to climb, peaking at 14 percent in the third quarter of this year.
Covid-19 cases have also started spiking across the country, and several states, including Florida, Texas and Arizona, have started to force some businesses to shut down again, further muddying the economic outlook.
In Texas, where Gov. Greg Abbott closed down bars and placed restrictions on other businesses at the end of last month, new unemployment claims rose last week by nearly 21,000 to 117,000.
Other parts of the Sun Belt where the coronavirus has resurged in recent weeks, including Arizona, Louisiana and Nevada, also saw an increase in new unemployment applications last week.
The sudden loss of income could have an especially dramatic effect on Florida, where officials have struggled with a deeply flawed unemployment system that required the state to spend up to $150 million on upgrades and ways to work around the troubled portal used by applicants.
Florida caps normal unemployment benefits at just $275 a week, one of the lowest rates in the nation. Gov. Ron DeSantis and the Florida Department of Economic Opportunity say they have fixed the great bulk of problems with the system, pointing to the more than $9 billion paid out so far to over 1.65 million Floridians. But more than 72 percent of that money is a result of the extra $600 payments.
DeSantis says he wants Congress to extend additional help to jobless workers but that the program should be structured differently so unemployed workers get an incentive to return to work instead of the extra weekly payment.
“They should structure it differently, but I would support them doing something to be able to keep them on their feet and get them back in the workforce,” he said.
Democrats have called on the governor to increase the amount of Florida’s weekly benefit payment, but the DeSantis administration has contended the governor lacks the legal authority to authorize a larger payment without legislative approval. Florida’s Legislature isn’t scheduled to return until November.
Republicans in Washington remain opposed to extending the additional payment and instead have signaled support for “back to work bonuses” or other programs to give workers an incentive to get back to the job.
But the GOP is in no rush to act, despite the looming deadline.
McConnell is aiming to pass another round of aid toward the end of the month, creating a potential buzzer beater debate over the benefits just before they expire.
Gary Fineout contributed to this report.
Source: politico.com
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