Did Employment Rise in States that Cut Benefits? NewsWire

NewsWire: 8/13/21

• According to a new study, states that reduced unemployment benefits early haven’t seen a hiring boom. Who gets hired, however, has changed, with fewer teens and more workers over 25. (The Washington Post)
• NH: In June, 20 Republican states reduced their pandemic unemployment benefits early. Governors believed this would decrease their states’ stubbornly high unemployment rates. (See “Is Labor Force Participation Down for Good?”)
• So did people return to work? It’s hard to say. All of the states that cut benefits in June did so after the BLS conducted their unemployment survey for the month. Thus we have to look at the July results to see if there was any effect.
• In July, nonfarm payrolls increased by +943K, and the unemployment rate fell from 5.9% to 5.4%. Both those readings were better than expected. This might seem to suggest that cutting benefits had an impact. But the BLS won't release individual state data until the beginning of September. Thus, we can’t be sure the employment increase is coming from these 20 Republican states. There could be another driver at play. And a new paper by Gusto, an online payroll company for small businesses, suggests just that.
• By analyzing company accounts for June, Gusto concluded there wasn’t an overall increase in employment in states that cut benefits. There was an increase in employment for those ages 25+, but this was offset by a decrease in teen workers. So, yes, more adults have returned to work in these states, but it hasn't led to job growth.
• Over the last month, I have become more and more skeptical that benefits are the primary driver keeping people home. Instead, it seems that Covid-19 may still be the main reason. An estimated 26M Americans have Long Covid. And in an extensive global survey, 22% of respondents with Long Covid reported not working due to their symptoms. At the same time, approximately 1.5M Boomers retired early in 2020. (See "Pandemic Forcing Boomers Into Retirement.") I suspect both of these drivers largely explain the 3M people missing from the labor force. (For my video discussion of Long Covid, see “The Long Shadow of Long Covid: An Economic Threat.”)