Cutting Benefits Early Didn't Help Employment. NewsWire

NewsWire: 9/9/21

• So far, the states that cut benefits early have seen the same job growth as those that didn’t. The debate over the impact of extra pandemic aid is still raging as the benefits come to an end nationwide. (The Wall Street Journal)
• NH: The results are finally in. The BLS has released July unemployment data for individual states. This is significant because July is the first full month that the unemployment survey captured the results of states ending UI benefits early. 
• So what did the data reveal?
• States that cut benefits did not experience higher rates of employment growth. In the 25 states that ended enhanced UI, nonfarm payrolls rose +1.33% between April and July. In the 25 states (plus DC) that kept enhanced UI, nonfarm payrolls rose +1.37%. In other words, there was no statistical difference between the two groups. (April was chosen for comparison because governors announced plans to end benefits in May even though benefits didn't officially end until mid-June.)

• The NYT recently reported on a Goldman Sachs study which suggests that even though total employment didn't rise any faster in states that cut benefits, the employment of those actively looking for work did rise somewhat faster. (Apparently, however, this rise must have been counterbalanced by less employment from those not in the workforce.) IMO, this is a distinction without a difference. It may be, for example, that teens have been vacating jobs faster in states where more working-age adults are reentering the workforce.
• In any case, the bottom line remains: As enhanced UI is terminated for all states this month, don’t expect to see the termination translate into any significant increase in nationwide employment. 
• We have predicted in past NewsWires that cutting benefits would have only minimal effects on employment. (See “Did Employment Rise in States that Cut Benefits?”)
• Clearly, some near-term rise in employment would be possible if the current Covid-19 threat recedes. But any dramatic improvement is limited, as we have explained, from some long-term barriers: a large rise in early retirements since the pandemic began and the debilitating side effects of Long Covid. (See “The Long Shadow of Long Covid: An Economic Threat.”)