Jobless Aid Cliff Nears for Millions Without Sign of State Help

Millions of out-of-work Americans will see their unemployment benefits end or substantially decrease next week, and so far even the politically bluest U.S. states look content to let the enhanced aid expire.

The federal pandemic jobless aid that began last March expires Sept. 6, meaning states can’t pay the benefits for weeks beyond that date. Proponents of generous unemployment benefits call it a cliff that will push many into poverty, evictions, and food insecurity.

The expiration date arrives while a surge of Covid-19 cases caused by the delta variant throws a wrench into plans for widespread economic recovery and nationwide school reopenings.

“As the delta variant picks up, we haven’t seen any trends showing employment improving to the pace that it needs to be,” said Alexa Tapia, who heads the unemployment insurance campaign at the left-leaning National Employment Law Project. The financial struggles of lingering unemployment are felt disproportionately by people of color and women, she added.

U.S. labor officials have suggested states could use federal relief funds to extend their own unemployment supports, but no state has announced such plans, as a number of them instead point people to other public benefits such as food and rent assistance.

At least 26 states—nearly all of them led by Republican governors—opted to end their participation in some or all of the federal benefits earlier than the federal expiration date, prompting lawsuits challenging the governors’ decisions.

“We know this pandemic has been tough on many workers and their families and that is why we are working with our partners to make sure unemployed Californians are aware that they may still qualify for vital programs to help cover food, housing, utility, and health care costs,” the state’s Employment Development Department said by email.

State workforce agencies across the country have sent out similar messages in recent weeks, including during an Aug. 30 press conference by Pennsylvania Labor Secretary Jennifer Berrier.

“While the federal unemployment benefits did a great job serving as a catch-all safety net during the peak months of the pandemic, we are now ready to return to a state where we address these hurdles with more specific assistance,” she said.

Hiring Is ‘Gargantuan Task’

State, local, and tribal governments were allocated $350 billion in the American Rescue Plan Act to spend at their discretion on Covid-19 relief and recovery efforts. That’s the pot of money from which Treasury Secretary Janet Yellen and Labor Secretary Marty Walsh suggested that states or cities might opt to extend further unemployment aid after the federal jobless aid programs expire.

The federal relief funding “provides states significant flexibility in how the new additional income support program is structured. States do not need to be confined to the eligibility requirements of the expiring temporary pandemic UI programs,” Michele Evermore, a senior adviser to the Labor Department’s Employment and Training Administration, told states in an Aug. 26 guidance email.

The latest unemployment figures from the U.S. Department of Labor show initial jobless claims for people who have recently lost work declined to their lowest point since March 2020.

But there’s no guarantee of a quick return to work for people who already are unemployed, an estimated 7.5 million receiving only federal benefits and another 2.6 million receiving state unemployment insurance plus the $300 federal weekly supplement, said Andrew Stettner, senior fellow and unemployment researcher at The Century Foundation.

“Whether it is a slower-than-expected return to office, the cancellation of live events, or understandable public fear of travel and shopping, the pandemic continues to make the gargantuan task of rehiring millions of workers that much harder,” Stettner said.

Studies have suggested little or no difference in how quickly people return to work in states that continued benefits versus the 26 that turned them off weeks or months ago. An August research brief from JPMorgan Chase & Co. also noted the economic drag of decreased spending when people lose their unemployment benefits before returning to work.

There’s reason to be skeptical of the state-to-state comparison, though, since the Republican-leaning states where benefits were turned off already had lower average unemployment rates than the Democratic-leaning states that continued them, said Matt Weidinger, a senior fellow at the conservative-leaning American Enterprise Institute.

Among the expiring programs are Pandemic Unemployment Assistance for independent workers and others and the Pandemic Emergency Unemployment Compensation, which provides extra weeks of aid after traditional benefits run out. The estimated 7.5 million people receiving one of these are losing all unemployment benefits.

Also expiring is the Federal Pandemic Unemployment Compensation, which provides the extra $300 per week to anyone getting benefits, including those 7.5 million plus 2.6 million who are receiving traditional unemployment insurance.

No Appetite for Extension

Democratic leaders in Congress and comments from President Joe Biden over the last several weeks indicated little or no interest in extending the pandemic-era unemployment programs, which have paid out more than $700 billion since their start in March 2020.

States have shown no interest either and likely won’t, said Rachel Deutsch, director of worker justice at the Center for Popular Democracy, who has led advocacy efforts around unemployment benefits since the pandemic’s start.

“States aren’t doing anything, and Biden knew they wouldn’t,” she said via email. “Biden punted to states to avoid accountability for an unprecedented 7.5M people being kicked off benefits,” she added, noting that in the previous two recessions about 1 million people still relied on enhanced federal unemployment benefits as they ended.

Weidinger said it’s doubtful states will opt to use the federal relief funding to continue unemployment enhancements, partly because they have other plans for the money and partly because enhanced benefits encourage unemployed people to remain on benefits longer, costing the state trust funds and the employers who pay into them more money in the long run.

The focus now for Deutsch’s group is to get longer-term changes to the unemployment system included in the $3.5 trillion budget reconciliation package that Democrats in Congress are crafting—changes such as more generous benefits and triggers to automatically expand benefits in times of high unemployment rates, rather than waiting for ad hoc solutions from Washington each time.

—With assistance from Ben Penn