Billions in Unemployment Payments Will Stop on Labor Day

That's how much less money will flow into the economy every week after Labor Day, when 7.5 million unemployed people will lose access to federal pandemic unemployment programs, according to a new estimate.

The end of two programs—one that extends the amount of time workers can collect unemployment, and another that allows otherwise-ineligible gig workers and contractors to collect it—is looming Sept. 6. On that date, 7.5 million people will be cut off from the programs, a researcher at The Century Foundation, a progressive think tank, estimated in a report Thursday.

The cutoff will threaten not only the wellbeing of those directly impacted, but could slow economic growth, said Andrew Stettner, senior research fellow at the foundation, in a report. Unemployment benefits are currently pumping more than $6 billion a week into the U.S. economy, but that figure will fall to $1 billion when the programs end, Stettner estimated.

In addition to those losing their unemployment payments entirely, an estimated 3 million more will stop receiving a $300 weekly federal supplement to their state unemployment benefits, which average just $334 per week nationally. The cutoff is likely to hit people of color the hardest, with Black workers still experiencing an unemployment rate of 9.2% and Hispanics an unemployment rate of 7.4%, compared with the White unemployment rate of 5.2%, according to the latest figures from the Bureau of Labor Statistics.

Whether cutting off these benefits will encourage people to return to work and alleviate a labor shortage is a matter of debate among economists, who are studying what happened in the 26 states that announced their intentions to withdraw from some or all of the programs in June and July. (Some of them were prevented from doing so by legal challenges). 

Analyzing preliminary data, the Federal Reserve Bank of St. Louis determined in July that some people were probably returning to work because of the loss of benefits. 

But a new report from UKG, a workforce management technology company, adds to a growing body of evidence that this is not the case. In states that didn’t cut benefits off early, there was a 4.1% growth in workforce activity between May and July compared with 2.2% growth in activity among states that had cut them off, the company said in an email Thursday. The analysis drew on weekly employee shift work trends across 35,000 U.S. businesses with 3.3 million employees.

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