With Unemployment at Historic Heights, Congress Must Extend $600 Lifeline to Workers

Last week, 2.4 million workers applied for unemployment insurance (UI) benefits. This is the 17th week in a row that unemployment claims have been more than twice the worst week of the Great Recession. Of the 2.4 million workers who applied for UI, 1.5 million applied for regular state unemployment insurance (not seasonally adjusted), and 0.9 million applied for Pandemic Unemployment Assistance (PUA).

Many headlines this morning are saying there were 1.3 million UI claims last week, but that's not the right number to use. For one, it ignores PUA, the federal program for workers who are not eligible for regular UI, like gig workers. It also uses seasonally adjusted data for regular state UI, which is distorted right now because of the way Department of Labor (DOL) does seasonal adjustments.

The spending generated by that $600 is supporting over 5 million jobs. That means letting the $600 expire would cost more than 5 million jobs.

Before I cover more of the details of today's UI release, I want to take a moment to note that the across-the-board $600 increase in weekly unemployment benefits is set to expire next week.

Many are talking about the potential work disincentive of the extra $600, since the additional payment means many people have higher income on unemployment insurance than they did in their prior job. The concern about the disincentive effect has been massively overblown. First, it ignores the realities of the labor market for working people, who will be unlikely to turn down a permanent job--particularly in a time of extended high unemployment--for a temporary boost in benefits. Further, there are 14 million more unemployed workers than job openings, meaning millions will remain jobless no matter what they do. Cutting off the $600 cannot incentivize people to get jobs that aren't there. Even further, many are simply unable to take a job right now no matter how much benefits are cut, because it's not safe for them or because they have care responsibilities as a result of the coronavirus. Cutting off the $600 will not incentivize them to get jobs, it will just cause hardship.

The millions who will remain jobless after the extra $600 is cut off will have no choice but to drastically cut their spending, causing a sharp decline in their living standards, an increase in poverty, and completely unnecessary suffering. Cutting off the $600 will also exacerbate racial inequality. Black communities are suffering more from this pandemic--both physically and economically--as a result of, and in addition to, systemic racism. Black communities will suffer even more if the $600 expires. And of course, letting the $600 expire won't just hurt UI recipients and their families, it would hurt millions more. The spending generated by that $600 is supporting over 5 million jobs. That means letting the $600 expire would cost more than 5 million jobs. Figure A shows how many jobs will be lost in each state if the extra $600 is allowed to expire.

If policymakers really are worried about the disincentive effect of the extra $600, they should address that issue in another way--not cut off the additional payment, which is far too important. Instead they could, for example, let people keep some of their UI when they go back to work. And Congress needs to move fast. If they let the extra payments expire and then reinstate them, it will be an unnecessary administrative nightmare for state agencies, and recipients will face a lapse in benefits of two to four weeks (even if benefits are reinstated right away).

Figure B shows continuing claims in all programs over time (the latest data are for June 27). Continuing claims are more than 30 million above where they were a year ago. The latest figure in "other programs" in Figure B is 1.3 million claims. Most of this (0.9 million) is Pandemic Emergency Unemployment Compensation (PEUC). PEUC is the additional 13 weeks of benefits provided by the CARES Act for people who have exhausted regular state benefits. The number of people on PEUC can be expected to grow dramatically as the crisis drags on and more of the nearly 17 million people currently on regular state benefits exhaust their regular benefits and move on to PEUC.

"Other programs" in Figure B also includes Short-Time Compensation (STC). The number of workers on STC ticked down in the latest data, after having risen for 14 weeks straight in this crisis. This is not good news. STC is a great program to prevent layoffs where employers reduce work hours rather than lay off workers, and workers get partial UI. However, STC is massively underutilized (there are only 342,666 workers on STC in the latest data, roughly 1% of all people on unemployment benefits). It should be being used more, not less.

Figure B only covers continuing claims through June 27, but Figure C combines the most recent data on both continuing claims and initial claims to get a measure of the total number of people "on" unemployment benefits as of July 11th. DOL numbers indicate that right now, 36.4 million workers are either on unemployment benefits, have been approved and are waiting for benefits, or have applied recently and are waiting to get approved. That is more than one in five workers. But a note of caution: while regular state UI and PUA claims should be completely non-overlapping--that is how DOL has directed state agencies to report them--some states may be misreporting claims, so there may be some double counting. Further, some states may be including some back weeks in their continuing claims.