WASHINGTON (AP) – A major source of income for roughly 30 million unemployed people is set to end, threatening their ability to meet rent and pay bills and potentially undercutting the fragile economic recovery.
In March, United States (US) Congress approved an extra USD600 in weekly unemployment benefits as part of its USD2 trillion relief package aimed at offsetting the impact of the coronavirus pandemic.
That additional payment expires next week unless it gets renewed.
For Henry Montalvo, who was furloughed from his job as a banquet server in Phoenix in mid-March, the expiration of the USD600 will cut his unemployment benefits by two-thirds. He uses the money to help support his three children and pregnant girlfriend.
“Now that it’s about to end, that grim and uneasy feeling is coming back and really fast,” Montalvo said.
The unemployment insurance programme has emerged as a crucial source of support at a time when the jobless rate is at Depression-era levels. In May, unemployment benefits made up six per cent of all US income, ahead of even Social Security, and up dramatically from February, when it amounted to just 0.1 per cent of national income.
“The increase has likely done as much or more to limit widespread hardship like food insecurity, homelessness, utility cut-offs, and mental health challenges, as any provision Congress has enacted in response to the pandemic and recession,” said Indivar Dutta-Gupta, co-executive director of the Georgetown Center on Poverty & Inequality.
Congress enacted the extra payment for just four months, largely on the assumption that the viral outbreak would subside by late July and the economy would be well on the way to recovery. But confirmed case counts are rising in 40 states and 22 states are either reversing or pausing their re-opening efforts, threatening to slow rehiring. The number of people seeking weekly jobless aid has levelled off at roughly 1.3 million, after falling steadily in May and early June.
Eliminating the extra payment would cut benefits for most recipients by 50 per cent to 75 per cent, depending on the size of each state’s unemployment benefit, which varies based on a worker’s prior income.
Arizona’s maximum payment of USD240 is near the low end, while Massachusetts is among the most generous, with a weekly maximum payment of more than USD800.
Other measures intended to shore up business and household finances, such as one-time payments of USD1,200 and a small business lending programme, have also largely run their course.
That could sharpen the impact of the pandemic-induced job losses, which have pushed the unemployment rate to 11.1 per cent.
Another government rescue package is in the works and some sort of extended extra benefit is possible. Trump administration officials have expressed support for more aid and Senate Majority Leader Mitch McConnell has signalled a willingness to compromise.
House Democrats passed legislation last month to extend the benefits to the end of January.
“They need to buy food. These are necessities. And when you use that money for necessities they inject demand into the economy and create jobs,” House Speaker Nancy Pelosi said on Thursday.
The extra USD600 was initially agreed upon because, for an average worker, it made their jobless benefits equal to their previous pay. Most states’ antiquated unemployment systems weren’t able to calculate a percentage increase in benefits that would have accomplished that for laid-off workers at different income levels.
Layoffs since the pandemic struck have been heavily concentrated in low-paying service industries such as restaurants and retailers, where workers make below-average incomes.
Many businesses said they have had trouble enticing their former employees to return to their jobs given the generous unemployment benefit.
Yet government data shows that in May there were four unemployed people for every available job, a sign that the biggest challenge facing the economy is a lack of jobs, not workers.
Many state limits on evictions will expire by this fall, raising the risk that more unemployed could become homeless.