News

The End Of $600 Unemployment Benefits Will Hit Millions Of Households And The Economy

By: Scott Horsley | NPR
Posted on: Monday, July 20, 2020

< < Back to

WASHINGTON, D.C. (NPR) — For Lorena Schneehagen, the additional $600 unemployment payment each week during the coronavirus pandemic has held her family’s expenses together.

She’s an out-of-work preschool teacher in Ann Arbor, Mich., whose son is about to start college.

“I need that to help pay his tuition,” Schneehagen said. “And for food and just to pay the general bills.”

Tens of millions of Americans who lost their jobs because of the pandemic are now in danger of having their incomes slashed for a second time. The supplemental unemployment benefits of $600 per week that Congress approved four months ago are set to expire at the end of this week in most states — threatening to hurt strapped households and the U.S. economy, as billions of dollars’ worth in spending suddenly comes to a halt.

As Congress comes back into session this week, lawmakers will debate whether to extend the supplemental benefits, which have been a lifeline for more than 30 million people across the United States.

“The extra $600 from the government has obviously helped me tremendously,” said bartender Courtney Woodruff, who lost her job at a Denver brewpub. “I don’t really spend a lot. My money is going towards rent and food right now.”

While ordinary unemployment benefits usually cover just a fraction of a worker’s lost wages, the additional $600 per week from the federal government was designed to fully replace the average worker’s missing paycheck.

“Honestly, that’s made it a lot less stressful to not have to be forced to go out and be in public with the virus,” said Stephen Pingle, who was laid off from his job installing Internet cable and security cameras in Nashville, Tenn.

Pingle has stopped spending on what he calls “frivolous” items and has tried to save as much as he can. He knows the supplemental benefits may run out soon.

“I’m trying not to worry too much about it,” he said. “But it’s hard to keep pushing it off, knowing that there’s potentially that massive of a financial hit coming.”

If the hit comes, it will be felt not only by the unemployed but by grocers, landlords and the broader economy. Cutting off benefits to so many people at once would reduce their collective spending power by nearly $19 billion per week.

“However you slice these numbers, we’re talking about very large amounts that mean quite a bit to workers and to the macroeconomy,” said Ryan Nunn, who leads applied research at the Federal Reserve Bank of Minneapolis.

In an interview last week, Nunn said the extra jobless benefits have acted as an important crutch for the economy. Without them, the U.S. would likely have experienced more defaults on car loans and credit card bills and more people falling behind on their rent. That’s one reason congressional Democrats argue that the government should keep the $600-a-week payments flowing.

“We’re never going to have our economy come back unless we recognize that we must put money in the pockets of the American people,” House Speaker Nancy Pelosi, D-Calif., told reporters.

Some employers have complained that the generous jobless benefits make it hard for them to attract workers. Nunn said while ordinarily that would be a concern, there’s little danger of a worker shortage when unemployment is in the double digits and the virus itself is forcing new limits on economic activity.

Still, it’s a complaint that the Trump administration takes seriously.

“I’ve heard stories of where companies are trying to get people back to work and they won’t come because of the enhanced unemployment,” Treasury Secretary Steven Mnuchin told CNBC. He suggested that if federal jobless benefits are extended, it will be in a different form than the flat $600 per week.

“We’ll fix that, and we’ll figure out an extension to it that works for companies and works for those people that will still be unemployed,” Mnuchin said.

Schneehagen, the Michigan preschool teacher, doesn’t expect to be called back to her old job anytime soon. Although the school has reopened, enrollment is down. Teachers who are working have had their hours cut, and the school is having to cut costs even on things like air conditioning during an unseasonably hot summer.

Schneehagen has started to explore alternative work as a nanny.

“I really think there’s going to be a crunch for jobs pretty soon,” she said. “There aren’t that many jobs out there. And there are going to be so many people looking in the next couple of weeks.”