By Natalie DeCoste
COVID cases are back on the rise, causing uncertainty in the job market and seemingly hindering job growth. At the same time, many states have ended their enhanced unemployment benefits, leaving economists to look at whether these benefits have been holding back growth.
The onset of the pandemic brought on a recession in the U.S., leading the federal government to offer pandemic-related aid, set to expire nationwide next week. The pandemic aid included a boost to unemployment payments, most recently by $300 a week, and extended benefits for as long as 18 months. While the nationwide expiration date is next week, 25 states already ended these benefits over the summer.
Data aggregated by The Wall Street Journal showed that nonfarm payrolls rose 1.33% in July from April in the 25 states that ended the benefits and 1.37% in the other 25 states and the District of Columbia. The Journal based its analysis on data from the Labor Department, which showed payroll figures taken from a government survey of employers. The Journal’s analysis compared July totals with April’s before governors in May began announcing plans to either end or reduce the benefits during the summer.
According to economists, the rates of job growth in states that ended their benefits compared to the states that maintained the benefits from a statistical perspective are roughly the same. The findings do not come without caveats. Economists warn that it might be too early to detect the effect of benefits on employment numbers. Additionally, offsetting effects from state re-openings and virus-related restrictions by local governments could be hiding the impact of the expiring benefits.
“If the question is, ‘Is UI the key thing that’s holding back the labor market recovery?’ The answer is no, definitely not, based on the available data,” said Peter Ganong, a University of Chicago economist, referring to unemployment insurance.
The analysis of unemployment benefits comes at the same time as the job report from payroll services firm ADP, just a few days ahead of Friday’s nonfarm payrolls report. The report from ADP revealed disappointing numbers for August, likely due to the resurgence of COVID cases brought on by the Delta variant.
Numbers from ADP showed that private payrolls rose only 374,000 for the month. However, the numbers are above July’s 326,000, revised downward slightly from 330,000 and significantly below the Dow Jones estimate of 600,000. Most of the jobs added during August were in the leisure and hospitality industry, which added 201,000 much-needed positions after the early devastation to the industry caused by the pandemic.
“The delta variant of COVID-19 appears to have dented the job market recovery. Job growth remains strong, but well off the pace of recent months. Job growth remains inextricably tied to the path of the pandemic,” said Mark Zandi, chief economist at Moody’s Analytics, which works with ADP on the report.
Not all news in the job market is bad news as Walmart announces it will be hiring 20,000 workers for its supply-chain operations ahead of the holidays. The addition highlights the company’s growing role in distribution and delivery and the need to keep the labored supply chain running.
The need for supply-chain workers shows that there is demand for workers despite troubling job growth numbers. Walmart said the average wage for its supply-chain workers is $20.37 an hour, while competitor Amazon said it raised pay for hourly employees by between 50 cents and $3 an hour.