By Nathalie Voit
A new report from the Federal Reserve Bank of San Francisco found that states that prematurely ended enhanced unemployment insurance (UI) benefits implemented during the pandemic did not experience greater job growth than states that kept them.
Researchers compared labor market outcomes between states that eliminated enhanced UI benefits in the first half of 2021 and those that maintained them until their official termination date in early September. The researchers found that states that cut benefits from the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March 2020 early experienced a small but largely imperceptible increase in hiring activity relative to states that kept the benefits through September 2021. The impact of the UI withdrawals on hiring rates was just 0.2%, mostly insignificant compared to monthly hiring rates of approximately 4 to 5%, the researchers said.
The researchers also found that job opening rates were not higher in states that terminated UI early. According to them, many expected to see employers post more job openings in states that cut UI prematurely as employers “may have wanted to take advantage of an expected surge in job applicants.”
Overall, the researchers found that “UI withdrawals had limited direct impacts on hiring rates, which suggests the enhanced UI benefits were not an important source of labor shortages in 2021.”
The end of enhanced UI benefits in some states in mid-2021 was only associated with a small increase in hiring activity but no differences in measured unemployment, the report stated.
The report contradicts the popular notion espoused by many conservative politicians that expanded unemployment benefits during the COVID-19 pandemic disincentivized Americans from returning to work.
