State cuts to pandemic unemployment benefits last summer had a small impact on hiring, suggesting enhanced funding for the unemployed didn't play a big role in labor shortages, according to research.
The federal government greatly expanded the social safety net for the jobless in March 2020. It offered hundreds of dollars in additional weekly benefits to individuals and gave aid to millions of previously ineligible people, like gig workers and the self-employed.
Governors of roughly half the states, most of them Republican, withdrew federal benefits in June or July 2021 — a few months before their scheduled expiration nationwide on Sept. 6.
There was a debate as to how much the enhanced unemployment benefits were contributing to hiring challenges employers seemed to be having.
Some officials believed federal assistance kept people from looking for work; others thought factors like ongoing pandemic health risks and family care duties (kids home from school, for example) played a bigger role.
An analysis by researchers at the Federal Reserve Bank of San Francisco found states that withdrew benefits early likely didn't experience the intended effect of spurring jobs. It compared hiring rates from July to September 2021 in the states that ended benefits relative to those that kept them intact.
Hiring picked up by 0.2 percentage points in the «cutoff» states relative to those that kept the federal funds — a «quite small» increase compared to states' average monthly hiring rates of about 4%-5%, according to the analysis.
Put differently, if a state that maintained federal benefits had a 4.5% hiring rate, a state that cut them would have had a 4.7% rate.
«That would be pretty much imperceptible,» said Robert Valletta,
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