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‘A tale of 2 recessions’: As rich Americans get richer, the bottom half struggles

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The path toward economic recovery in the U.S. has become sharply divided, with wealthier Americans earning and saving at record levels while the poorest struggle to pay their bills and put food on the table.

The result is a splintered economic picture characterized by high highs — the stock market has hit record levels — and incongruous low lows: Nearly 30 million Americans are receiving unemployment benefits, and the jobless rate stands at 8.4 percent. And that dichotomy, economists fear, could obscure the need for an additional economic stimulus that most say is sorely needed.

The trend is on track to exacerbate dramatic wealth and income gaps in the U.S., where divides are already wider than any other nation in the G-7, a group of major developed countries. Spiraling inequality can also contribute to political and financial instability, fuel social unrest and extend any economic recession.

The growing divide could also have damaging implications for President Donald Trump’s reelection bid. Economic downturns historically have been harmful if not fatal for incumbent presidents, and Trump’s base of working-class, blue-collar voters in the Midwest are among the demographics hurting the most. The White House has worked to highlight a rapid economic recovery as a primary reason to reelect the president, but his support on the issue is slipping: Nearly 3 in 5 people say the economy is on the wrong track, a recent Reuters/Ipsos poll found.

Democrats are now seizing on what they see as an opportunity to hit the president on what had been one of his strongest reelection arguments.

“The economic inequities that began before the downturn have only worsened under this failed presidency,” Democratic presidential nominee Joe Biden said Friday. “No one thought they’d lose their job for good or see small businesses shut down en masse. But that kind of recovery requires leadership — leadership we didn’t have, and still don’t have.”

Recent economic data and surveys have laid bare the growing divide. Americans saved a stunning $3.2 trillion in July, the same month that more than 1 in 7 households with children told the U.S. Census Bureau they sometimes or often didn’t have enough food. More than a quarter of adults surveyed have reported paying down debt faster than usual, according to a new AP-NORC poll, while the same proportion said they have been unable to make rent or mortgage payments or pay a bill.

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And while the employment rate for high-wage workers has almost entirely recovered — by mid-July it was down just 1 percent from January — it remains down 15.4 percent for low-wage workers, according to Harvard’s Opportunity Insights economic tracker.

“What that’s created is this tale of two recessions,” said Beth Akers, a labor economist with the Manhattan Institute who worked on the Council of Economic Advisers under President George W. Bush. “There are so obviously complete communities that have been almost entirely unscathed by Covid, while others are entirely devastated.”

Trump and his allies have seized on the strength of the stock market and positive growth in areas like manufacturing and retail sales as evidence of what they have been calling a “V-shaped recovery”: a sharp drop-off followed by rapid growth.

But economists say that argument fails to see the larger picture, one where roughly a million laid-off workers are filing for unemployment benefits each week, millions more have seen their pay and hours cut, and permanent job losses are rising. The economy gained 1.4 million jobs in August, the Labor Department reported Friday, but the pace of job growth has slowed at a time when less than half of the jobs lost earlier this year have been recovered.

Some economists have begun to refer to the recovery as “K-shaped,” because while some households and communities have mostly recovered, others are continuing to struggle — or even seeing their situation deteriorate further.

“If you just look at the top of the K, it’s a V — but you can’t just look at what’s above water,” said Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth. “There could be a whole iceberg underneath it that you’re going to plow into.”

The burden is falling heavily on the poorest Americans, who are more likely to be out of work and less likely to have savings to lean on to weather the crisis. While recessions are always hardest on the poor, the coronavirus downturn has amplified those effects because shutdowns and widespread closures have wiped out low-wage jobs in industries like leisure and hospitality.

Highly touted gains in the stock market, meanwhile, help only the wealthiest 10 percent or so of households, as most others own little or no stock.

The disconnect between the stock market and the broader economy has been stark. On the same day in late August that MGM Resorts announced it would be laying off a quarter of its workforce, throwing some 18,000 workers into unemployment, its stock price jumped more than 6 percent, reaching its highest closing price since the start of March.

“The haves and the have-nots, there’s always been a distinction,” Sahm said. But now, she added, “we are widening this in a way I don’t think people have really wrapped their head around.”

A store going out of business
A customer leaves a retail store, which is going out of business, during the coronavirus pandemic. | Lynne Sladky/AP Photo

Without further stimulus, the situation appears poised to get worse. Economic growth until now had been led by increasing levels of consumer spending, buoyed by stimulus checks and enhanced unemployment benefits that gave many people, including jobless workers, more money to spend.

Low-income consumers have led the way, and they spent slightly more in August than they did in January, according to the Opportunity Insights tracker — even as middle- and high-income consumers are still spending less.

But those low-income consumers were also the most dependent on the extra $600 per week in boosted unemployment benefits, which expired in July. Since that lapsed — and since Congress appears unlikely to extend it any time soon, if at all — “we’re likely to see other macroeconomic numbers really fall off a cliff in the coming weeks,” Akers said.

The expected drop in spending, paired with the expiration of economic relief initiatives like the Paycheck Protection Program, could also spell trouble for businesses in the coming months. Many economists expect a wave of bankruptcies and business closures in the fall, contributing to further layoffs.

In that sector, too, owners are feeling disparate impacts. More than 1 in 5 small business owners reported that sales are still 50 percent or less than where they were before the pandemic, according to a recent survey from the National Federation of Independent Business, and the same proportion say they will need to close their doors if current economic conditions do not improve within six months.

At the same time, however, half said they are nearly back to where they were before, and approximately 1 in 7 owners say they are doing better now than they were before the pandemic, the survey showed.

Those diverging narratives could be understating the need for further stimulus by smoothing over some of the deeper weaknesses in the labor market and the economy, experts say.

“This is a case where the averages tell a different story than the underlying data itself,” said Peter Atwater, an adjunct economics professor at William & Mary.

While Republicans appear to be embracing the idea of further “targeted” aid, they are also touting what Trump has called a “rocket-ship” economic recovery and emphasizing record-breaking growth while downplaying the record-breaking losses that preceded it.

“There’s no question the recovery has beat expectations,” said Rep. Kevin Brady (R-Texas), the top Republican on the House Ways and Means Committee, this week on a press call with reporters.

Talks between the White House and Democratic leaders, meanwhile, have been stalled for weeks. The Senate is set to return from its summer recess next week with no clear path forward on a relief package.

“People are in these bubbles,” Atwater said. “And if people aren’t leaving their homes, are not really getting out, it’s unlikely that they’re seeing the magnitude of the downside of this K-shaped recovery.”

This article originally appeared at Politico on September 7, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.

A D.C.-area native, Megan headed south for a few years to earn her bachelor’s degree in business journalism and international politics at the University of North Carolina at Chapel Hill. Now settled back inside the Beltway, Megan’s on the hunt for the city’s best Carolina BBQ — and still rooting for the Heels.


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U.S. unemployment rate fell to 8.4 percent in August

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The unemployment rate dropped to 8.4 percent in August, the Labor Department reported on Friday, marking the fourth month of declines even as the pace of job growth is slowing.

The August rate is down from its April peak of 14.7 percent, but still remains far above the 3.5 percent recorded in February, before coronavirus shutdowns took hold.

The economy recovered 1.4 million jobs last month, the report showed. That’s a slowdown from the previous month’s gain of a revised 1.7 million and from the 4.8 million recovered in June.

After four straight months of growth, fewer than half of the more than 23 million jobs lost in March and April have been recovered.

“Slowing job growth is a disaster when you are 11.8 million jobs in the hole,” Heidi Shierholz, a former chief economist at the Labor Department, posted on Twitter Friday. “This is not the V-shaped recovery that could get us out of this crisis in a reasonable timeframe.”

The data released Friday morning are the results of a survey conducted in mid-August, reflecting some of the earliest effects since enhanced federal unemployment benefits expired at the end of July. The growth was led by rehires in retail, education, leisure and professional services. It also includes nearly 240,000 workers the government temporarily hired to work on the 2020 Census.

Economists warn the labor market may well have grown weaker since the report was conducted, however. Many expect further layoffs through the fall especially if Congress fails to pass further stimulus relief, as an expected drop in consumer spending, the expiration of a small business relief program and other factors could spur a wave of business closures across the country.

The number of permanent job losses is also rising, a signal that damage to the labor market is likely to be long-lasting. The vast majority of unemployed workers are classified as on temporary layoff, indicating they still expect to return to their previous jobs. But permanent losses climbed to 3.4 million in August, the report showed, up from July’s 2.9 million.

White House National Economic Council Director Larry Kudlow hailed the latest numbers on Friday, with the caveat that “we are not out of the woods.” He also downplayed the need for further stimulus, saying in an interview on Bloomberg TV that he believed the economy was “self-sustaining” and could survive without an immediate deal in Congress.

“We can absolutely live with it,” he said, adding, “It depends on the package. A bad package would not be helpful, a smart, good package, well-targeted would be helpful.”

The unemployment rate is dropping fastest for white workers, the report shows, while employment among minority workers is recovering at a slower rate.

The white unemployment rate for white people fell to 7.3 percent in August, the report showed, a drop of 6.9 percent from its April peak. The unemployment rate for Black people, meanwhile, stands at 13.0 percent, a drop of 3.7 percent from its April level.

This article originally appeared at Politico on September 4, 2020. Reprinted with permission.

About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.

A D.C.-area native, Megan headed south for a few years to earn her bachelor’s degree in business journalism and international politics at the University of North Carolina at Chapel Hill. Now settled back inside the Beltway, Megan’s on the hunt for the city’s best Carolina BBQ — and still rooting for the Heels.


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Florida may turn down Trump’s plan to increase jobless aid

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Republican and Democratic legislators alike say they don’t understand why Florida hasn’t acted yet.

TALLAHASSEE — Although Florida has some of the lowest unemployment payments in the nation, Gov. Ron DeSantis remains undecided about whether to ask for the stripped-down federal benefits recently authorized by President Donald Trump.

Eleven states have applied for a $400 weekly extra unemployment payment program, which was initiated following Trump’s expansion of jobless aid via executive action. Florida, however, remains on the sidelines and it could stay that way.

The longer the DeSantis administration delays, the longer it will take for hundreds of thousands of out-of-work Floridians to receive the extra help Trump promised — if the state eventually does apply for it. There is also a risk that the limited federal funding available could run out before the state acts.

But the delay speaks to the conundrum that Trump’s actions pose for Florida, a state led by a key campaign ally of the president. While extending the benefits could pump tens of millions into the battleground state’s economy, the federal proposal could prove extremely costly — and unwieldy — for the state to carry out given the rules surrounding the effort.

When asked about the funding on Thursday, a spokesperson for DeSantis did not say when — or if — Florida plans to act.

“Florida is currently reviewing guidance issued by the Department of Labor and the Federal Emergency Management Administration to determine the best course of action that will preserve the state’s financial stability while providing important assistance to Floridians in need,” said Cody McCloud, a spokesperson for the governor.

Republican and Democratic legislators alike say they don’t understand why Florida hasn’t acted yet.

“We should be exploring every option and following the lead of other states that have been successful,” said State Sen. Jeff Brandes (R-St. Petersburg).

Florida’s tourist-based economy collapsed amid the coronavirus pandemic and the forced business shutdown. More than 3.5 million Floridians have filed jobless claims since mid-March — including another 66,000 who filed their initial claim last week. The state has paid out more than $13 billion in the last five months, but most of that money has been an extra $600 a week payment that Congress included in the CARES Act. That extra payment expired at the end of July, but the House and Senate have been at odds over a new coronavirus relief package.

Trump stepped in and authorized dipping into $44 billion worth of disaster relief funds to pay for a new round of extra benefits. DeSantis last week suggested he was considering having Florida apply to FEMA to receive what is being called “lost wages assistance.”

The problem, however, is that the FEMA aid requires 25 percent matching money from states. Initially Trump suggested states could use unspent money that was part of the CARES Act but DeSantis has told the White House that such an approach could not work. The governor plans to use the more than $5 billion sent to Florida to help pay for coronavirus response and to patch holes in the state’s budget.

Federal authorities then told states they could use money they are already spending on state unemployment benefits to count toward the matching requirement. But there are complications with that approach as well. The first obstacle is that money spent by the state must be on or after Aug. 1.

That’s a problem because Florida benefits — which pay out a maximum of $275 a week — are capped at 12 weeks. Congress authorized additional payments to workers whose state benefits are exhausted but those are paid entirely out of federal aid. Many jobless Floridians already have rolled over from the state program to the federal one. Florida’s budget is in tatters and there’s no other place the state could easily get the matching money. DeSantis suggested that the state could perhaps borrow money for its unemployment trust fund, but such a move risks triggering tax hikes on employers.

Rich Templin, director of politics and public policy for the Florida AFL-CIO, said all the complications with the extra aid show that it’s “not a workable solution.”

“This really seems like a campaign soundbite just to get us through November with no real understanding how this will work,” Templin said.

Rep. Evan Jenne (D-Dania Beach) saaid DeSantis still needs to act quickly and take care of Floridians reeling from the economic collapse.

“If Donald Trump is going to offer him a bucket and a mop then he needs to take the bucket and mop and clean up the mess,” Jenne said.

This blog originally appeared at Politico on August 20, 2020. Reprinted with permission.

About the Author: Gary Fineout came to POLITICO Florida in February 2019 after spending more than two decades covering Florida politics and government.


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New unemployment claims fall below 1 million for the first time in five months

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The number of workers filing jobless claims last week fell to 963,000.

New unemployment claims fell last week to 963,000, the Labor Department reported Thursday, the first time in months the figure has been less than 1 million.

An additional 488,622 laid-off workers filed for jobless aid under the new pandemic unemployment assistance program, created for those not traditionally eligible for unemployment benefits like the self-employed and gig workers.

Though the numbers are gradually falling, the report indicates workers are still being pushed out of their jobs at historic levels during the coronavirus pandemic.

New applications filed in state programs are still far above the previous record of 695,000 in 1982, fueling concerns that the economic recovery may not be fully under way.

In total, more than 25 million people are currently receiving jobless benefits, according to DOL.

Why it matters: Another week of elevated unemployment claims is likely to add more pressure on lawmakers to reach a deal on another coronavirus aid package. Despite nearly three weeks of negotiations, party leaders are no closer to a deal, and it’s likely the stalemate will drag into September.

A major sticking point in the talks is how much extra aid Congress should give to laid-off workers. President Donald Trump signed a bill in March that included an extra $600 per week in unemployment benefits, but that payment expired on July 31.

Democrats want to extend the extra jobless aid into 2021. But Republicans don’t want the benefit to continue at $600, arguing that it paid some workers more to be unemployed than they earned at their jobs and would encourage people not to return to work.

To prod negotiations along, Trump over the weekend signed an executive action that would offer jobless workers an extra $400 a week. But, the move would require states to opt in, implement a new system, and fund one-fourth of the aid. Governors of some states have complained that Trump’s plan would be too expensive or logistically impossible.

This blog originally appeared at Politico on August 13, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.


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Black workers are hurt most as Congress doesn’t extend unemployment

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One mostly unintended—definitely on the Republican side—aspect of the $600 in added unemployment benefits is that it reduced racial disparities. But that means that one aspect of the $600 expiring is that those same racial disparities have come roaring back. Why? Because, for one thing “Black workers disproportionately live in states with the lowest benefit levels and the highest barriers to receiving them,” The New York Times reports. “Without the $60 federal payments, the most an unemployed worker in Florida or Alabama can receive is $275 a week.” Nearly 60% of Black workers live in the South, where state governments have spent decades ensuring workers would have the weakest protections and rights possible. So the additional $600 a week in unemployment benefits has dramatically equalized the situation between states with relatively few Black workers and relatively generous unemployment benefits and those with relatively many Black workers and appallingly weak unemployment insurance.

These disparities aren’t an accident. “Yesterday’s racist system becomes today’s incidental structural racism,” RAND Corporation economist Kathryn Edwards told The New York Times. The added federal benefit also reduced racial disparities by expanding the categories of workers covered by unemployment, since historically another way Black workers have been excluded from government assistance is by excluding the types of work Black workers do from being covered. And frankly, as Republicans resist renewing the additional $600 in unemployment that they allowed to expire, we have to consider the fact that it benefits Black people as one more reason Republicans oppose it.

This blog originally appeared at Daily Kos on August 8, 2020. Reprinted with permission.

About the Author: Laura Clawson has been a Daily Kos contributing editor since December 2006. Full-time staff since 2011, currently assistant managing editor.


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Big support for $600 unemployment benefit, but people don’t know who to blame for its lapse

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Americans want the $600 pandemic unemployment benefit renewed by a huge margin, a new poll from HuffPost/YouGov finds. Continuing the benefits gets 54% support with just 29% of people opposed. 

What’s incredibly frustrating in the poll, though, is that 39% of people say congressional Democrats are “at least somewhat responsible” for the expanded unemployment lapsing last Friday, with 41% pointing the finger at congressional Republicans and 29% at least somewhat blaming Donald Trump. That’s despite the fact that the House, which is controlled by Democrats, passed an extension of the $600 months ago, in the HEROES Act. Now, Speaker of the House Nancy Pelosi is pushing hard to continue the $600 while Republicans, both in the Senate and from the White House, push to slash the boosted amount.

Delays on the unemployment renewal are also coming from the fact that, while Republicans are united in wanting to slash it from $600, they’re in disarray on basically everything else, with no consensus among Senate Republicans and the White House typically muddled.

Meanwhile, by the end of August, 5.4 million people will be unable to pay their bills—in addition to those who already can’t—if the benefits aren’t renewed. More than 40% of people receiving unemployment insurance will get less than $800 per month without the additional money from the federal government. Republicans’ refusal to extend the unemployment aid before it ran out to begin with is already hitting people hard with fear of what’s to come.

“Just a few men have to make this decision for how many million people? Ten guys to make a decision over these millions of people’s lives?” Willie Wood, a former banquet server at a New Orleans hotel, told The Washington Post. “This country not taking care of American citizens like they’re supposed to. We didn’t bring this pandemic home. We were at work, and you hit us with a pandemic.”

And Republicans aren’t ready to do the right thing yet, even though it’s also the popular thing. Don’t expect them to do the right thing until the public gives them the blame they deserve.

This blog originally appeared at Daily Kos on August 5, 2020. Reprinted with permission.

About the Author: Laura Clawson has been a Daily Kos contributing editor since December 2006. Full-time staff since 2011, currently assistant managing editor.


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‘A meaningful hit to the economy’: What could happen if Congress cuts unemployment benefits

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White House economic advisers and GOP lawmakers including Senate Majority Leader Mitch McConnell contend the extra payment acts as a disincentive for workers to seek new jobs.

More than 30 million people are receiving unemployment benefits and new applications for jobless aid have started to rise again. But Republicans want to reduce a $600 enhanced unemployment benefit in the next coronavirus relief package, a proposal that could leave families with billions of dollars less to spend to bolster the economy.

White House economic advisers and GOP lawmakers including Senate Majority Leader Mitch McConnell contend the extra payment acts as a disincentive for workers to seek new jobs, because some people are receiving more money in benefits than they would earn working. Democrats and many economists say there are no jobs for those people right now anyway, and the payments are essential for keeping the economy afloat — and ensuring Americans can buy food and pay the rent.

Here’s a look at the potential impact of cutting benefits right now:

The GOP argument

The Senate GOP’s latest $1 trillion plan calls for the reduction in increased unemployment benefits from $600 to $200 a week for 60 days, or until states are able to provide a 70 percent wage replacement. Some Republican senators are rolling out their own proposals that would reduce the benefits with varying levels of wage replacement.

Their argument is that payments should be pegged to workers’ former wages as an incentive for them to seek jobs instead of remaining on benefits.

“Should we have generous unemployment insurance in this crisis? Of course,” McConnell said on the Senate floor Wednesday. “But obviously we should not be taxing the essential workers who’ve kept working so the government can pay their neighbors a higher salary to stay home.”

Under the GOP plan, weekly benefits would drop from a national average of $920.68 per week to $520.68 per week, an average overall cut of 55 percent, according to a recent analysis by The Century Foundation, a progressive think tank.

Laid-off workers would lose more than $10 billion per week, under the GOP proposal. And by the end of September, the losses would reach $90 billion, the analysis found.

But White House economists say the checks aren’t stimulating the economy.

Do not repeat this idiot notion that giving people money is somehow a stimulus to the economy,” said Stephen Moore, a conservative economist and outside adviser to President Donald Trump, in an interview. “I mean, in that case we could just give everybody $100,000 and we’d all be rich right? It’s just so stupid.”

The impact on the economy

It’s a “meaningful hit to the economy,” if lawmakers reduce or cut off the enhanced benefits, wrote Mark Zandi, chief economist at Moody’s Analytics. He estimates that cutting the benefit to $200 per week as the GOP has proposed would cost nearly 1 million jobs by the end of the year and raise unemployment by 0.6 percentage points.

Other estimates of job losses are higher. Economists caution that a reduction in benefits could spark a drop in demand, setting off a “vicious cycle” that eventually results in the permanent loss of millions of jobs. Slashing the extra $600 week could destroy as many as 5 million jobs, according to an analysis by the left-leaning Economic Policy Institute.

“People will have to make terrible choices between things like medicine and rent, but it also means that they will no longer be buying things that they had been buying, and the workers that produce the goods and services that they will no longer be buying will lose their jobs,” said Heidi Shierholz, EPI policy director and former Labor Department chief economist. “And the vicious cycle is set off. So it’s terrible macroeconomic policy.”

Federally enhanced unemployment benefits led to a 10 percent increase in consumption among those out of work when they were first rolled out, according to an analysis by the JPMorgan Chase Institute, estimates that have alarmed business groups.

A disruption could result in a drop in spending as high as 20 percent, the research found.

“Small businesses desperately need the consumer demand” Small Business for America’s Future, a coalition of small business owners, said in a statement. “We need legislation that puts money in the hands of people who will spend it at local small businesses. The future of our Main Street economies depend on it.”

Rachel Greszler, a senior policy analyst at the conservative Heritage Foundation, agreed that the change in benefits will have short-term negative impacts on the economy. But she warned the increased spending will have the longer-term consequence of running up the national debt.

“If you continue excessively high payments, then you end up just trading a global health pandemic for a fiscal crisis,” she said.

The impact on Black and Hispanic workers

Because Black and Hispanic workers are disproportionately reliant on unemployment aid, slashing the benefits could do permanent damage to the economic well-being of those demographics, already among those the pandemic has hit hardest. Forty-seven percent of recipients of state unemployment benefits in July are projected to be nonwhite, according to the Congressional Budget Office.

“These universal approaches to addressing economic issues ignore the recent and past history of structural racism, and how wealthy is distributed in the country,” said Andre Perry, a research fellow at Brookings Institution.

“We need to think about the long-term protection of the most vulnerable,” Perry said. “And unemployment insurance provides that safety net for now.”

Is a $600 payment causing workers to stay home?

The Congressional Budget Office estimated in June that extending the boost by six months would likely lead to greater economic output in the second half of 2020. But the non-partisan scoring office also forecast that the work disincentive would lead to lower levels of employment for the remainder of the year and into 2021 — an estimate Republicans have seized on during discussions over the benefits.

Yale University researchers recently found “no evidence” that the boosted unemployment benefits increased layoffs at the outset of the pandemic or discouraged workers from returning to their jobs over time, according to a report based on data from the business scheduling software company Homebase.

“If there is still really depressed labor demand, asking people to go out and search more intensely will not necessarily yield higher employment,” said Dana Scott, the primary author of the report. “And on the flip side of the coin, reducing people’s income will also decrease those stimulus effects…where they’ll have income replaced, go out and spend more money, which isn’t just for the economy.”

But those close to the White House disagree. “I get ten calls a day from employers telling me the workers will not come back on the job,” Moore told POLITICO. He pointed to the 5.4 million new job openings reported by the Bureau of Labor Statistics in May. “That’s a lot of jobs,” Moore said, “but look that’s not 20 million.”

The most recent jobs report from BLS indicated that the number of workers who permanently lost their job increased to 2.9 million in June. Some 9.1 million workers would have preferred working full-time, but were only able to get part time jobs in June. And 8.2 million individuals said they would like a job, but were unavailable or not actively seeking out work in June, according to BLS.

What about just sending stimulus checks?

Republicans’ proposal would suggest another round of stimulus checks, similar to those enacted via a previous round of aid, in an effort to bolster consumption.

“The way the previous bill was crafted, five out of six workers are actually making more staying at home than going back to work,” McConnell said on CNBC’s “Closing Bell” Tuesday. “And remember, all of these folks are going to get another $1200 in direct payment.”

But the cash is a less efficient way to rejuvenate the economy because it is not as narrowly tailored, economists warn.

“Spending less on unemployment insurance and also doing the stimulus check … is terrible economic policy,” Shierholz said. “You’re taking something that’s very, very well targeted — getting money to people who’ve lost their jobs — and giving it broadly.”

This blog originally appeared at Politico on July 30, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.

About the Author: Eleanor Mueller is a legislative reporter for POLITICO Pro, covering policy passing through Congress. She also authors Day Ahead, POLITICO Pro’s daily newsletter rounding up Capitol Hill goings-on.


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A gap in federal unemployment benefits is now unavoidable. Here’s why.

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State offices will need weeks to reprogram their systems to account for an extension of the $600 weekly federal payments that expire on Saturday.

Tens of millions of laid-off American workers will go weeks without federal jobless aid — because Congress hasn’t renewed the benefits in time for overwhelmed state unemployment systems to adjust their computers.

State offices will need weeks to reprogram their systems to account for an extension of the $600 weekly federal payments that expire on Saturday — or any changes that Congress makes to the benefit amount or eligibility rules. That comes on top of hardships faced by workers in states like Washington and Nevada, who are already waiting months to get their first payments in the middle of the coronavirus pandemic because their unemployment offices can’t handle the historic flood of claims.

In some states with particularly antiquated systems, it’s already too late to prevent a lapse, even though the federal benefits haven’t officially expired, according to people familiar with how the systems work.

“In some states, it could take quite a bit of time, and it could cause severe delays,” said Arindrajit Dube, a professor of economics at UMass Amherst. “This is the kind of thing you don’t try to change in the middle of a pandemic.”

A gap in the federal program could be devastating for laid-off workers, many of whom are on the verge of eviction and are already behind on their bills. The $600 federal check comes on top of workers’ normal benefit payments which average around $340. The weekly benefit amount varies by state, and is as low as $235 per week in Mississippi.

“I know my clients are really fearful that they’re going to have a deluge use of bills that are going to become due very quickly, and that $600 supplement was really critical to ensuring that they could meet those bills,” said Tori Dempsey of Legal Services of Eastern Missouri, which offers free legal services to lowincome Americans. “Without it, and without any prospect really returning to any sort of secure employment, it’s really unnerving for a lot of them.”

Dempsey said that while some of her clients have been called back to work in recent weeks, their shifts have been reduced to one or two days a week.

“The work just isn’t there for them,” she said.

It’s unlikely Congress will act before Saturday, but even if they do, states have already prepared their systems to cut off the benefits. Republicans want to cut the amount or change how benefits are calculated to prevent workers from making more money on unemployment than they did at their jobs. Democrats are insisting on maintaining the benefit as-is.

The GOP’s next relief proposal is expected to include a temporary flat payment for unemployment insurance for two months, but the final details have not yet been released. President Donald Trump this week said other changes could include capping benefits at 70 percent of a worker’s prior wages.

Any changes could create an accounting disaster for the state systems, which are still struggling to keep up as the number of new workers applying for unemployment benefits each week remains at nearly two times the peak seen during the Great Recession.

More than one million new unemployment applications have poured into state agencies each week for 17 straight weeks, piling onto state backlogs. Across the country about 10 to 15 percent of applications are still waiting to be processed, said Andrew Stettner, a fellow at the Century Foundation.

Hundreds of laid-off workers from Alabama to Oklahoma made headlines in recent weeks as they resorted to camping out in front of unemployment offices, demanding payment.

In Nevada, some workers have been waiting on their unemployment checks for months.

Rhea Gertken, an attorney with Nevada Legal Services, said her clients call the unemployment hotline first thing in the morning, and within minutes, the number of claims that can be processed that day has been reached.

“Say someone calls in at eight o’clock in the morning. Almost immediately, what they’ll get is a recording that says the queue is full for the day, call back later,” she said.

There also are problems with the pandemic unemployment assistance program — a payment created by Congress to send jobless aid to workers ineligible for traditional unemployment benefits, such as gig workers.

Nevada was the last state in the nation to set up its PUA program and Gertken said there’s also been confusion over whether workers should file for unemployment or through the pandemic unemployment assistance program, leading to even more delays.

This week a Nevada judge ruled that the state unemployment office must start paying benefits to some out-of-work gig and independent workers who qualified but haven’t received payments.

The state’s Department of Employment, Training and Rehabilitation, the agency that administers unemployment, didn’t respond to a request for comment.

In Washington state, laid-off workers have been waiting an average of three months to finally receive their benefits, Behnaz Mansouri, an attorney at Unemployment Law Project in Washington state, told POLITICO.

Once workers finally receive their benefits they’re “beyond grateful” and “relieved,” Mansouri said, “However, at this point, they may have already lost their home, their car may have already been repossessed. A lump sum payment coming in doesn’t necessarily resolve recurring expenses that need to be paid in a timely fashion.”

Washington state is still so overwhelmed with new unemployment claims that it has resorted to completely shutting off its phone system except to those who need accommodations for disabilities or because they don’t have internet access.

A spokesperson for Washington’s Employment Security Department said the agency instead focused the bulk of its agents on “making outbound calls to claimants.” ESD said that it began accepting inbound calls again earlier this week.

In Texas, it can still be difficult to just file a claim, said Karen Miller, executive director of the Texas Legal Services Center. Just this week, one of her clients called from 1 p.m. to 7 p.m., every thirty minutes. That person was never able to get through, she said.

Miller also said many of the low-income workers she advises don’t have access to a computer, and have trouble applying through their phones. Before, she’d send the workers to public libraries, but they are now closed due to the coronavirus.

The timing of the lapse in the $600 federal payment couldn’t be worse, she said, as it coincides with the moratoriums on eviction expiring.

“That’s the kicker. Eventually, in Texas, tenants have to be able to pay their rent and so if there’s too much of a delay in that benefit being there, they’re really going to suffer,” she said.

This blog originally appeared at Politico on July 23, 2020. Reprinted with permission.

About the Author: Katherine Landergan covers the state budget, tax policy and labor issues for POLITICO New Jersey.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.


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Maine AFL-CIO Calls on Senate to Extend $600 Lifeline to Unemployed Workers

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Working people across the United States have stepped up to help out our friends, neighbors and communities during these trying times. In our regular Service + Solidarity Spotlight series, we’ll showcase one of those stories every day. Here’s today’s story.

The Maine AFL-CIO, led by President Cynthia Phinney (IBEW), is publicly pushing its senators to support renewing the federal $600 weekly unemployment payment for those who are out of work as a result of the pandemic. This weekly payment was included in the CARES Act and is set to expire at the end of July. “With double-digit unemployment, it is appalling and morally repugnant that the U.S. Senate would even consider cutting this critical lifeline to Maine families,” Andy O’Brien (UFCW), the state federation’s communications director, told the Beacon. The Maine Department of Labor announced last week that it will extend the maximum length of time workers can remain on unemployment benefits by 13 weeks.

This blog originally appeared at AFL-CIO on July 14, 2020. Reprinted with permission.

About the Author: Aaron Gallant is a contributor for AFL-CIO.


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$600 weekly jobless benefit will likely lapse before more aid is passed

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Laid off workers would see a lapse in the additional benefits — reducing their weekly income by more than two-thirds in many states.

Congress will likely allow the $600-a-week boost in unemployment benefits to expire at the end of this month if lawmakers follow Senate Majority Leader Mitch McConnell’s proposed timeline for the next round of pandemic aid.

When the Senate returns to Washington from recess next Monday, McConnell said he will begin “socializing” the GOP’s next rescue package and start the legislative process with Democrats. He said during an event in Corbin, Ky., Monday he expects that a bill will come together “sometime within the next three weeks, beginning next week.”

The $600 additional weekly unemployment benefit created under the March CARES Act is set to expire in the weeks “ending on or before July 31.” But because most jobless benefit payments end on Saturdays, economists say the last payment will actually land on the week ending July 25.

Although the GOP has recently signaled that jobless aid may be a part of the next rescue package, unless another bill is signed by the president before the aid expires, laid off workers will see a lapse in the additional benefits — reducing their weekly income by more than two-thirds in many states.

“Because state unemployment benefits need to be extended by July 25 in order to be processed by states administering their programs, McConnell’s announcement that the Senate will not even begin drafting or negotiating legislation until next week effectively makes a lapse in those expanded payments unavoidable,” Rep. Don Beyer (D-Va.), vice chair of Congress’ Joint Economic Committee, told POLITICO in a statement.

Beyer said the Democrats’ HEROES Act, which passed the House in May, would extend those benefits through the end of January.

“Now we are out of time,” Beyer said. “All of this could have been avoided if McConnell had acknowledged the economic emergency facing our country and acted on it sooner.”

Republicans and the Trump administration have opposed extending the benefitat $600 a week but have recently indicated that unemployment insurance could be on the table in the next aid plan.

During another event at Rockcastle Regional Hospital Monday in Mount Vernon, Ky., McConnell said the next package would have a “continued emphasis on jobs, meaning unemployment insurance for those who are unable to get back to work.”

He said he’s been discussing the next legislation with Treasury Secretary Steven Mnuchin, who said last week the GOP would “figure out an extension” to the enhanced benefits that works “for companies and for people who will still be unemployed.”

White House spokesperson Judd Deere told POLITICO that “maintaining UI benefits at current levels does not incentivize returning to work,” but added that “UI reform is a priority for this White House in any phase four package and we are in ongoing discussions with the Hill.”

Once the additional unemployment payment ends, out-of-work Americans could see their benefits drop by anywhere from 50 to 85 percent according to Century Foundation fellow Andrew Stettner.

The size of an unemployment check depends on the recipient’s income and on rules that vary from state to state, but the average weekly payment over the past year was $342, according to the Labor Department.

This blog originally appeared at Politico on July 14, 2020. Reprinted with permission.

About the Author: Rebecca Rainey is an employment and immigration reporter with POLITICO Pro and the author of the Morning Shift newsletter.


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