Is Unemployment Declining Faster In States Dropping Federal Unemployment Benefits?

…No Evidence Yet

Eric P. Fox – Chief Economist, Veros Real Estate Solutions
Drew Rumfola – Economics Intern, Veros Real Estate Solutions

As the economy reopens, states are beginning to reconsider their plans for getting their residents back to work.  There are strongly divergent opinions as to whether states should continue to hand out federally enhanced unemployment benefits as the economy continues to open.  Since the start of the pandemic, the federal government has provided extra benefits to unemployed workers, the most recent being a $300 a week increase to every state’s current unemployment payment. The enhancement is planned to end on September 6th, 2021.  Twenty-six states have decided that waiting until September to end payments is far too long and have chosen to cut them off early to encourage workers back to work.

June 12th marked the start of repeals of the federal benefits with four states ending benefits. Eighteen more states were soon to follow, with end dates staggered through the end of June. Before any federal benefits were lifted in April and May, it is interesting to note that states with plans to pull back benefits already had a significantly lower unemployment rate than their counterparts – by about 1.5%.  That gap was expected to widen in June as states began cutting off the enhanced federal benefits and encouraged workers to go back to work.  With the release of the June data, it is clear there was minimal change in the unemployment levels of both groups from May.  While the findings are preliminary due to only a partial month’s impact, next month’s data will give more insight into whether the repeal of unemployment benefits is actually driving return-to-work behavior or, like June, will be continuation of little impact.

Veros continuously monitors all aspects of the economy as it pertains to the future of house prices.  Unemployment is a key predictor variable used in our residential real estate forecast product VEROFORECAST.

 

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