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Here’s what could happen when the $ 300 unemployment expires, according to Goldman Sachs

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Amid reports of labor shortages and fears of economic overheating thanks to what some see as excessive government stimulus spending, a total of 26 states are now considering ending the federal unemployment supplement. $ 300 to boost hiring, something Goldman Sachs analysts expect to happen once payments stop.

Highlights

Goldmans analysts point out that, given that 25 of the states terminating benefits prematurely account for only 29% of pandemic job losses, it is likely that labor market pressures, labor shortages and a depressed labor force participation rate will continue until benefits expire in each state in early September.

Analysts note that it is too early to say how the early termination of benefits will affect official employment statistics. This snapshot will likely be contained in the July jobs report that the Labor Department will release in August.

That said, claims for regular state unemployment insurance benefits have declined more rapidly in states that have announced they will end the supplement sooner. Analysts say this is a hint that hiring will resume once benefits are cut, but note that other data like job posting volume does not yet support this conclusion.

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Analysts say their best guess is that the expiring benefits will provide a significant tailwind to hiring in the months to come, spurring the growth of more than 150,000 jobs in July and more than 400,000 jobs in September, although ‘they note that the forecast is still uncertain.

Based on previous academic studies, analysts estimate that a typical worker receiving regular state benefits will see those benefits drop by 50% once the $ 300 supplement expires in their state, and the length of their stay. unemployment would fall by around 25%.

Crucial quote

The temporary increase in unemployment benefits. . . helped people who lost their jobs through no fault of their own and may still be getting the vaccine, but it will expire in 90 days, President Biden said in remarks prepared after the report was released on the May job last week. It makes sense.

Large number

$ 12 billion. This is how much local economies in the 24 Red states that announced an early termination of the $ 300 federal supplement as of June 2 are expected to lose due to the benefit’s early termination, according to a report by the Joint Economic Committee of the United Nations. Congress.

Surprising fact

Louisiana on Thursday became the first state with a Democratic governor to announce the early expiration of the $ 300 supplement. The other 25 states have Republican governors.

Key context

An emergency federal unemployment insurance supplement was first authorized in the amount of $ 600 per week under the CARES Act last year. A new supplement of $ 300 was authorized by executive order of President Trump after the expiration of the first supplement. The $ 300 supplement was extended once by Congress as part of a stimulus bill last December, and again by Congress as part of President Bidens’ $ 1.9 trillion US bailout. of dollars.

Further reading

Louisiana John Bel Edwards becomes first Democratic governor to cut federal unemployment benefits by $ 300 a week (Forbes)

Biden: it makes sense that $ 300 unemployment ends in September (Forbes)

California and Florida are sending more stimulus checks. Could your state be next? (Forbes)

IRS Releases Child Tax Credit Payment Dates Here’s When Families Can Expect Relief (Forbes)

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