Jobs Recovery Gains Speed in States That Are Ending Federal Benefits

A pedestrian walks by a Now Hiring sign outside of a Lamps Plus store in San Francisco, on June 3, 2021. (Justin Sullivan/Getty Images)

WASHINGTON—Many economists are scrambling to weigh whether the federal pandemic unemployment benefits have really discouraged workers from returning to work. There are a variety of factors contributing to the current labor shortage, they say. Early signs, however, show an acceleration in the labor market recovery in states that have ended the supplemental federal benefits early.

Severe labor shortages across the country have prompted 26 states—all but one led by Republican governors—to opt out of the expanded benefit program ahead of its expiration on Sept. 6. The effect on employment data won’t be fully visible until early August when the July jobs report is published. However, continued claims for regular unemployment benefits have recently declined faster in those states that are ending the extra $300 weekly unemployment insurance early. A similar pattern is also observed in initial claims.

Expiration of unemployment insurance benefits “will likely provide a tailwind to hiring in the coming months,” according to Jan Hatzius, a chief economist at Goldman Sachs.

“Our baseline assumption is that expiring benefits will boost job growth by over 150k in July and over 400k in September,” Hatzius wrote in a report dated June 11, noting, however, that there’s high uncertainty around these estimates.

Some other early signs also hint at a fast recovery in those states. For example, ZipRecruiter, a U.S. employment marketplace for job seekers and employers, has noted a rapid rise in job applications.

According to ZipRecruiter’s job search data, the number of applications submitted from the week ending June 12 to the week ending June 19 jumped 7.6 percent for states—Alaska, Iowa, Mississippi, and Missouri—that had ended the enhanced benefits on June 12. This is compared to 1.3 percent in states that will maintain benefits until Labor Day (Sept. 6).

The results were even higher—between 11.5 and 15 percent—in states that were set to end the benefits on June 19, 26, and 27.

“Job search sites have more frequent data on job search activity and are a valuable source of information on what’s going on in real time,” Julia Pollak, ZipRecruiter’s labor economist, told The Epoch Times.

To observe the labor market trends, ZipRecruiter is tracking the response to the expiration of enhanced benefits of job seeker clicks, application volumes, and searches in each state.

There was little difference in trends across states before June, according to Pollak.

However, after the Memorial Day holiday week ending June 5, there has been an uptick in some of the metrics in those states that are ending the enhanced benefits.

“But it is too soon to tell for sure,” Pollak said.

Millions of Americans are still unemployed, even as many business owners are having trouble filling jobs. Employers posted a record 9.3 million job openings in April as the economy continues to recover. And job positions are opening faster than businesses can fill them.

HomeGrounds, based in Westbury, New York, is a small business that provides an online community and content for coffee hobbyists. In the midst of a pandemic digital boom, the company has sought to grow, but it’s short of staff.

“You'd think a digital business would be the easiest for finding workers during and after the pandemic. It’s been such a trial,” Alex Mastin, CEO of Home Grounds, told The Epoch Times.

Launched in 2015, HomeGrounds was recently acquired by digital media company Blexr. The online platform is looking to hire 10 people, including digital content creators, search engine optimization experts, web developers, and user experience specialists. All of the positions are remote, which makes it easy for job seekers who are concerned about returning to work due to COVID-19.

“We’ve tried any number of tactics,” Mastin said, including headhunters, incentives, and easy applications but “we have found no magic bullet.”

Many business owners say they can’t compete with the rich federal benefits, which incentivize people to stay home instead of working. The U.S. Chamber of Commerce has called for all remaining states to end the $300 weekly unemployment supplement early to address “the country’s ever-worsening workforce crisis.”

Many Democrats and economists, however, don’t see enhanced unemployment benefits as a key bottleneck for labor supply. They say factors including a lack of child care, ongoing health risks, skills mismatches, and jobless benefits are collectively holding back people from returning to work.

Concern about COVID-19 is the most cited reason that holds people back from rejoining the labor force, according to a survey by the Indeed Hiring Lab, which provides research on the global labor market.

The survey among 5,000 people in the United States between the ages of 18 and 64 found that only about 10 percent of respondents were urgently looking for a job. Spousal earnings, household savings, and enhanced unemployment benefits are other factors that allow unemployed workers to be patient, according to the survey.

“This is an employee’s bargaining chip now,” President Joe Biden told journalists on June 24 at the White House.

The solution to attracting workers, according to Biden, is to “pay them more.”

There is an increase in job postings that advertise bonuses and other incentives. Due to the labor shortage, the share of job postings that offer signing bonuses has increased to 20 percent recently from 2 percent, according to ZipRecruiter.

“We have hired 20 people this year, but it gets harder and harder,” Jim Jacobs, CEO and founder of Focus Insite, told The Epoch Times. “Why would people work when they can make $47,000 a year on unemployment?”

Based in Pennsylvania, Focus Insite is a market research company that provides recruitment for focus groups, online studies, and interviews.

Jacobs believes Pennsylvania “has been brutal with the extension of benefits.”

“Since we have fully transitioned to a 100 percent remote company, we are specifically looking to recruit from only business-friendly states moving forward,” Jacobs said.