Economic Commentary – Expiring pandemic jobless programs

Expiring pandemic jobless programs will likely push people towards jobs and spur a modest uptick in growth and inflation

Michael Skordeles, AIF®

Senior U.S. Macro Strategist

Truist Advisory Services, Inc.

What happened

There was a massive 6.5 million decline in workers participating in pandemic-related jobless programs in the most recent week, September 11, 2021. About 2.1 million remain on the two programs, nearly evenly split between the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) (see slide 3). 

The PUA program adds up to 57 weeks of benefits for self-employed, contract or gig workers that are normally ineligible for unemployment insurance (UI), which are administered by states. The PEUC program extends benefits for an additional 24 weeks of assistance provided for by the CARES Act after state-level UI benefits expire. Both programs ended September 6, 2021.

This is unrelated to the highly-publicized Pandemic Unemployment Compensation (PUC), which added $600 a week on top of other weekly unemployment insurance (UI) benefits and programs such as PUA and PEUC. Those expired July 31, 2020, then dropped to $300 for several weeks. In December 2020 and March 2021, Congress extended the $300 federal supplement until September 6, 2021. 

Traditional state-level jobless programs

Initial claims for state-level unemployment insurance (UI) benefits fell to 298,300 (not seasonally adjusted) in the most recent week. This count is the number of workers asking for UI. The pre-pandemic 3-year average was 227,000. Thus, new state-level UI claims are roughly back to pre-pandemic range (see slide 4). 

Continuing claims—the number of workers receiving UI benefits—fell to 2.46 million. The pre-pandemic 3-year average was 1.813 million, though more than one-quarter of the weeks were greater than 2 million and the maximum was 2.52 million. So, continuing claims are down from the lockdown period, but remain somewhat elevated relative to the pre-pandemic range (see slide 3). 

Now, as the pandemic-related jobless programs expire, the total participating in all programs is about 4.9 million with nearly 60% on state-level programs. 

Our take

The loss of continued support – from the myriad of jobless benefits programs to CARES Act checks – will certainly push more people towards the many open jobs. There were 4.2 million more job openings than hires in July 2021 (the latest figures), which is more than 3.5 times the level in July 2019 (see slide 5).

Yet, there are several factors driving the gap between job openings-hiring, including job-pay differences, COVID-related issues such as child care, fear of infection, and vaccine hesitancy, along with jobless benefit programs. And the loss of support will likely not outweigh the COVID-related issues for all people, particularly those struggling with child care. 

"The loss of continued support – from the myriad of jobless benefits programs to CARES Act checks – will certainly push more people towards the many open jobs."

Job-pay differences are largest driver

Job-pay differences appear to be the biggest driver of the job openings-hiring gap in our view, while we don’t view the jobless benefit programs as necessarily being “too generous,” especially during 2020. Nonetheless, all of these factor have contributed to the massive gap between job openings and hiring.

By job-pay differences, we are referring to workers unwilling to take jobs paying under $12-$15 per hour or quitting other jobs. This is evident in the 2.7% rate of employees voluntarily quitting their jobs, down slightly from 2.8% in the spring (see slide 6). 

However, the quit rates for three industries—food service, manufacturing, and retail—are significantly higher than their respective long-term average since 2001 (see slide 6).

Bottom line

The expiration of pandemic-related jobless programs will likely push more people towards the millions of open jobs. Most will return to higher wages, which will boost overall growth. On the other hand, those wage gains will contribute modestly to inflation, which we believe will come down from current levels, but remain above the pre-pandemic pace. 

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