Following the expiration of extra federal unemployment benefits provided by the CARES act, it has been revealed that more than 1.2 million Americans filed for first-time unemployment benefits last week. The U.S. Labor Department released the numbers on Thursday, with CNN later noting that this was actually down from the 1.4 million claims filed the week prior. The coronavirus pandemic cause mass business shutdowns in the nation back in March, which led to a rise in unemployment claims.
The CARES act was a COVID-19 relief bill that funneled federal money into the economy by way of bailouts, business loans, stimulus checks, and extra unemployment funds. CNN noted that unemployment claims had been going down over the past few months, but as states started to reopen coronavirus cases started to spike again, unemployment started to raise again as well. The additional unemployment benefit ran out on July 31, and now Republican and Democrat leaders are locked in negotiations for a new stimulus bill that will hopefully lead to an extension on federal unemployment benefits, or a whole new plan altogether. Many Republican leaders have been opposed to continuing the $600 price tag that the CARES Act put on federal unemployment benefits, as they argue that this is an incentive for people to not go back to work.
Unemployment Insurance Weekly Claims
Initial claims were 1,186,000 for the week ending 8/1 (-249,000).
Insured unemployment was 16,107,000 for the week ending 7/25 (-844,000).https://t.co/ys7Eg5LKAW— US Labor Department (@USDOL) August 6, 2020
Notably, many economy experts have stated that they feel less federal unemployment funds could cause a lot of fiscal issues for American. Ohio State University economics professor Trevon Logan spoke to the Wall Street Journal and commented on the amount of time it will take to get money to citizens after a new relief bill is signed into law. "It could take weeks and weeks and weeks to get this money to people, which means of course they will default on a number of obligations," he said.
Peter Ganong, a University of Chicago economist, added, "If we went to a world with no supplement, we'd see spending of the unemployed fall. Because there are so many unemployed people right now, that would have a really dramatic effect on the macroeconomy." Mark Zandi, the chief economist at Moody's Analytics, added that the stimulus payments alone do not provide the same "economic bang for the buck" as enhanced unemployment insurance does. "UI beneficiaries spend every penny of the support very quickly on necessities that generate other economic activity and jobs," he said.