What Happens to the Unemployed When the Checks Run Out
Millions face a steep and immediate drop in spending power when federal jobless benefits end this month, with a sharp rise in the poverty rate.
Volunteers distributed food donations last week in Newton Centre, Mass. Poverty declined in the first months of the pandemic, reflecting CARES Act relief, but has since surged.
Volunteers distributed food donations last week in Newton Centre, Mass. Poverty declined in the first months of the pandemic, reflecting CARES Act relief, but has since surged.Credit…Cody O’Loughlin for The New York Times
Eduardo Porter
By Eduardo Porter
Dec. 14, 2020
When jobless workers get their last unemployment check, the effect on spending is sharp and swift.
Unemployed workers’ spending on food, clothes and other so-called nondurable goods immediately drops 12 percent, about twice as much as when they lost their job and went on unemployment insurance, University of Chicago researchers have found. Spending at drugstores falls 15 percent. Co-payments for visits to the doctor fall 14 percent. Spending on groceries falls 16 percent, or $46.30 a month, on average.
Millions of Americans are less than two weeks from cutbacks like those. The last two federal emergency unemployment programs in the CARES Act, passed as the pandemic’s first wave surged in March, expire on Dec. 26.
An analysis by the Century Foundation concluded that 12 million workers who rely on one or the other of these programs will lose them on that day. This will add to 4.4 million who will have already exhausted their federal unemployment benefits.
It projected that fewer than three million of these workers will be eligible for what are known as extended benefits, which kick in when the unemployment rate in a state is exceptionally high and can last six to 20 weeks, depending on the state.
If Congress and the administration are unable to hammer out a deal to provide additional relief, the others will be left with nothing.
Gift Subscriptions to The Times, Cooking and Games.
Starting at A$25.
“It was obvious this would be totally inadequate,” said Stephen A. Wandner, a senior fellow at the National Academy of Social Insurance, who has argued for extending unemployment benefits for a longer period, especially at a time when jobs are so hard to come by.
Mr. Wandner noted that unemployment benefits lasted up to 99 weeks — almost two years — as part of the recovery effort in the last recession. In 2003, when the nation was also recovering from recession, maximum benefits were extended as long as 72 weeks, or almost a year and a half.
Joblessness will not only affect consumer spending. Nearly 12 million households fear they may not being able to meet their mortgage payments, according to a survey in October by Moody’s Analytics and Morning Consult. Millions of others can no longer afford their rent. And 37 percent of the unemployed said the coronavirus pandemic prevented them from looking for a job. “You are really putting coal in people’s stockings,” Mr. Wandner said.
At the end of November, 16 million people reported they had not worked in the last seven days and were relying on unemployment insurance payments to make ends meet, according to a Census Bureau survey of Americans’ financial condition. Losing those checks will translate into immediate hardship. “Come Jan. 1, a lot of people are going to be on Defcon 1,” said Mark Zandi, chief economist at Moody’s Analytics.
The expiring programs are Pandemic Unemployment Assistance, created for gig workers and others not covered by regular unemployment insurance, and Pandemic Emergency Unemployment Compensation, which extended benefits up to 13 weeks beyond their regular duration (from 12 to 30 weeks, depending on the state).
The New York Times
Me: Better plan to expect your income payments to run out before a relief package is put in place, probably AFTER Trump has been removed from the presidency and Biden gets one in and puts one up, BUT it as been reported, he does not seem to have much humanity, so we will see won’t we?.