‘Five-alarm fire’: Unemployment aid expires for millions of Americans

The end of vital pandemic lifelines on Labor Day ‘could not come at a worse time’ amid ongoing public health crisis and climate emergencies

More than seven million out-of-work Americans have lost all of their federal unemployment assistance, marking an abrupt end to safety net programmes approved by Congress during the ongoing coronavirus pandemic and its economic fallout.

In addition to the end of federal relief for 7.5 million people, another three million people will lose their additional $300 per week in federal aid to supplement state unemployment benefits. The expiration of aid could impact roughly 35 million people who live in households where a family member receives unemployment income, according to the US Census Bureau.

President Joe Biden has suggested that states allocate other relief funds to continue to float unemployment aid, but state lawmakers do not appear ready to do so, while Congress – which is currently in recess – is unlikely to extend the relief.

The expiration of critical aid for millions of Americans hits households during the ongoing public health crisis and spread of the more-contagious Delta variant, as well as nationwide climate emergencies, including mass flooding and other hurricane damages that have left thousands of homes in the dark, or forced thousands of others to evacuate, with their employment status unclear.

“The Labor Day cut-off of 7.5 million workers or more is unlike anything we have seen in our lifetimes,” said Andrew Stettner, senior fellow at The Century Foundation.

“This is a five-alarm fire that we’re treating as if nothing were wrong,” he said in a statement late last month. “It is an act of policy negligence to allow a record number of workers to be completely cut off from unemployment benefits as the Delta variant surges, jeopardising the economic progress we have made.”

He called on the Biden administration and state officials to “move with greater urgency to provide a safety net and aggressive reemployment assistance to those being summarily dropped from the unemployment rolls.”

A key component of federal assistance included a weekly supplement to state jobless benefits, initially adding $600 a week from April through July 2020, then, after it was revived in December, dropping to $300 a week.

Congress also created two other programmes – the Pandemic Unemployment Assistance programme supported independent contractors and self-employed Americans, while the Pandemic Emergency Unemployment Compensation extended jobless aid to people who exhausted their state benefits.

More than 9 million people were receiving benefits from the Pandemic Emergency Unemployment Compensation programme or Pandemic Unemployment Assistance programme, and roughly 100,000 others filed an initial claim for the latter programme within the last week of August, according to the Bureau of Labor Statistics.

Roughly 235,000 jobs were created last month, a sharp decline from the 1.1 million created in July, the agency reported.

The end of Covid-19-related unemployment aid follows the loss of benefits for nearly 3 million Americans who were cut off from some or all unemployment aid across half of all US states – all but one governed by Republicans – in a bid to push residents back to work earlier this summer.

Analysts have argued that cutting off those benefits did not lead to an uptick in hires, and may have pushed workers into low-wage jobs.

For every eight workers who lost their unemployment aid, only one found a job.

More than three million people are also not working over health concerns, without adequate or consistent safety measures in place against Covid-19 transmission, while 5.5 million others are caring for children who are not in school or enrolled in daycare, according to the US Census Bureau.

The end of Covid-19-related aid also is unlikely to fuel more hiring but mark a significant decrease in household spending, according to JPMorgan Chase. That spending also is likely to rely more heavily on credit, which could also impact credit scores and missed payments, creating a ripple effect in Americans’ finances.

“Amid increasing uncertainty in the trajectory of the pandemic, Monday’s unemployment cliff could not come at a worse time,” said Rakeen Mabud, chief economist at Groundwork Collaborative.

“Millions will suffer as they lose this critical source of income and the loss of spending will suppress job growth, setting us back yet again in our efforts for an inclusive and equitable recovery,” he said.