For the tens of million of Americans receiving unemployment benefits, the extra $600 boost will run out sooner than expected.
The $600 weekly payments from the Federal Pandemic Unemployment Compensation program were put in place as part of the $2.2 trillion CARES Act Congress passed in late March amid the coronavirus pandemic. Americans who are eligible for unemployment insurance receive an extra $600 on top of what they normally claim under their state's benefits. Yet this boost is scheduled to end "on or before July 31, 2020."
July 31 falls on a Friday this year, which is a problem because states typically pay out unemployment benefits on a weekly cycle that ends on Saturday or Sunday. And because of the wording of the CARES Act, that means states will end the $600 extra payments on July 25 or 26, rather than on the very last day of the month, depending on how the state's weekly calendar is set up.
"If the benefit week ends after the July 31 cutoff, then the $600 can't apply to that week, and most benefit weeks end on Saturday or Sunday," according to Michele Evermore, senior policy analyst for the National Employment Law Project. Evermore adds that she hasn't been able to confirm any state that ends their weekly benefits cycle on a Friday.
There's roughly 33 million Americans who are still receiving unemployment benefits or waiting to be approved, according to the Department of Labor. So once the extra $600 payments end, unemployed Americans will be left with whatever unemployment compensation their state typically pays out, the amounts of which can vary dramatically by state. Last year, the Department of Labor reported the unemployment benefits replaced about 45% of a worker's pay nationally.
In terms of dollars, the Brookings Institution estimates that the national average weekly payment was $387 prior to the coronavirus pandemic. Mississippi, for example, paid an average of $215 per week, while unemployment benefits max out in Arizona at $240 a week, which is second lowest in the nation. Meanwhile those in Massachusetts received $550 per week, on average.
"It's going to be a real shock to people, especially in states like Arizona, where the maximum benefit is $240 a week," Evermore says. "I doubt anybody can afford rent in Phoenix on that much."
But it's not just those who are unemployed who will be affected. "I think most people think that when the $600 gets cut off that if they're not unemployed, it's not going to affect them. But when 30 million people are no longer getting $600 extra dollars, that's going to have a multiplier effect on the whole economy," Evermore says.
In fact, in a recent Congressional testimony economist, Jason Furman estimated that the extra $600 unemployment benefit will boost GDP by 2.8% and support just under three million jobs.
"Letting this extra $600 in unemployment insurance benefit expire at the end of July would by itself cause more job loss than was seen in either of the recessions of the early 1990s or early 2000s," writes Josh Bivens, director of research for the Economic Policy Institute.
Going forward, Bivens predicts that extending the $600 unemployment benefits through the middle of next year would provide an average GDP quarterly boost of 3.7% and employment of 5.1 million workers.
The widespread impact of the unemployment boost is likely to push federal lawmakers into extending the benefit, Evermore says. "It's moved from an 'if' to a 'how much' kind of question. I think most people realize you can't just drop $600 from 30 million people's weekly benefit and have nothing happen," Evermore says. But that means that Congress will have to act fast since the Senate is not scheduled to return from its recess until July 17.
"There's actually a reasonable likelihood of that happening just because the economy really is fairly stable right now. Goofing around with it too much could be really disastrous," Evermore says.