Though the pace is slower than anticipated, the U.S. economy has continued to grow through the end of summer. The unemployment rate continues to decrease, job openings are at an all-time high, and unemployment claims have fallen to the lowest level since before the COVID-19 shutdowns in March 2020. During this growth, pandemic-related unemployment benefits ended Sept 6. Economists not only have grappled with the question of whether the unemployment benefits impacted people returning to the workforce; it’s also unclear what affect its ending may have on employment in September and beyond.
Employment Situation Summary
Economists use a variety of monthly and weekly reports to get a sense of U.S. employment but view the monthly Bureau of Labor Statistics (BLS) Employment Situation Summary as one of the most accurate in documenting employment conditions. “The monthly employment situation report is one of the timelier snapshots of where the economy is,” says Joe Pickard, ISRI’s chief economist and director of commodities. According to the Sept. 3 release, nonfarm payroll employment rose by 235,000 jobs, seasonally adjusted, in August. This number was lower than economists’ expectations for 750,000 jobs. The number is also lower than the monthly job growth this year, which has averaged 586,000.
The unemployment rate declined in August by 0.2 percentage point to 5.2%. While this rate is much lower than the peak unemployment rate of 14.7% in April 2020, it’s a higher level than the pre-pandemic 3.5% in February 2020. About 8.3 million people remain unemployed in August, a decrease of 318,000 from July. Over 17 million jobs have been added since May 2020. Seventy-four percent of jobs lost due to COVID-19 during March and April 2020 have been regained. As economic conditions continue to improve, the unemployment rate may rise a little in the next few months, says Bret Biggers, ISRI’s senior economist. “As we get more jobs, that’s just what tends to happen,” he adds. The unemployment rate is a lagging indicator, because the workforce used to calculate the percentage changes. The rate may decrease as the economy falls as some job seekers leave the workforce or work part-time. It may increase as the economy recovers and people who were previously out of the workforce begin looking for positions again.
Job Openings and Labor Turnover (JOLTS)
The BLS’ Job Openings and Labor Turnover Survey (JOLTS) program tracks job openings, hires, and separations. “We have been adding jobs, the unemployment rate is going down, but we aren’t filling jobs as quickly as we would like,” Pickard notes. “I think that’s the other part of it, the record number of job openings that are out there and how difficult it’s been to fill those jobs.” Job openings for private industry and government positions in July increased 749,000 to more than 10.9 million, seasonally adjusted. That’s the highest number in the series history since job openings were tracked in December 2000. There were 9.9 million job openings, seasonally adjusted, in the private industry, and government jobs accounted for nearly 1.1 million openings, seasonally adjusted. Total hires in July fell by 160,000 to 6.667 million, seasonally adjusted. Total separations, which include retirements, employee initiated, and employer initiated, increased by 174,000 to nearly 5.6 million in July.
Initial unemployment claims decreased by 23,331 in the week ending Sept. 11, 2021, to 262,619 not seasonally adjusted—its lowest level in nearly 17 months (March 14, 2020, showed 251,851 initial claims not seasonally adjusted.). Since reaching a 2021 high of nearly 1.1 million for the week ending January 9, 2021, initial unemployment claims have fallen 76% seasonally adjusted.
Ending of Pandemic Unemployment Benefits
- The Pandemic Unemployment Assistance (PUA), which covers those not traditionally eligible for aid including part-time workers, freelances, and self-employed.
- The Pandemic Emergency Unemployment Compensation (PEUC), which gives aid to those who have exhausted their state’s benefits period; and
- The Federal Pandemic Unemployment Compensation (FPUC), which provides $300 a week.
Biggers and Pickard are curious to see how the programs and their closures may have impacted unemployment. Economists have speculated whether the additional $300 a week has kept people from reentering the workforce. “At this time, we are unsure of the impact the ending of the federal pandemic assistance may have on job growth,” Biggers says.
Research examining states that ended aid over the summer may indicate a limited impact on employment. Payroll and time-management firm UKG examined the shifts among hourly workers in 26 states that ended benefits in June and July. The firm found hourly workers in those states grew 0.4% from May through August. Hourly workers in states that kept federal aid grew 1.7%. Homebase, another payroll and time-management firm, found that employment fell 0.9% in states that ended federal benefits between mid-June and mid-July compared to the April 2021 baseline, but rose 2.3% in states that maintained the program. However, since the beginning of the pandemic, employment has been consistently higher in the states that ended the pandemic benefits early. Only in August did the states that continued these benefits catch up with the other states. “The reporting I’ve seen has tended to indicate that those impacts have been small and that the increased unemployment benefits isn’t what’s kept people out of the workforce,” Pickard says. However, he adds that those studies are imperfect and relatively limited in scale.
Now that the programs have ended, Pickard and Biggers will keep an eye on how the closure may impact people entering the workforce and nonfarm payrolls. “Time will tell,” Pickard says. “It may make sense intuitively that if you pay more not to work, you’ll have less people in the workforce, but quantitatively we don’t have great data on it, so we’ll have to wait and see.”
Biggers agrees and points to the BLS Employment Situation in early October for the true effects of the assistance program. “If you ask economists some will say yes, it’ll be impactful, and others will say it’s marginal at best. It is imperfect data right now, so we don’t know the true effect,” he states.
Pickard and Biggers will keep ISRI members updated on the effect pandemic-related government aid has on September employment, job openings and hires, and initial unemployment claims.