Ending COVID Emergency Unemployment Benefits Helped the Economy, New Fed Study Shows

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The ending of emergency unemployment benefits (EUB), which were put in place during the early days of the pandemic, helped boost economic growth, according to a new paper by the Federal Reserve Bank of St. Louis.

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“Using the cessation of EUB across states in 2021, we establish a strong positive causal link from a reduction in the number of beneficiaries to state employment growth,” the study paper reads, in part.

The St. Louis Fed notes that because of the pandemic, between February and April of 2020, U.S. employment declined by 22 million people (or 15%).

In turn, the federal government introduced several temporary EUB programs, including providing program eligibility to Americans who would not otherwise be covered — such as contract and gig workers — extensions of benefit durations and a $600 weekly add-on for recipients, according to the Fed.

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By spring 2021, employment growth began to slow and job openings were steadily rising, reaching 9.6 million in May 2021, up 2.6 million from a pre-pandemic level. This pushed some states to halt emergency benefits, saying that “the historic generosity of EUB was contributing to businesses’ difficulty filling job vacancies.”

The paper notes that 26 governors ended benefits before September, with 20 halting participation between June 19 and July 3.

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In a blog post, Iris Arbogast, a research associate at the Federal Reserve Bank of St. Louis, and Bill Dupor, an economist and vice president at the Federal Reserve Bank of St. Louis, found that terminating EUB had a statistically significant and quantitatively large positive impact on employment.

“In the three months following a state’s EUB termination, employment increased by about 37 people for every 100-person reduction in EUB recipients,” they wrote.

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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