When the federal $600-a-week boost to unemployment benefits lapsed at the end of July with no replacement in sight, economists warned it could create a fiscal cliff that would hurt both laid-off workers and the nation's early economic recovery from the coronavirus pandemic.
But according to a recent analyst note from JPMorgan, the expiration of the sweetened benefits "has not marked a sharp turning point for the overall economy."
"We see little sign that the benefit expiration has marked a major turning point for the overall economy, as many other high-frequency spending and activity indicators have continued rising into August," said the note, written by JPMorgan economist Jesse Edgarton.
When the boosted benefits ended, the typical unemployment check fell from $812 to $257, according to a paper published by the National Bureau of Economic Research in August. More than 30 million Americans, or roughly one in five workers, are receiving unemployment benefits, according to Labor Department data.
The end of the $600 benefit was expected to drain about $15 billion per week from the economy, according to one estimate from the Century Foundation.
A separate study by the Economic Policy Institute found that expanding jobless aid boosted personal income by $842 billion in May; extending the heightened benefits through mid-2021, the nonprofit said, would provide an average quarterly boon to GDP of 3.7 percent.
"Without more stimulus, the bottom could fall out from the American economy," Josh Lipsky, director of programs and policy at the Atlantic Council, said at the beginning of August. "Millions of unemployed citizens, renters across the country, small business owners, and every state government are asking for help in a time of crisis. We can worry about the price tag later. When your house is on fire, you don’t ask the fireman how much the hose costs."
President Trump partially restored the aid with an executive measure on Aug. 8; although he originally envisioned it to be $400 a week, most laid-off Americans will likely receive $300. Just six states have started to distribute the money to the millions of unemployed workers.
But data from 30 million Chase credit and debit cardholders suggests that spending has actually increased slightly since the supplemental jobless aid, enacted in April as part of the massive $2.2 trillion CARES Act, ended.
Still, the data shows that spending is more prevalent in states with lower unemployment, compared to those with unemployment rates above 7.8%.
Edgarton said in the note to investors the evidence "suggests that the expiration of the extra $600 of weekly unemployment benefits has produced some effects on the data in parts of the economy that are most directly impacted, but it has not marked a sharp turning point for the overall economy."