Giving People Money Is Apparently Not Crushing The Economy

The May jobs report showed little evidence that unemployment benefits are stalling economic growth, despite Republicans' continued attacks.

If the federal government’s efforts to help the economy are actually hurting it, as Republicans have been claiming, the best available data isn’t corroborating that theory.

Employers added 559,000 jobs in May, continuing months of gains as vaccination rates go up and businesses reopen. The numbers fell a bit short of economists’ projections, but were a decent rebound after the previous month’s disappointing report. Despite missing expectations, the May number is still a bigger monthly jobs gain than the economy had seen in decades before the pandemic.

April’s jobs report fueled complaints from employers and Republicans, who said that the extra $300 per week Congress added to state unemployment benefits prevented people from taking jobs.

But May’s numbers simply do not reflect the narrative that robust unemployment benefits have halted economic recovery, Mark Zandi, the chief economist at Moody’s, told HuffPost.

“Concerns that supplemental unemployment insurance would significantly impair the ability of businesses to fill open positions are significantly overdone,” Zandi said. “This is playing a role in slowing when workers take open jobs, but it is a minor role.”

The May jobs report showed employment in the leisure and hospitality industry increased by 292,000 jobs, with two-thirds of those increases in food service.
The May jobs report showed employment in the leisure and hospitality industry increased by 292,000 jobs, with two-thirds of those increases in food service.
Noam Galai via Getty Images

Half of U.S. states, all governed by Republicans, have announced plans to stop disbursing billions of dollars in additional federal unemployment benefits sometime between June and July, before the program expires in September. More than 4 million Americans will lose the additional $300 per week provided by the federal government this month.

It’s a decision that President Joe Biden’s administration says is ignoring the realities of the pandemic. Labor Secretary Marty Walsh tried to temper expectations for the jobs report in an interview with HuffPost on Thursday, saying Republicans were “acting as if we didn’t have a pandemic in this country.”

The jobs report reflects that: In May, roughly 7.9 million Americans reported that they could not go back to work because their employer is currently closed for business or had less work due to the pandemic.

“That’s down 2 million from last month, but still a lot of people. Many of these businesses just won’t reopen and people will have to search for new jobs, which takes time,” said Andrew Stettner, an unemployment expert at the Century Foundation, a progressive think tank. “Indicators outside of today from the [unemployment insurance] system and also from job search sites like Indeed indicate that job search activity is increasing, and I think you’ll continue to see positions fill over the summer.”

Among other reasons attributed to this lag in reemployment are factors like elder care and child care, as the school year comes to an end and day care remains out of reach for many Americans.

A concerning number in Friday’s report was the size of the civilian labor force, which dipped slightly, by 53,000, after three months of gains. Walsh had pointed to steady labor force increases as a reason not to fret about the overall economic trend.

Republicans took the opportunity to continue their campaign against Biden’s COVID-19 relief and economic recovery plans, lambasting the May report for falling short of economists’ expectations of 671,000 jobs added.

“As we emerge from the virus, our economy should be booming, but today’s lackluster jobs report shows President Biden’s policies have stalled our recovery,” House Minority Leader Rep. Kevin McCarthy (R-Calif.) tweeted Friday morning. “Washington needs to stop paying people NOT to work. Bidenomics is bad for America.”

The extra money from the federal government, including the more generous unemployment benefits and recent stimulus checks, significantly reduced material hardship and resulted in lower rates of hunger, financial instability and depression, according to a University of Michigan study published last month.

The May jobs report suggests a relatively quick economic recovery from the pandemic, according to Zandi.

“Average monthly job growth appears to be settling at close to 500,000 per month, which is consistent with a decline in unemployment of 0.1 percentage points per month,” Zandi said. “At this pace, the job market will fully recover from the pandemic by late 2022.”

Another encouraging sign in the May report: Employment in the leisure and hospitality industry increased by 292,000 jobs, with two-thirds of those increases in food service. Most of the overall job increases over the past three months have come from this industry, which has seen big gains.

The jump in restaurant jobs is significant because employers have complained loudly about their hiring struggles. Restaurant workers, who typically earn less than half the U.S. median wage, get a bigger boost from the extra $300 relative to their prior wages than most workers.

The Biden administration is setting the expectation that job numbers will only improve over the summer as the country gets closer to its goal of at least partially vaccinating 70% of the adult population against COVID-19 by July 4.

“Thanks to a robust vaccination program, Americans are getting back to work, and President Biden’s economic plan – building the economy from the bottom up, and the middle out – is working,” the White House said in a statement.

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