“It’s time to get back to work,” Idaho Republican Gov. Brad Little said Tuesday while announcing that his state would be ending federal unemployment benefits. “We do not want people on unemployment. We want people working. A strong economy cannot exist without workers returning to a job.”
The flurry of activity underscores the rising concern that the economic recovery could be jeopardized even as lockdown restrictions are lifted if restaurants, travel companies and other businesses are unable to hire enough staff to keep up with surging consumer demand.
Fears of a labor shortage have been fed by government data that showed employers added 266,000 jobs in April, falling far short of the roughly 1 million that many economists had forecast.
While economists warn against jumping to conclusions based on one month of data, a second survey released Tuesday showed there were a record 8.1 million job openings available going into April. And there were fewer hires per job opening that month than at any time since the series began in 2001, said Jed Kolko, the chief economist at the job-search site Indeed. That’s fueling the suspicion that a shortage of workers is holding employers back.
The difficulty in hiring workers has prompted some of the country’s largest employers to increase pay. McDonald’s announced Thursday it would raise wages for more than 36,500 hourly workers by an average of 10 percent over the next several months. Amazon said it will hike wages by up to $3 an hour for more than half a million of its U.S. employees.
But the conversation over how to boost hiring has focused primarily on the enhanced unemployment benefits, which Republicans say are overly generous and give people an incentive to stay home.
The benefits currently supply an extra $300 per week in federal money on top of state jobless aid, which varies among states but averages more than $300 a week.
More states are expected to follow those that have cut off the federal benefits. And GOP lawmakers in Washington are pushing legislation to overhaul the federal aid: Nine Republicans this week introduced a bill to cut the benefits in half by the end of the month and phase them out entirely by the end of June. Sen. Ben Sasse (R-Neb.) is rolling out legislation that would convert the last two months of extra unemployment benefits into a signing bonus for any worker who gets a job by July 4.
“We’ve been warning about this predictable crisis for a year now,” Sasse said in a statement. “Americans want to work, but the federal government is paying more for unemployment than for work. Well-meaning but stupidly designed policy is holding Main Street back.”
Senate Democrats also signaled this week that they are unlikely to support extending the enhanced benefits beyond the program’s current September expiration date if the economy continues to recover.
At the same time, economists caution that the benefit of cutting off the extra jobless aid early would be limited and could hurt those who truly need it, while also forcing people into jobs that aren’t a good fit and don’t work out long-term. Mark Zandi, chief economist at Moody’s Analytics, said the motivating effect of ending the aid would only be “on the margin.”
“You’re obviously hurting people who really need the UI, but you’re only going to get a few people back to work,” Zandi said. “Net-net, I think it’s a mistake.”
Andrew Stettner, a senior fellow at the left-leaning Century Foundation, said, “There is simply no economic evidence that pandemic unemployment aid is holding back job creation.” Stettner highlighted weekly jobless claims data to show that more than 1 million workers have already gotten off unemployment rolls since early March — moves made before GOP governors began cutting off their federal benefits.
The Labor Department said Thursday that 473,000 people filed initial claims for jobless benefits in the week ending May 8, down 34,000 from the previous week and the lowest since the pandemic began.
While Biden administration officials and most economists acknowledge that the unemployment aid is probably one reason for the slow pace of hiring in April, they say a combination of lingering health concerns, lack of child care and workers being choosier about their job choices is also likely to blame.
“The biggest issue is that you’ve got several moms and dads that are home that had been working, but have to be home to take care of their kids,” said Zandi. “Certainly when schools reopen in person, these parents ought to be able to get back to work and really fill in a lot of these open positions.”
Other elements that could be contributing to slower rehires can be harder to track through official data: a heightened level of early retirements, for example, by baby boomers who quit their jobs at the start of the pandemic and aren’t planning to return. A huge number of people are also switching jobs and sometimes industries, and in those cases it can take longer for an employee to match with a new employer.