New economic data is raising questions about the effectiveness of policies in states such as Louisiana that cut off federal COVID-19 jobless benefits as a way to encourage people to return to the workforce.
Twenty-six states decided to opt out of the $300-per-week unemployment benefit provided through the Coronavirus Aid, Relief and Economic Security (CARES) Act. But only eight of them saw statistically significant drops in their unemployment rates in July, according to data from the U.S. Bureau of Labor Statistics (BLS).
Louisiana, which was among those eight states, saw its unemployment rate drop from 6.9% in June to 6.6% in July, the BLS reported. But the drop may not have been the result of Gov. John Bel Edwards’ decision to cut off the federal jobless benefits early, since the cutoff in Louisiana didn’t become effective until July 31. Most of the states that opted out of the unemployment benefits did so in June.
The $300-per-week benefit is scheduled to expire on Sept. 6, but lawsuits have been filed in Louisiana and other states in an attempt to restore the benefit. Louisiana’s unemployment rate remains well above the national rate of 5.4% in July and 5.2% in August.
“We believe ending the federal supplement a few weeks early was the right call,” Dawn Starns McVea, senior state director for the National Federation of Independent Business, told the Louisiana Record in an email. “The supplement was always a temporary fix to help people who lost their jobs because of the pandemic and couldn't get another job because businesses weren't hiring.”
But eventually, the supplement was no longer needed because state economies began to reopen and more companies began rehiring workers, according to McVea.
“There are many reasons why people are reluctant to return to work, but certainly continuing to pay them the supplement even as vacant positions went unfilled didn't make sense and affected the state's economic recovery,” she said.
Nationally, nine states that kept the $300 supplemental benefits in place recorded significant drops in unemployment, suggesting that economic expansion can still occur even with the benefit in place, according to the Politico news site.