The federal government eliminated pandemic UI benefits on September 6 with the full support of President Biden. At the time, the available labor market data showed that this was a mistake: states that had prematurely ended the benefits in the summer did not grow payrolls faster than states that didn’t and so the cuts served no purpose except to immiserate jobless people.
A few days ago, the BLS released its monthly local area unemployment data for August and this data shows once again that UI cuts are not supercharging employment growth. Quite the opposite in fact. In August, states that cut UI benefits over the summer saw their payrolls grow by 0.12 percent. States that had retained UI benefits grew their payrolls by 0.27 percent, more than twice as fast as the benefit-cutting states.
Half of the states announced in May of this year that they would be cutting UI benefits early, with the first wave of cuts happening in early June. The other half of the states held on to the pandemic UI benefits until September 6 when the federal government cut them off. Between that period, the states that cut UI benefits grew their payrolls by 1.47 percent. That states that did not cut UI benefits grew their payrolls by 1.60 percent.
No serious economic planner would look at this time series and say that it shows we need to eliminate pandemic UI benefits in order to supercharge employment growth. And yet this is exactly what the federal government has now done with precisely that goal in mind.