Sep 25, 2020 - Economy

The next cliff for the unemployed

illustration of a briefcase on the edge of a hundred dollar bill

Illustration: Sarah Grillo/Axios

A program supporting Americans who are typically ineligible for unemployment benefits will expire at the end of the year, with millions still relying on it as the labor market sputters.

Why it matters: The result could be catastrophic for the economic recovery that Wall Street fears is already fragile.

  • Unemployment insurance is "propping up all parts of our economy," Kathryn Edwards, an economist at think tank RAND Corporation, tells Axios.
  • The money has buffered consumer spending and helped unemployed Americans pay bills while out of work, she says.

The backdrop: The Pandemic Unemployment Assistance (PUA) program, created by the CARES Act, allows freelancers, gig workers or others with limited work history to get unemployment benefits.

Driving the news: Data from the Labor Department on Thursday showed over 11 million people were receiving benefits through PUA as of Sept. 5 — a whopping 43% of the roughly 26 million Americans relying on some form of unemployment.

  • Economists estimate millions are depending on the program, though they warn the DOL’s number is overstated. Goldman Sachs economists wrote in a note Thursday that “processing backlogs, delayed filings and fraudulent filings” have boosted the figure.

Where it stands: Congress can’t seem to agree on another stimulus package. Even if they do break the stalemate, it’s unclear whether the PUA will be extended.

  • A failed version passed by the House over the summer proposed extending the PUA through January.
  • A failed version proposed by Senate Republicans didn't mention a PUA extension.

Between the lines: Economists aren't expecting a massive shift in economic conditions (or a complete return to pre-pandemic life) between now and December that would cause a substantial drop-off in the number of workers receiving these benefits.

  • PUA recipients — who can span from lawyers who can't be in court to salon stylists — have a different kind of job search experience.
  • "Someone who is self employed is not looking for a job, they're looking for a customer," Edwards says.
Data: Department of Labor; Chart: Andrew Witherspoon/Axios
Data: Department of Labor; Chart: Andrew Witherspoon/Axios

Grant McDonald, a video director who's been receiving unemployment through the PUA program, tells Axios that the benefits will expire long before the industry where he made a living before COVID-19 — concert touring — comes back to life.

What happened: Like millions working in sectors that rely on people gathering in public places, McDonald's income vanished when the pandemic hit.

  • Unemployment — with the additional $600 in weekly aid — replaced roughly a third of his pre-pandemic income, were it to be extended every week for the year. Since those supplemental benefits expired, the gap in income is even wider.
  • By year-end, his income will likely drop back to zero when the PUA program lapses. And even if he gives up his New York City apartment and moves back in with his parents, McDonald says, other bills are still mounting.

What they're saying: "I wouldn't know how to pay for health insurance,” or a number of other bills, says McDonald, who co-founded the advocacy group Extend PUA in July.

The bottom line: There have been endless cliffs for the unemployed, heightening anxiety around being jobless during the pandemic.

  • First: Millions watched their financial cushion dwindle when the additional $600 in payments expired.
  • Then: The supplemental $300 in aid provided by President Trump's executive action dried up earlier this month for most states that offered it.
  • Now: An unemployment program helping keep Americans afloat is set to expire, and there’s little hope that Congress will act.
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