Extra $600 in unemployment benefits ends: "It's an impossible situation"
The last unemployment check with the extra $600 in jobless benefits arrived last week for Danielle Grant, a single parent in San Francisco who credits the pandemic aid with helping her meet her basic living needs. Now, with no future extra aid in sight, Grant said she's worried.
"I'm already financially strapped," said Grant, 38, who owns her own public relations firm for the arts, which lost business this spring when the pandemic shuttered museums and other arts venues. "It's an impossible situation."
Grant is among the 25 million people who are losing access to the extra $600 in federal unemployment benefits that were designed to help jobless workers keep afloat after the coronavirus pandemic brought the economy to a standstill. But with lawmakers haggling over the next stimulus bill — with Democrats pushing for an extension of the $600 in extra aid but Republicans seeking $200 per week — jobless workers like Grant are about to tumble over an income cliff.
Most workers have likely already received their final July check to include the $600 in extra pay, said Michele Evermore, senior policy analyst at the National Employment Law Project. Although the CARES Act set July 31 as the final day for paying the additional weekly benefits, many states disburse their unemployment benefits on weeks that end on Saturdays or Sundays, which means those final benefits were sent to jobless workers on the week ending Saturday, July 25, or Sunday, July 26.
The next round of unemployment checks will reflect each state's regular payout, which could be as much as 85% less. Grant, for instance, received a little over $1,000 per week in total through her state's regular jobless aid plus the extra $600. Starting in August, she'll drop down to just the California jobless benefit, which is about $450 per week. That's not enough to cover her monthly mortgage, let alone other expenses, she said.
"I worry that workers see that July 31 date and think they'll get one more check," Evermore told CBS MoneyWatch. "Most people will look at their benefit on Monday and realize that they are not getting the $600."
$18 billion in lost income per week
The impact to households and the U.S. economy could be immense. Even if lawmakers come to an agreement next week on a deal to extend extra unemployment benefits, there will be a gap of at least two weeks until jobless workers get the new aid, Evermore estimated, adding that the gap could be as long as four weeks.
That will take a toll, with Bank of America estimating that each week with a lapse in extra jobless aid will strip $18 billion in income from U.S. households.
"The $600 weekly Pandemic Unemployment Compensation payments accounted for nearly 5% of incomes in June and, with those payments expiring at midnight today, that could prove another headwind to spending over the next couple of months," Andrew Hunter, senior economist at Capitol Economics, wrote in a client note on Friday.
Take Grant, who said she's paid her mortgage for August, but isn't sure what will happen beyond that. If the Republicans push forward with $200 in extra pay, she still won't be able to meet her monthly bills. Given that an extra $200 would be far less than the $600 she'd been receiving, she said she'll have to make tough choices about what expenses to cut, such as her car insurance.
With millions of jobless workers potentially cutting spending in the next several weeks due to the loss in benefits, that could put more pressure on both local and big businesses as they're trying to recover from a record decline in economic activity.
The income cliff facing millions could create more headwinds for an already embattled economy, economists are now warning.
"Any cutback in jobless benefits will have a disproportionate impact on consumer spending, as it will hit the very segment of the population that spends virtually every penny of income," noted Oxford Economics economist Bob Schwartz in a Friday research note. "The economy has to climb a titanic hill to regain the level of performance set before the pandemic."
A "black hole"
Grant said she's been looking for another job, but that it's been a "black hole" so far receiving no responses to her job applications.
She said she'd consider taking a customer service job or something similar, but her options are limited given that her 5-year-old daughter will be at home for online school classes this year as California has ordered most students to attend remotely this fall.
She also said she believes Democratic lawmakers were right to reject the White House's short-term extension of the $600 benefit in order to get a longer and stronger deal in place for jobless workers like herself.
"One thing I keep thinking is I wish I could sit in a room with [Senate Majority Leader] Mitch McConnell and ask him point blank what he thinks I should do," Grant said. "I was a business owner for 10 years; I've done everything exactly right — tell me how I should pay my bills."
