Powell urges Congress to continue boosted jobless benefits ‘in some form’

Federal Reserve Chairman Jerome Powell said Wednesday that Congress should extend enhanced unemployment insurance “in some form” after a $600 increase to current benefit levels expires on July 31.

During a House hearing Wednesday, the Fed chief made his most explicit call yet for lawmakers to continue supplementing unemployment benefits as Congress debates whether to extend or modify the $600-boost included in the Coronavirus Aid, Relief and Economic Security (CARES) Act.

Powell urged members of the House Financial Services Committee on Wednesday to prevent a steep drop in income for millions of unemployed Americans who may be unable or unwilling to return to work during the coronavirus pandemic. The Fed chairman did not specify how Congress should do so, but warned lawmakers not to let unemployment benefits revert back to their pre-pandemic levels when the support expires at the end of July.

“It probably is going to be important that it be continued in some form. I wouldn’t say what form, but you wouldn’t want to go all the way to zero on that,” Powell said.

“It’s important to just keep in mind that some of the jobs are not coming back soon,” he continued, singling out those employed in the travel, leisure and hospitality, dining and entertainment industries.

“They are going to have a hard time finding a job, so I think [it’s] better to keep them in their apartment, better to keep them paying their bills,” he said.

Powell and several Fed officials have warned lawmakers for weeks against pulling back on fiscal support for the economy despite early signs of recovery from the pandemic-driven recession.

The economy in May gained back 2.5 million of the more 20 million jobs lost to the pandemic and saw a surprising surge in retail sales, fueling hopes of a quicker than expected rebound. Even so, the unemployment rate remains at a staggering 13.3 percent.

President Trump, White House officials and GOP lawmakers who have stressed the importance of quickly returning to normal life have touted the strong data as vindication for their approach to fighting the medical and economic crises. Many Republicans see the increased unemployment benefits as a disincentive for workers to return to their jobs and oppose extending them.

The CARES Act boosted unemployment benefits to a level equal to or greater than the average weekly wage in 38 states, according to an analysis from former Treasury Department economist Ernie Tedeschi. Critics of the increase say that dynamic will prevent the economy from recovering at its full potential.

“The $600 plus-up that’s above the state unemployment benefits they will continue to receive is in effect a disincentive. I mean, we’re paying people not to work. It’s better than their salaries would get,” said top White House economic adviser Larry Kudlow said Sunday on CNN’s “State of the Union.”

“That might have worked for the first of couple months. It will end in late July,” he added.

But Democrats largely support extending the increase to help prevent high-risk workers from choosing between their health and finances while supporting those who worked in industries severely restricted by the pandemic.

“The May jobs report showed slightly better jobs numbers than the April jobs report, which was the worst in recorded history, but there are still major reasons for alarm,” said Rep. Maxine Waters (D-Calif.), the committee’s chairwoman, on Wednesday. “Yet this administration and Senate Republicans are not moving with any urgency.”

Supporters of enhanced unemployment benefits also argue that paying workers more to stay home during the pandemic will limit the virus’s spread and help the economy recover sooner.

Powell acknowledged the concerns of each party Wednesday, noting that while many Americans would make more money on unemployment, much of the difference reflects the low wages they earned before the pandemic forced them home.

“Many employees are reluctant to go back quickly, and it may partly be that the $600 is generous compared to what they make. We know that many of them weren’t making that much,” Powell said.

“But it’s also if it’s a service economy job and you’re very close to someone — it’s a barbershop it’s a beauty parlor, it’s a nail salon, any of those things — there’s also still reluctance on the part of workers to go back to work at all,” he said.

Lawmakers have proposed various ways to bridge the gap and balance the concerns of each side, including back-to-work bonuses and more targeted benefit increases. Powell declined to endorse a specific proposal, but said it would be a “concern if Congress were to pull back from the support that it’s providing too quickly.”

“It would be wise to look at ways to continue to support both people who are out of work, and also smaller businesses that may not have vast resources for a continued period of time,” he added. “Not forever, but for a period of time so that we can get through this critical phase.”