September unemployment cliff looms for 7 million Americans

More than 7 million Americans are set to lose their unemployment aid immediately after Labor Day, even as the delta variant poses new challenges to the economic recovery.

Gig workers and other unemployed Americans receiving aid through programs created for the pandemic will see those checks end on Sept. 7, along with the $300 weekly federal supplement to traditional jobless benefits.

President Biden had all but formally ruled out an extension before the delta variant caused COVID-19 cases to surge, saying in July it would “make sense” for those programs to lapse in September.

But as cases climbed, White House press secretary Jen Psaki left the door to an extension open, telling reporters on Aug. 6: “At this point, they’re expiring at the beginning of September. Nothing has changed on that front, but a final decision has not been made.”

Even if Biden decides he wants to change course, Congress would need to pass legislation. And a bill to extend unemployment benefits would almost certainly face universal GOP opposition.

Sen. Joe Manchin (D-W.Va.) has also spoken out against extending pandemic jobless aid programs, dashing the chance of an extension through the pending reconciliation spending bill that would require only a simple majority for passage in the 50-50 Senate.

“I’m done with extensions,” Manchin told Insider last week. “The economy is stronger now, the job market is stronger. Nine million jobs we can’t fill. We’re coming back.”

The U.S. added 943,000 jobs in July and saw the unemployment rate drop from 5.9 percent to 5.4 percent as the country ended the month with a record 10 million job openings. Labor force participation also picked up as an increasing percentage of workers got vaccinated and returned to the job search.

But progressives argue it’s still too soon to pull support for struggling Americans given the uncertainty created by another wave of COVID-19 and disparities in the pace of recovery along demographic lines.

While the unemployment rate for whites dropped to 4.8 percent in July, the Black unemployment rate fell from 9.2 percent to a still-high 8.2 percent because of a significant drop in labor force participation. Hispanic unemployment fell from 7.4 percent to 6.6 percent without a decline in the labor force, but it is still considerably above the jobless rate for whites.

“Our long-term unemployed, our Black and Latinx workers continue to need these benefits because, due to systemic racism, they face longer periods of unemployment,” said Jenna Gerry, senior staff attorney with the National Employment Law Project, an advocacy group that supports expanded jobless benefits and greater labor protections.

“By cutting this off, we’re going to exacerbate the inequity that already exists within our economy.”

Gerry and other experts estimate that 7.5 million stand to lose all of their unemployment aid after Labor Day. The group includes 4.3 million gig workers and contractors who are recipients of Pandemic Unemployment Assistance and roughly 3.2 million Americans receiving Pandemic Emergency Unemployment Compensation, which provides up to 53 weeks of additional aid for those who’ve exceeded their state allowances.

Those still able to collect traditional unemployment benefits will also lose the $300 weekly boost to payments in place since the beginning of 2021.

“The vast majority will be totally cut off,” Gerry said.

Democrats have little time to act if they want to avert the looming unemployment cliff. Since jobless benefits are distributed through a patchwork of antiquated systems, renewing the pandemic programs could take weeks to firm up in state computers.

Progressive lawmakers have shown little urgency after winning a bruising fight to extend the Centers for Disease Control and Prevention eviction ban. But while Biden ultimately issued another temporary moratorium, the president lacks authority to extend unemployment benefits on his own.

It’s also far from certain how the delta variant will impact the U.S. economy heading into the fall, when more activities move indoors.

Delta’s surge has overwhelmed poorly vaccinated areas while driving another wave of canceled events, delayed office reopenings and anxiety that could slow the recovery. Several gauges of consumer and business confidence have plunged in August, and prolonged school closures could pose another hurdle to workers.

Some policymakers, including Federal Reserve Chairman Jerome Powell, expressed confidence in the early days of delta’s surge that the economy would be able to withstand another setback.

“What we’ve seen is with successive waves of COVID over the past year and some months now, there has tended to be less in the way of economic implications from each wave,” Powell said on July 28. “We will see whether that is the case with the delta variety, but it’s certainly not an unreasonable expectation.”

But Gerry argued that greater child care responsibilities and other delta-related limitations could narrow job options for those still struggling to return to the labor force, necessitating more time with benefits to smooth the process.

“We don’t know what’s going to happen with schools. Just having an open job isn’t enough. We need the proper support to allow these workers the ability to get back to quality jobs,” she said.