Study: Enhanced benefits helped boost spending by those unemployed in the pandemic

A new study released Thursday by JPMorgan Chase reveals that the extra $600 weekly unemployment benefits given to the millions of Americans during the coronavirus pandemic boosted their spending habits.

According to the bank, roughly 1 in 5 Americans received unemployment benefits in June, five times more than the previous highest unemployment insurance rate recorded.

Normally, unemployment benefits only cover a portion of lost wages, causing spending by those who have lost their jobs to decrease 7 percent on average, JPMorgan Chase says. But because of the enhanced benefits signed into law in March, an estimated two-thirds of Americans who applied for unemployment received more than 100 percent of the income they had lost.

“Although average spending fell for all households as the economy shut down at the start of the pandemic, we find that unemployed households actually increased their spending beyond pre-unemployment levels once they began receiving benefits,” JPMorgan Chase wrote. “The fact that spending by benefit recipients rose during the pandemic instead of falling, like in normal times, suggests that the $600 supplement has helped households.”

The bank says that spending will decrease when the enhanced benefits expire at the end of July, potentially causing “negative effects on both households and macroeconomic activity.”

The report follows findings from the Congressional Budget Office in June, in which the federal office said that if the beefed up unemployment benefits were to be extended an additional six months, around 80 percent of all recipients would receive more money than if they were working during that time.

The Labor Department reported Thursday that an additional 1.3 million Americans filed for unemployment benefits during the second week of July, even as jobless numbers have improved for two months straight after cratering in April.

House Democrats passed another coronavirus stimulus bill at the end of May that includes an extension of the enhanced benefits until January, but Republicans have made it clear that the proposed $3 trillion package won’t make any progress in the Senate.

Majority Leader Mitch McConnell (R-Ky.) signaled this week that Senate Republicans could roll out their counter to the House bill as soon as next week, when Congress returns from its recess.

“Once we go back into session next week, I’ll begin socializing … internalizing, if you will, discussions that I’ve had during this week off, with my members,” McConnell said during a stop in Kentucky on Tuesday.

However, the Senate is only expected to be in back in session until Aug. 7, leaving approximately two weeks for the two sides to figure out the latest round of pandemic relief.