Millions to lose federal unemployment aid by the end of the year – leading macroeconomic influencers

19 November 2020 (Last Updated November 19th, 2020 10:48)

Millions to lose federal unemployment aid by the end of the year – leading macroeconomic influencers
Credit: Pafnuti, Shutterstock.com.

Experts believe that approximately 12 million workers face the risk of losing federal unemployment benefits by the end of the year if the US Congress does not reach a re-authorisation deal for a second coronavirus stimulus. Millions are expected to lose their homes and meet their basic health and food needs with the economy dipping further in the next few months.

Dean Baker

Dean Baker, a senior economist at the Centre for Economic and Policy Research, re-tweeted on how nearly 12 million people in the US will lose federal unemployment benefits if lawmakers are unable to agree on a second coronavirus relief package.

The onset of the virus saw the Congress spring to action with new unemployment programmes and boosted benefits worth $600 per week. However, lawmakers assumed the pandemic to be in control in a few months, with the extra stimulus having exhausted in July. Additionally, the unemployment aid is due to end despite rising infections in the country, the article noted.

Approximately seven million gig workers and Uber drivers under no payroll benefits, are expected to lose the Pandemic Unemployment Assistance benefits extended by the Congress, as suggested by the Century Foundation that has been tracking unemployment claims during the pandemic.

An additional 4.6 million workers are also expected to lose the Pandemic Emergency Unemployment Compensation extended to those who had lost jobs for an indefinite period, the article highlighted.

Howard Archer

Howard Archer, the chief economic advisor to the EY ITEM Club, shared an article on a Reuters poll of economists who revealed that the euro zone economy was likely to be already in double-dip recession with the gross domestic product (GDP) contracting to 7.4% in 2020. They also pointed at a muted recovery in 2021 despite expectations for a $592bn monetary stimulus.

As Europe grapples with the second wave of the virus, forecasters predict the euro zone economy to shrink to 2.5% in the fourth quarter of 2020 after reporting a record high of 12.6% in the third quarter. Many felt that a double-dip recession was already happening in the last quarter of the year.

However, forecasters predict the economy to grow 0.8% in the first quarter of 2021, and at 5.0% in 2021. Some economists are looking at the availability of vaccines for distribution and administration as an upside potential to recover next year, the article noted.

Michael Clemens

Michael Clemens, a development economist, re-tweeted an article on countries adopting different strategies to mitigate the worst effects of the Covid-induced job crisis globally. The article compares the steps taken by Greece to the rest of Europe and North America. Experts believe that managing labour shocks like Covid-19 requires protecting the jobs in the short-run, extending support to where the shock persists and reoccurs, and crucially enabling job creation when conditions are better.

The pandemic has affected the labour markets gravely and disproportionately, highlighting how it adjusted based on factors such as the severity of the pandemic, the country’s economy, and social contracts between employers and employees. Broadly, countries have adopted two models to protect their workers, the article noted. The first being cash transfers and unemployment insurance to support those who lost jobs, and the second to retain employees through subsidies, short-term compensation, and layoff restrictions.

Greece, among other European countries adopted the job retention approach right in the initial months of the pandemic. And although it managed the virus well through lockdowns and restrictions, it suffered a severe economic downturn and is expecting a further dip during November lockdowns. However, with virtually no jobs created in these months, the country did not report a rise in unemployment when the markets re-opened in early May. In fact, the number of separations were found to be much lower than the previous years, the article noted.