Ceasing emergency federal unemployment benefits: A look at the latest state-level data

The federal government has provided emergency unemployment insurance (UI) benefits to states since March 2020 to supplement their regular state programs. On June 12, 2021, Alaska, Iowa, Mississippi, and Missouri will stop accepting those benefits. Over the next several weeks, 21 other states will also withdraw from these federal emergency UI benefit programs.

These 25 states are withdrawing from these federal emergency programs before their federally legislated closure in September. They include extended eligibility to many workers who otherwise wouldn’t be covered by state UI programs, a $300 weekly add-on for UI recipients, and an extension of benefits beyond the regular state programs’ duration.

These 25 states, which we refer to as “halting states,” will continue to operate their regular state UI programs (RSPs). The non-halting states will operate both their RSPs and the federal emergency programs. RSP details vary by state, but a typical RSP offers benefits for up to 20 to 26 weeks and a replacement rate of 40% to 50%.

This post looks at one of the first places we might see an impact of these upcoming policy changes: state UI claims.

The FRED graph above shows RSP continuing claims in Florida (a halting state) and California (a non-halting state) over the past several months through the week ending May 29. Each series is reported as an index, normalized to equal 100 at the start of May. Continuing claims in Florida have been falling substantially more than in California. These two states are indicative of a nationwide pattern.

In recent weeks, continuing UI claims in RSPs declined in halting states in both absolute terms and relative to claims in non-halting states. The most recent weekly RSP continuing claims data cover the week ending May 29. From May 15 to May 29, these claims fell by 12.9% in halting states but was unchanged in non-halting states.1

In fact, with 90% confidence, the data indicate that continuing claims fell an average of at least 7% more in these halting states. Simply put, continuing claims filings in RSPs have, on net, been falling relatively more in states in which governors had announced they will end the federal emergency programs before July.

It’s possible claimants in halting states—aware the $300 weekly add-on and other provisions will soon expire—chose not to continue taking what will become less-generous benefits. No such expectation of reduced generosity would have been present in non-halting states. Likewise, non-claimants in halting states might have chosen to leave the labor force or take up jobs: If the latter is the case, a straightforward interpretation of the data is that ending emergency benefits early is re-incentivizing work for some individuals.2

We’ll be looking at future employment reports to see if differences in RSP claims in halting and non-halting states are associated with differences in employment across those states. Time will tell whether the pattern that is identified in this blog post holds for future claims reports and is seen in future employment reports.

For more analysis, read on…

Other explanations (beyond work incentives) might explain these differences. For example, halting and non-halting states could differ in other important ways, such as in their pre-recession employment trends.

Another relevant issue is that many currently out-of-work individuals are not making initial claims or continuing claims on RSPs. These include recipients who have timed out of the RSPs and others who receive UI as gig workers through the federal programs rather than RSPs. The labor force and employment decisions of these individuals may differ from those tracked in the data examined here and thus may not be representative of the entire out-of-work population.

1 In this comparison, we identify halting states as the 16 states that announced prior to May 15 and have planned program termination in June. And comparisons are based on data weighted by state populations.

2 In some states—both halting and non-halting—potential recipients of the federal benefits are required to first apply and be rejected for their RSP before they can be admitted to the federal program. In these states, a decline in initial claims might be due to this feature of the program. For this reason, this post only looks at continuing claims.

How this graph was created: Search for and select “continuing claims California.” From the “Edit Graph” panel, change “Units” from “Number” to “Index (Scale value to 100 for chosen date).” Then select 2021-05-01 as the custom index. Next, use the “Add Line” tab to search for and add “initial claims Florida.” Follow the same steps to change the Florida series from a number to an index. The series will show data from 1986 to the present, but use the slider bar beneath the graph to move the start date to April 5, 2021, to zoom in on the most recent data.

Suggested by Bill Dupor.