Early withdrawal of pandemic UI: impact on job finding in July using Current Population Survey

Arindrajit Dube

August 20, 2021

In Coombs et al. (2021), we use bank transaction level data from Earnin to track job finding rates of those previously unemployed and receiving UI benefits for 19 states where pandemic UI expired in June versus 23 states which decided to retain the federal benefits through September. We found that while around 1.1 million UI recipients (causally) lost benefits from the early withdrawal, around 145 thousand (around 1 out of 8) of these individuals found jobs. In that study, we found that the loss in benefits led to sharp (20 percent) drop in spending among beneficiaries.

Here I supplement the analysis by looking at month job-finding rate from a public data source, the Current Population Survey (CPS). I compare the same set of 19 Withdrawal and 23 Retain states as in Coombs et al. I plot the monthly job finding rate, controlling for 5-part education categories, gender, detailed race, Hispanic origin, marital status, 6-part age categories, and 16-part unemployment duration categories.

I find that the controlling for these factors, the job finding rates had evolved broadly similarly in Withdrawal and Retain states during late 2020. Following the withdrawal, the job finding rate increased by around 6 percent point in Withdrawal states as compared to Retain states between June and July—a roughly 25 percent increase in the job finding rate. According to the CPS, there were around 2.7 million unemployed individuals in the Withdrawal states in June. This suggests that if the only impact of the policy were through job finding of the previously unemployed, then the expiration led to an added 160,000 (0.06 x 2.7million) additional jobs in Withdrawal states in July—jobs that would otherwise have likely been added a few months later. These estimates are noisy due to sample size limitations in the CPS, but qualitatively similar to what we found using data from Earnin. Note that in reality some of these found jobs may have displaced job finding by those who were not previously in the labor force. Moreover, the reduced demand due to lower consumption may have also affected the number of people losing jobs. For these reasons, the CPS based estimate here (like the Earnin data based estimate) is likely an upper bound of the aggregate employment impact.

Update (August 23, 2021):

Did these modest job gains among those who were initially unemployed come at the expense of job finding among those who were initially outside of the labor force? The extent there are congestion effect, an increase in labor supply due to expiration of unemployment benefits will tend to partly crowd out others’ ability to find jobs. The consequence is that aggregate employment changes will be less than what is implied by increased job finding among the unemployed.

When we look at job finding rates among those who were not in the labor force (NILF), we find a mirror image of the picture above that looked at those who were unemployed. Namely, the flows between NILF and employment fell in relative terms in the Withdrawal states as compared to the Retain states following the end of pandemic UI in the former states. There was a a roughly 1.5 percentage point fall in the job finding rate in the Withdrawal states in relative terms between June and July, driven by an absolute increase in Retain states. Note that since the number of individuals who were not in the labor force was much larger than the number of individuals who were unemployed (around 6 times as large), the resulting reduction in fob finding from NILF seem to more than erase the jobs gains from increased job finding among unemployed.

As one example of who might be those being recruited from outside the initial labor force, we can look at teens. Here we find an especially stark picture. In June, teen job finding rates were 0.11 in Retain states while 0.1 in Withdrawal states. But in July, the former jumped to 0.15 while the latter fell to 0.075. The resulting gap in the teen job finding rate between the two groups of states was much larger than at any point over the analysis period.

The take-away is that the modest increases in employment suggested by job finding among those who were unemployed is unlikely to show up as aggregate job numbers due to substantial reduction in flows into employment from those who were initially not in the labor force.

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