Almost 200K Michigan jobs could be lost if unemployment benefits expire

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The $600 weekly federal unemployment insurance benefits meant to stimulate the national economy during the COVID-19 pandemic expire on July 31. Unless Congress extends those payments, the state could lose a boost in jobs, personal incomes and gross domestic product (GDP) over the next year, according to research from the Washington, D.C.-based Economic Policy Institute (EPI).

For Michigan, an extension of Pandemic Unemployment Assistance (PUA) benefits to mid-2021 means 194,520 jobs would be retained. The state’s GDP, or the total value of goods and services provided in one year, would increase by 6.6%. 

“If these benefits aren’t extended, what you’re going to see is just incredibly depressed demand for goods and services,” said Julia Wolfe, EPI state economic analyst.

If more people halt spending because they are not receiving benefits, that can trickle down to create insufficient demand for goods and services. Lesser demand from households, businesses and governments constrains economic growth. If businesses are not turning a profit or making enough money to cover operating expenses, that increases their chances of economic turmoil — which can result in pay cuts, layoffs and closures. 

State unemployment rate falls slightly to 21.2% in May

That extra $600 per week boosted incomes across the nation by $842 billion in May, according to the Bureau of Economic Analysis (BEA). Extending the weekly $600 unemployment insurance benefits to mid-2021 would add 5.1 million workers and increase the national gross domestic product (GDP) by 3.7%, according to EPI, which conducted individual analyses on incomes, GDP and employment on all 50 states.

The CARES Act, an extensive piece of COVID-19 relief passed by Congress in March, notably expanded the federal unemployment insurance program and its benefits. Not all states had that capability to do that with their own programs.

Michigan’s jobless rate last stood at 21.2% in May, according to the Department of Management, Technology and Budget (DTMB). About 11% of the workforce collects regular unemployment benefits through the state. But Michigan also has the fourth-most Pandemic Unemployment Assistance (PUA) claims of any state or number of claimants, according to Wolfe. 

“We have 1.1 million people claiming just this specific type of unemployment insurance alone, which is not necessarily a bad reflection on Michigan,” Wolfe said. “In fact, it’s just a reflection that they are responding to this crisis by expanding the benefits to people who really need it.”

Michigan won’t bounce back from COVID-19 recession until after 2022

Since 2002, an unemployed Michigan worker is eligible to receive up to $362 a week from the Unemployment Insurance Agency (UIA), which covers only a portion of their lost income.

“For many, many years in Michigan, the maximum benefit was at 58% of the average weekly wage,” said Peter Ruark, a senior policy analyst with the Lansing-based Michigan League for Public Policy (MLPP). 

Since switching to that flat rate in 2002, Michigan’s unemployment insurance now only covers about 35% of the average weekly wage. Tacking federal benefits of $600 a week onto already-existing state benefits helped cover nearly all of the average weekly wage, according to Ruark.

“The maximum benefit is equal to 93% of the average weekly wage, so that’s how much it changes,” Ruark said. 

State to clear unemployment backlog by July 4

Michigan falls behind other states in the Midwest when it comes to unemployment insurance benefits, he added. Michigan covered the lowest percentage of all those states. For example, Iowa’s own program would cover 63% of the average weekly wage in Michigan.

“The MLPP strongly encourages Congress to pass more stimulus and to do more to help unemployed workers,” Ruark added. 

Economic growth will be hindered if unemployment benefits are cut off because households might not be able to keep spending money for goods and services, per the EPI.

“If people don’t have money to spend at all, then not only is that going to affect their ability to get things that they need, but it’s also going to hurt the broader economy at large when there’s not enough demand for the goods and services that they will be providing and the jobs those goods and services support,” Wolfe said.