Jobless Americans who received enhanced unemployment benefits during the pandemic were able to boost spending and pad up their savings for a time. But the majority of those savings were spent quickly after emergency benefits expired, a study released on Friday found, suggesting many of the unemployed may need more financial help soon.
People receiving unemployment benefits and direct cash payments as part of the CARES Act were able to approximately double their liquid savings between March and July of this year, according to an analysis by the JPMorgan Chase Institute.
Spending by unemployed consumers also increased by 22% after they started receiving enhanced jobless benefits, which increased state jobless benefits by $600 a week through July.
But those trends reversed quickly after the supplement expired at the end of July, the study showed. Consumers spent about two-thirds of the savings they had built up over four months in August alone. Unemployed people also cut their spending by 14% that month – a trend that could continue if their finances don’t improve, the researchers said. The report did not analyze trends in September.
“Eventually, without further government support or significant labor market improvements, jobless workers may exhaust their accumulated savings buffer, leaving them with a choice to further cut spending or fall behind on debt or rent
payments,” the researchers wrote.
The enhanced unemployment benefits more than replaced lost earnings for many out of work Americans, amounting to 145% of previous earnings for the median worker receiving benefits. But when the supplement expired, the total value of unemployment benefits paid out fell by 52% between July and August, the study found.
The federal government introduced a $300-per-week supplement for people receiving unemployment benefits, but the program was limited and at least 36 states had depleted their funding as of Oct. 7, the researchers noted.
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