The Unemployment Benefit Boost: Initial Trends in Spending and Saving When the $600 Supplement Ended

4 Pages Posted: 27 Oct 2020

See all articles by Diana Farrell

Diana Farrell

JP Morgan Chase & Co. - JP Morgan Chase Institute

Peter Ganong

University of Chicago; National Bureau of Economic Research (NBER)

Fiona Greig

JPMorgan Chase Institute

Max Liebeskind

JPMorgan Chase Institute

Pascal Noel

University of Chicago Booth School of Business

Daniel M Sullivan

affiliation not provided to SSRN

Joseph Vavra

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: October 16, 2020

Abstract

Unemployment benefits have played an unprecedented role in the U.S. economy as a result of record high job losses and the authorization of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act authorized a $600-per-week supplement, which hugely increased the value of unemployment benefits, such that the median jobless worker received unemployment benefits equal to 145% of their pre-job loss wages compared to 50% in normal times. The $600 weekly supplement expired at the end of July, however, causing the total value of unemployment benefits paid out to fall by 52 percent between July and August. In this paper, we present evidence that the increased unemployment benefits boosted both spending and savings among the unemployed and that upon the expiration of the $600 benefit supplement in August, families receiving unemployment benefits sharply cut spending and dipped into savings. Our first finding shows that spending of the unemployed increased by 22 percent upon receipt of unemployment benefits and declined by 14 percent in August with the expiration of the $600 supplement. Our second finding shows that the unemployed roughly doubled their liquid savings over the four month period between March and July 2020 but then spent two-thirds of the accumulated savings in August alone. 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.

Keywords: unemployment insurance

JEL Classification: J65, E21, E24, I38, H31

Suggested Citation

Farrell, Diana and Ganong, Peter and Greig, Fiona and Liebeskind, Max and Noel, Pascal and Sullivan, Daniel M and Vavra, Joseph, The Unemployment Benefit Boost: Initial Trends in Spending and Saving When the $600 Supplement Ended (October 16, 2020). Available at SSRN: https://ssrn.com/abstract=3715660 or http://dx.doi.org/10.2139/ssrn.3715660

Diana Farrell

JP Morgan Chase & Co. - JP Morgan Chase Institute ( email )

New York, NY
United States

Peter Ganong

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Fiona Greig (Contact Author)

JPMorgan Chase Institute ( email )

Washington, DC
United States

Max Liebeskind

JPMorgan Chase Institute ( email )

601 Pennsylvania Avenue NW
Washington, DC 20004
United States

Pascal Noel

University of Chicago Booth School of Business ( email )

Daniel M Sullivan

affiliation not provided to SSRN

Joseph Vavra

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
51
Abstract Views
363
rank
464,690
PlumX Metrics