Has the unemployment rate fallen after unemployment benefits were ended?

The Labor Department has published the United States' jobs report for July, showing the fastest rate of hiring increase in over a year despite concern that the Delta variant would plague reopening businesses.

The figures show that American employers added 943,000 jobs, while the unemployment rate dropped from 5.9% to 5.4%. Another one million out-of-work Americans reported that they had found a new job in July, nearly quadrupling the number who did so the previous month.

Concerned with the moderate gains made in the jobs market in recent months, 26 states had opted to prematurely withdraw from the additional unemployment programmes funded by the federal government. However some have had their decisions reversed by state judges.

Unemployment rate is “moving in the right direction”

The July jobs report exceeded forecasters’ expectations, having predicted around 860,000 new jobs would be created. The hospitality sector was again the biggest beneficiary with Americans more comfortable travelling around and states loosening covid-19 restrictions. Hotels and restaurants added 327,000 jobs last month.

Some businesses had complained that they were struggling to find enough workers as they began to reopen and the lack of available labour has had a positive impact on wages. The average hourly wage for July 2021 was 4% higher that it had been a year earlier.

Experts have offered various explanations for the unemployment decrease, many of which are to do with typical fluctuations in certain industries that are observered every year.

Aside from the newly-opened hospitality sector, employment in education has soared as schools prepare for the return of in-person learning. The Labor Department’s Bureau of Labor Statistics said: “pandemic-related staffing fluctuations in education have distorted the normal seasonal build-up and layoff patterns, likely contributing to the job gains in July.”

Positive report may allay unemployment benefits fears

Despite the promising figures from the Labor Department it appears that the unemployment rate reduction was not related to the decision by some states to end the additional benefits early. Payroll and time-management firm UKG found that shifts among hourly workers in states to have cancelled the benefit grew at just half the rate of those who remain in the federal programme.

It seems that the additional unemployment benefits may have actually boosted the employment rate, perhaps by providing greater economic stimulus to the state’s businesses.

“Unemployment benefits were not the thing holding people back from going to work,” said Dave Gilbertson, UKG vice president. “There are other elements out there, particularly in their personal lives, making it really difficult to go back to work.”