Ending pandemic unemployment aid has not yielded extra jobs—yet

ONE OF THEUIUI questions gripping America is the extent to which generous unemployment benefits are distorting the economy. When covid-19 began to spread last year, Congress expanded unemployment insurance () by topping up payments, allowing recipients to claim for longer and widening the eligibility criteria. The aid helped preserve incomes during lockdowns and fuelled consumer spending during the recovery. In March lawmakers extended federal funding for the benefits. But it is due to expire on September 6th—with consequences that are uncertain.One possibility is that the cliff-edge will bring people back to work. Although employment remains about 5.7m below its level in February 2020, firms are struggling to fill vacancies. In July wages in leisure and hospitality jobs were nearly 10% above pre-pandemic levels. Economic theory says that deters jobseeking—a prediction supported, at least to some degree, by most studies of its effects before 2020.