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The robust US job market is boosting consumer spending and bill payments for many Americans. However, LaRon Eskew, 28, who lost his job at a large bank's data center, is facing financial challenges in Atlanta. Despite taking up gig work such as car repairs and security camera installations, he is only earning about three-quarters of his previous salary, while his rent has risen from $1,200 to $1,600 monthly in the past two years.
Although the US unemployment rate remains near historic lows, concerns are raised about the pain experienced by individuals affected by recent layoffs in sectors like housing, technology, and human resources. Additionally, some state legislators are keeping unemployment benefit levels low, with five states having weekly payment maximums below $300, despite nearly 20% inflation since 2020. A third of states also fail to consider wage growth and inflation in their benefit payouts.
Anna Eskamani, a Democratic state representative from Florida, highlighted the challenges of increasing the benefit amount, citing resistance and accusations of "trying to help lazy people." In Florida and several other states, the weekly maximum benefit is $275, which, adjusted for inflation, is equivalent to about $232 in early 2020, according to the Bureau of Labor Statistics.
Jobless Benefits Fall Behind Inflation in Some US States
A third of states don't adjust weekly payments to changes in average wages
Source: US Department of Labor Comparison of State Unemployment Insurance Laws 2023
Note: Mississippi offers the lowest weekly maximum payments; Massachusetts the highest
By the numbers, the average American should feel relatively secure in their jobs. Friday’s employment report is expected to show nonfarm payrolls rose by a robust 170,000 in December, based on economists’ forecasts, and the jobless rate ticked up to 3.8%, still low by historical standards. Weekly jobless claims have remained low as well, while wages keep increasing, helping to offset rising prices.
But for those Americans who’ve fallen through the cracks, two years of outsize inflation and the highest interest rates since the early 2000s have upped the stakes of being unemployed. Buying groceries costs 25% more than it did at the beginning of 2020, while used-car prices are up 35% and rents are up roughly 20%, according to a recent Bloomberg analysis.
In Coventry, Rhode Island, Richard Dorgan lost his $57,000-per-year job with a Medicare and Medicaid consultant in June. He’s scraped by ever since: The weekly $600 he got for several months from unemployment benefits couldn’t keep up with the cost of car insurance, which has soared to more than $2,000 a year for him and his wife, on top of rises in their energy, phone, and cable bills.
Dorgan, 64, is looking for a remote job so he can continue to help care for his wife, who has health problems. Hiring managers “are just sitting and waiting for the ideal candidate to come along,” he said.
Extra Benefits
At the start of the pandemic through July 2020, the federal government buttressed unemployment payments by $600 a week on top of ordinary benefits. The extra federal checks fell to $300 a week for more than a year afterward. Freelancers and the self-employed were eligible too, despite ordinarily missing out on jobless benefits.
The payments were so generous they set off a red-state-blue-state debate over whether they allowed Americans to sit home, collect unemployment, and avoid looking for work. Some economists have also said the benefits, coupled with stimulus checks sent to households, contributed to the highest inflation rate in more than 40 years in 2022. The Federal Reserve has raised interest rates 11 times since early that year to stem the rise.
Nowadays, low unemployment means it’s easy for state legislators to push the issue to the back burner, said Michele Evermore, a senior fellow at the Century Foundation, a progressive think tank.
“States know they can keep up a race to the bottom for regular benefits because the federal government will probably jump in and save claimants in an emergency period,” Evermore said.
Researchers who track unemployment benefits say the US faces a reckoning if the nation falls into recession, which many economists still expect. The number of people applying for recurring unemployment benefits hit a two-year peak in mid-November, backing off only slightly since then, suggesting it’s taking people longer to find work.
Heather Hammond, 38, lives in central Michigan with her husband and six kids. Until she was let go from a home warranty company in early October, Hammond was keeping up with payments, despite rent that’s almost 25% higher than two years ago, a weekly grocery check of about $300, and lingering bills from her recent wedding.
When she lost her job, she had to withdraw $6,000 from her 401(k) plan to help stay afloat, even with her husband’s stable manufacturing salary. She was able to preserve some of that retirement money after tapping her network of LinkedIn contacts to land a new job doing business development for a staffing firm by early December.
“We weren’t even sure we were going to survive,” said Hammond.