Did pandemic unemployment benefits increase unemployment? Evidence from early state‐level expirations

Abstract

AbstractDuring the 2021 pandemic year, the generosity of Unemployment Insurance benefits was expanded (Federal Pandemic Unemployment Compensation [FPUC]) and eligibility for benefits was broadened (Pandemic Unemployment Assistance [PUA]). These two programs were set to expire in September 2021. In June 2021, 18 states exited both FPUC and PUA and three states exited FPUC (but not PUA). Using Current Population Survey data and a wide range of estimation methods, we find that the flow of unemployed workers into employment increased by around two‐thirds following early exit among prime‐age workers. We also find evidence of reductions in state‐level unemployment rates, increases in employment‐populations ratios, and reductions in the share of households that had no difficulty meeting expenses.