Citing Labor Shortage, US States End Pandemic Jobless Benefits

A handful of US states have announced they will end extra unemployment benefits provided by the federal government, which they blame for creating a shortage of workers.

Iowa on Tuesday joined Alabama, Arkansas, Mississippi, Montana and South Carolina in cutting off the payments that through September are providing $300 a week on top of regular state benefits.

But President Joe Biden pushed back against the argument that the extra payments -- funded by the $1.9 trillion rescue package Congress approved in March -- mean "people are being paid to stay home rather than go to work."

The moves in the Republican-led states came after a disappointing employment report released last week, which showed the US economy recovered just 266,000 positions last month, far short of the expected gain of one million positions.

The data show the economy still has not recovered 8.2 million of the 22 million jobs lost during the Covid-19 pandemic.

Some employers and the US Chamber of Commerce blame the sluggish hiring in part on the generous jobless benefits.

"It's time for everyone who can to get back to work," Iowa Governor Kim Reynolds tweeted on Tuesday, saying her state would end its participation in all federal pandemic-related unemployment benefit programs.

"Our unemployment rate is at 3.7 percent, vaccines are available to anyone who wants one and we have more jobs available than unemployed people," she said.

Some states also cut off the special federal program that provided funds to help freelance and gig workers, such as those employed by ride hailing services, who do not qualify for regular unemployment benefits.

Montana recently reacted to its labor shortage by launching a "return-to-work bonus" that would pay $1,200 to workers who accept a job and get off unemployment.

In Mississippi, Governor Tate Reeves said he had spoken to many small business owners and found the special programs "that may have been necessary in May of last year are no longer so in May of this year."

"It has become clear to me that we cannot have a full economic recovery until we get the thousands of available jobs in our state filled," he said on Twitter.

Biden championed the bill that extended the benefits till September, and told reporters Monday "we don't see much evidence" of their linkage with the labor shortage.

"Americans want to work," he said, adding, "We also need to recognize that people will come back to work if they're paid a decent wage."

The president also noted that unemployed workers lose their benefits if they refuse a suitable job offer so they cannot "game the system."

A White House official told AFP the pandemic benefits have been "a vital lifeline" to families during the crisis.

The official employment data were collected in the week of April 12, when only 18 percent of working age people were vaccinated against Covid-19, while the rate has risen to 24 percent, and the White House official pointed to uneven school reopenings and lack of childcare as key factors hindering workers from accepting positions.

The White House official said data show that states with higher wage replacement rates have higher job finding rates, "The opposite effect of what we would expect if the FPUC were inhibiting job creation right now."

A study published by the University of Massachusetts in February found "no indication" that changes in benefit amounts "had a substantial impact" on hiring.

Even so, Alabama Governor Kay Ivey said Monday the benefits are "contributing to a labor shortage that is compromising the continuation of our economic recovery."

Treasury Secretary Janet Yellen has acknowledged that "there's no question" businesses are having trouble filling open positions, an issue borne out by data.

The National Federation of Independent Business said Tuesday that while optimism among its members improved, "a record 44 percent of owners reported job openings that could not be filled."

"Small business owners are seeing a growth in sales but are stunted by not having enough workers," NFIB Chief Economist Bill Dunkelberg said in a statement. "Finding qualified employees remains the biggest challenge for small businesses and is slowing economic growth."

Members are raising wages to attract employees, he said.

Meanwhile, the Labor Department's report Job Openings and Labor Turnover Summary released Tuesday showed openings jumped to a record 8.1 million on the last day of March, but hires were little changed at 6.0 million.

Yellen cautioned that "we've had a very unusual hit to our economy, and the road back is going to be somewhat bumpy."