More Than 5 Million Americans May Be Insolvent By End Of August If Unemployment Benefits Reduced

Some 5.4 million Americans will struggle with their bills by end of August if the federal government reduces the $600 enhanced unemployment insurance provided in the last stimulus bill.

Morning Consult, a data intelligence company based in Washington, noted about 30 million Americans currently are receiving jobless benefits, and will continue to do so through the end of 2020. However, the extra $600 weekly payment from the federal government expired last week. In the absence of that additional cash, 44% of those currently collecting unemployment benefits will now receive less than $800 per month.

“The personal finances of workers who have been laid off or placed on temporary leave since the onset of the pandemic deteriorated in July,” wrote John Leer, Morning Consult’s chief economist.

Morning Consult projected 5.4 million Americans will be financially insolvent by the end of August, and more than 9 million will be insolvent by the end of September without additional unemployment benefits.

“Without income from work or unemployment insurance, 5.4 million unemployed Americans will run out of money to pay for things like rent, auto payments, credit cards, health insurance, food and clothing by the end of this month, and 9.2 million Americans will face the same fate by the end of September,” Leer wrote. “These numbers are on top of the millions of Americans already unable to pay their expenses.”

Morning Consult further warned these estimates don’t take into account the number of people who will lose their jobs in coming weeks and months.

“It is also important to emphasize that layoffs have not stopped,” Leer wrote. “As the virus spreads and employers shrink their workforces, more Americans will become unemployed.”

Leer added: “As each month passes, it will become increasingly difficult for unemployed workers to use their savings to cover the shortfall in their finances.”

In Washington, politicians are still trying to hammer out a new stimulus package. Democrats want to extend the additional $600 per week through January 2021, but Republicans have proposed reducing that figure to $200 per week through September, followed by a 70% wage replacement scheme.

“It is likely [Democrats and Republicans] will strike a deal somewhere in the middle,” Leer concluded.