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AdvertisementContinue reading the main storySupported byContinue reading the main storyWhat Happens to the Unemployed When the Checks Run OutMillions face a steep and immediate drop in spending power when federal jobless benefits end this month, with a sharp rise in the poverty rate.Volunteers distributed food donations last week in Newton Centre, Mass. Poverty declined in the first months of the pandemic, reflecting CARES Act relief, but has since surged.Credit…Cody O’Loughlin for The New York TimesDec. 14, 2020When jobless workers get their last unemployment check, the effect on spending is sharp and swift.Unemployed workers’ spending on food, clothes and other so-called nondurable goods immediately drops 12 percent, about twice as much as when they lost their job and went on unemployment insurance, University of Chicago researchers have found. Spending at drugstores falls 15 percent. Co-payments for visits to the doctor fall 14 percent. Spending on groceries falls 16 percent, or $46.30 a month, on average.Millions of Americans are less than two weeks from cutbacks like those. The last two federal emergency unemployment programs in the CARES Act, passed as the pandemic’s first wave surged in March, expire on Dec. 26.An analysis by the Century Foundation concluded that 12 million workers who rely on one or the other of these programs will lose them on that day. This will add to 4.4 million who will have already exhausted their federal unemployment benefits.It projected that fewer than three million of these workers will be eligible for what are known as extended benefits, which kick in when the unemployment rate in a state is exceptionally high and can last six to 20 weeks, depending on the state.If Congress and the administration are unable to hammer out a deal to provide additional relief, the others will be left with nothing.“It was obvious this would be totally inadequate,” said Stephen A. Wandner, an expert on unemployment insurance at the Upjohn Institute for Employment Research, who has argued for extending unemployment benefits for a longer period, especially at a time when jobs are so hard to come by.Mr. Wandner noted that unemployment benefits lasted up to 99 weeks — almost two years — as part of the recovery effort in the last recession. In 2003, when the nation was also recovering from recession, maximum benefits were extended as long as 72 weeks, or almost a year and a half.Joblessness will not only affect consumer spending. Nearly 12 million households fear they may not being able to meet their mortgage payments, according to a survey in October by Moody’s Analytics and Morning Consult. Millions of others can no longer afford their rent. And 37 percent of the unemployed said the coronavirus pandemic prevented them from looking for a job. “You are really putting coal in people’s stockings,” Mr. Wandner said.At the end of November, 16 million people reported they had not worked in the last seven days and were relying on unemployment insurance payments to make ends meet, according to a Census Bureau survey of Americans’ financial condition. Losing those checks will translate into immediate hardship. “Come Jan. 1, a lot of people are going to be on Defcon 1,” said Mark Zandi, chief economist at Moody’s Analytics.The expiring programs are Pandemic Unemployment Assistance, created for gig workers and others not covered by regular unemployment insurance, and Pandemic Emergency Unemployment Compensation, which extended benefits up to 13 weeks beyond their regular duration (from 12 to 30 weeks, depending on the state).The November Census survey found that about one in four people out of work was relying on savings or selling assets to meet spending needs. One-fifth said they were still using some of the so-called economic impact payment of $1,200 that most Americans got under the CARES Act in the spring. But that is running out fast. More than one in six said they were borrowing from friends and family.Pascal Noel, an economist at the University of Chicago, analyzed the consequences of expiring unemployment benefits with his colleague, Peter Ganong, in a study published last year. Mr. Noel noted that spending “falls substantially exactly in the month in which benefits expire, and it falls across the board.”And that kind of shock has consequences. Mark Aguiar of Princeton and Erik Hurst of the University of Chicago have estimated that the drop in grocery spending that Professors Ganong and Noel associate with the end of unemployment benefits leads to a deterioration in diet quality: a significant decline in household consumption of fresh fruit and a jump in the consumption of hot dogs and processed lunch meat.Business & EconomyLatest UpdatesUpdated Dec. 15, 2020, 7:19 a.m. ETSolar energy had one of its best years in the U.S. despite the pandemic.U.S. stocks set to open higher as vaccine rollout outweighs virus restrictions.Millions are about to lose jobless benefits. Expect a sharp drop in spending.Jesse Rothstein of the University of California, Berkeley, and Robert Valletta of the Federal Reserve Bank of San Francisco studied what happened when unemployment insurance ended for workers who lost their jobs during the recessions of 2001 or 2007-9. Household income declines $522 a month on average, they found.When unemployment checks run out, the poverty rate among families who received them rises from 20 percent to about one-third in the next six months, the researchers found. Other government programs, like food stamps, did not raise their income by much.The current crop of unemployed is already in bad shape. According to the Census Bureau, for instance, by the end of November, more than one person in 10 who had not worked in the past week was relying on federal nutrition assistance, also known as food stamps, to meet needs. That is up from one in 40 in mid-July, just before the expiration of another component of the CARES Act — a $600 weekly supplement to other unemployment benefits.Poverty, which actually declined in the first months of the pandemic — reflecting the extraordinary relief offered by the CARES Act through the spring and early summer — has snapped back with a vengeance. According to estimates by Bruce D. Meyer of the University of Chicago, James X. Sullivan of the University of Notre Dame and Jeehoon Han of Zhejiang University, 11.4 percent of Americans subsisted with incomes below the official poverty line by October, up from 9.3 percent in June.The checking accounts of the unemployed also reflect this reversal of fortunes since the early phases of CARES Act relief, according to an analysis by researchers at the JPMorgan Chase Institute and the University of Chicago. Their account balances more than doubled from January to July, helped by the supplemental unemployment payments and the economic impact check. In percentage terms, their gain was vastly greater even than for workers who kept their jobs. Their spending also surged, peaking in July.By the end of August, however, the last month in which the researchers tracked the finances of the unemployed, their median bank balances had shrunk by about a third since July, losing most of the cushion built up since March.“The typical family does still have somewhat of a cash buffer,” said Fiona Greig, co-president of the JPMorgan Chase Institute, “but it is declining precipitously.”Regular unemployment insurance in the United States remains among the least generous in the Organization for Economic Cooperation and Development, typically falling to zero after six months, barring extraordinary legislation. In Denmark or Portugal, by contrast, unemployment benefits replace around 80 percent of the lost wages of workers even two years after they lose their jobs.In the United States, jobless benefits add up to about 20 percent of the median income for a family with two children, according to data from the O.E.C.D. In Germany and Ireland, they amount to over 50 percent.Emergency legislation like the CARES Act has provided an intermittent boost to unemployed American workers during crises. But barring new action by Congress in the coming days, the safety net will revert to its previous state. Millions will fall through the cracks.AdvertisementContinue reading the main story More
They don’t do that this year, not in the age of the coronavirus. Lambeau is absent of fans, and the bars and party houses are mostly empty. So are the restaurants and sausage stands at Miller Park in Milwaukee, home to the Brewers, and the seats at Fiserv Forum, where the Bucks play.
The sports economy has been ravaged by the pandemic. The absence of live fans alone has forced the thousands of people who once put on games at these venues out of work.
In Wisconsin, ticket agents and hot dog vendors and bartenders and janitors lost their livelihoods this year. More
AdvertisementContinue reading the main storySupported byContinue reading the main storyJobless Benefits Saved Them, Until States Wanted the Money BackA pandemic relief program allows no forgiveness of overpayments, even when recipients are not at fault and the funds are already spent.William and Diana Villafana were told they had received more than $7,000 in excess unemployment benefits. To collect the debt, Nevada is taking all of his benefits and paying her $73 a week.Credit…Bridget Bennett for The New York TimesDec. 11, 2020, 5:00 a.m. ETUnemployment payments that looked like a lifeline may now, for many, become their ruin.Pandemic Unemployment Assistance, a federal program that covers gig workers, part-time hires, seasonal workers and others who do not qualify for traditional unemployment benefits, has kept millions afloat. The program, established by Congress in March as part of the CARES Act, has provided over $70 billion in relief.But in carrying out the hastily conceived program, states have overpaid hundreds of thousands of workers — often because of administrative errors. Now states are asking for that money back.The notices come out of the blue, with instructions to repay thousands or even tens of thousands of dollars. Those being billed, already living on the edge, are told that their benefits will be reduced to compensate for the errors — or that the state may even put a lien on their home, come after future wages or withhold tax refunds.Many who collected payments are still out of a job, and may have little prospect of getting one. Most had no idea that they were being overpaid.“When somebody gets a bill like this, it completely terrifies them,” said Michele Evermore, a senior policy analyst for the National Employment Law Project, a nonprofit workers’ rights group. Sometimes the letters themselves are in error — citing overpayments when benefits were correctly paid — but either way, she said, the stress “is going to cost people’s lives.”The hastily conceived Pandemic Unemployment Assistance program has presented other troubles, including widespread fraud schemes and challenges with processing. As a result, states only recently had enough resources to start sending out overpayment notices. In the meantime, people have been collecting — and spending — sometimes thousands of dollars in what they understood to be legitimate benefits.Olive Stewart, a 56-year-old immigrant from Jamaica, worked part time as a sous-chef at a cafeteria at a Jewish school in Philadelphia, earning $16 an hour for roughly 25 hours a week. But when the pandemic hit and schools shut down, she was laid off.Ms. Stewart applied for Pandemic Unemployment Assistance and began receiving $234 a week. It was not quite enough to cover the $650 in rent, $200 electric bill and $200 internet bill for the house she shares with her 12-year-old daughter, her retired mother and her sister, who has a disability that prevents her from working. To make ends meet, Ms. Stewart started dipping into her savings.Then, on Oct. 6, she got a notice saying that Pennsylvania’s unemployment insurance vendor, Geographic Solutions, had overpaid her by accident. The overpayment included funds from Pandemic Unemployment Assistance and from a $600 federal supplement to unemployment insurance. In total, she was told, she would have to pay back nearly $8,000.To collect the debt, the state began to withhold more than half of her unemployment payments, leaving her just $105 a week. In early November, the state began taking all of her unemployment benefits, leaving her with no income. She has yet to pay her December rent.“The state should be paying attention to what they are sending out,” Ms. Stewart said. “It was their mistake, and I’ve already spent all the money on food and rent. How am I going to pay it back?”Geographic Solutions made duplicate payments for 30,000 Pennsylvania claims because of a system problem, a $280 million mistake, the State Department of Labor and Industry said. (The company says the problem arose from a one-day error that was immediately reported.) Overpayments can also occur if an applicant makes a mistake on a form, as ProPublica reported, or if a state determines that a recipient should not have been eligible.As of Sept. 30, about 27 percent of those approved for Pandemic Unemployment Assistance in Ohio had been overpaid, about 162,000 claims. In mid-November, the figure in Colorado was about 29,000; in Texas, it was over 41,000.Many states waive overpayments on regular unemployment insurance when no fraud is involved, or when paying the money back would cause someone significant hardship. But the federal rules for Pandemic Unemployment Assistance prohibit forgiveness. Even if the state is at fault, the recipient is on the hook.States often start collecting the overpayment automatically, by withholding a portion — from 30 to 100 percent — of future unemployment benefit payments.Many overpayments arose because state unemployment systems are designed to calculate benefits using W-2 forms, employer records, pay stubs and other documents associated with traditional jobs. But because gig workers and part-timers had different sorts of documentation, states had to adapt quickly to a new method of processing and approving claims.Mistakes in the rollout were inevitable, said Behnaz Mansouri, a senior attorney for the Unemployment Law Project, a nonprofit legal aid organization in Seattle.Business & EconomyLatest UpdatesUpdated Dec. 10, 2020, 4:09 p.m. ETWalmart is preparing to administer a coronavirus vaccine once it is available.Mastercard and Visa stop allowing their cards to be used on Pornhub.The U.S. budget deficit hit $207 billion in November.“For a new system to have such a punitive response when the system itself fails seems overly harsh and draconian,” Ms. Mansouri said.“I don’t think they understand that unemployment benefits are for survival,” Mr. Villafana said. “Or if they do understand it, they don’t care.”Credit…Bridget Bennett for The New York TimesGina Jones, 29, was furloughed in March from her part-time job at a breakfast bar at a Quality Inn in Spokane, Wash., and began receiving $750 a week from the pandemic program, which allowed her to pay for rent, food and necessities for her two daughters, ages 1 and 5. She was called back to work in July, and now works about 28 hours a week at $13.50 an hour.Then, in mid-November, she checked her unemployment portal online and saw a message that she had been overpaid by nearly $12,500. She fears that the state will start garnishing her wages to collect the debt.“I already used that money to support my family,” Ms. Jones said. “It’s all gone, and I can’t afford to pay it back.”Asking people to pay back unemployment funds can undermine the unemployment system’s goal of stabilizing the economy, said Philip Spesshardt, branch manager for benefits services at the Colorado Division of Unemployment Insurance.If a person’s unemployment checks are reduced each week because of an overpayment, the recipient will have less cash to pay bills and patronize local businesses. “Ultimately that has a cascading effect on many of those small businesses, causing them to close permanently and further adding to the unemployment rate,” Mr. Spesshardt said.While overpayments under the federal program cannot be waived, applicants can appeal demands for reimbursement after the notice is issued. But the time allowed for appeal can be as little as seven days. After that, the process can be slow, confusing and cumbersome.Colorado has taken steps to address the hardships of reimbursement. In October, after the state noted the large number of overpayments, it determined that the application form was confusing because it did not specify whether the person filing was supposed to provide gross or net income. It decided to “write off” cases where the recipients had submitted earnings and tax documentation that would have allowed the correct benefit to be calculated.Asked how the policy squared with the federal prohibition against forgiveness, a spokeswoman for the Colorado Department of Labor and Employment cited “the administrative burden that it would create for us to collect on these overpayments given competing priorities.”House Democrats have called for renewed pandemic relief to include a provision allowing states to waive overpayments when workers cannot repay them without severe hardship. The provision would apply to previous and future cases. A separate House bill, with bipartisan sponsorship, provides for forgiveness if the overpayment was not the recipient’s fault and “such repayment would be contrary to equity and good conscience.”But the possibility of a remedy is not much consolation to those wondering how they will pay rent and put food on the table in the meantime.William and Diana Villafana, 55 and 34, who before the pandemic ran a car rental business in Henderson, Nev., were told in late October that between them, they had been overpaid by more than $7,000. To cover that debt, the state is taking all of Mr. Villafana’s benefits, and giving Ms. Villafana $73 a week. They are using credit cards for their $2,000 monthly rent, as well as utilities, food and other necessities.“I don’t think they understand that unemployment benefits are for survival,” Mr. Villafana said. “Or if they do understand it, they don’t care.”Mr. Villafana worries about how he will continue to provide for their son and daughter, ages 6 and 7. When his daughter recently asked for a paintbrush set and an easel, he didn’t know what to tell her.“It’s kind of hard to explain to them, ‘Look, you can’t do this’ or ‘I can’t buy you that,’” he said. “I have no idea what we’re going to do about Christmas.”Sheelagh McNeill contributed research.AdvertisementContinue reading the main story More
AdvertisementContinue reading the main storySupported byContinue reading the main storyAirbnb Tops $100 Billion on First Day of Trading, Reviving Talk of a BubbleThe home-rental company’s blockbuster I.P.O. followed that of the delivery company DoorDash. Investors piled into both.Brian Chesky, Airbnb’s chief executive, on Nasdaq’s digital billboard in Times Square on Thursday.Credit…Hiroko Masuike/The New York TimesDec. 10, 2020SAN FRANCISCO — Over the last decade, Airbnb has upended the travel industry, riled regulators, frustrated local communities and created a mini-economy of short-term rental operators, all while spinning a warm narrative of belonging and connection.On Thursday, Airbnb sold investors on an even unlikelier story: that it is a pandemic winner.The company’s shares skyrocketed on their first day of trading, rising 113 percent above the initial public offering price of $68 to close at $144.71. That put Airbnb’s market capitalization at $100.7 billion — the largest in its generation of “unicorn” companies and more than Expedia Group and Marriott International combined.Airbnb’s offering raised $3.5 billion, making it the biggest I.P.O. this year. More
AdvertisementContinue reading the main storySupported byContinue reading the main storyUnemployment Claims Jump, Casting New Shadow Over U.S. EconomyThe recent coronavirus surge is taking a toll on jobs that one economist calls “a slow-moving disaster.” More
#masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesBritain’s Vaccine RolloutVaccine TrackerFAQ: Vaccines and MoreAdvertisementContinue reading the main storySupported byContinue reading the main storyStates Try to Rescue Small Businesses as U.S. Aid Is SnarledState governments are offering loans, grants and tax rebates, but budget constraints limit their impact.Kirk Meurer’s business installing office furniture in the Cleveland area dried up practically overnight when the pandemic began.Credit…Da’Shaunae Marisa for The New York TimesDec. 10, 2020, 5:00 a.m. ETWith the economic recovery faltering and federal aid stalled in Washington, state governments are stepping in to try to help small businesses survive the pandemic winter.The Colorado legislature held a special session last week to pass an economic aid package. Ohio is offering a new round of grants to restaurants, bars and other businesses affected by the pandemic. And in California, a new fund will use state money to backstop what could ultimately be hundreds of millions of dollars in private loans. Other states, led by both Republicans and Democrats, have announced or are considering similar measures.But there is a limit to what states can do. The pandemic has ravaged budgets, driving up costs and eroding tax revenues. And unlike the federal government, most states cannot run budget deficits.“We have done what we can do to pump money into small businesses so that people can continue to work,” said Gov. Mike DeWine of Ohio, a Republican. “From the jobs point of view and the economy point of view and the workers’ point of view and small businesses, we’ve got to get that help from the federal government. That’s the only place we can get it.”After months of false starts and on-again-off-again negotiations, there are signs of progress in Washington. Top Democrats last week embraced a $908 billion plan proposed by a bipartisan group of moderate senators. That plan would include nearly $300 billion in aid for small businesses, as well as smaller sums for unemployed workers, state and local governments and other groups. On Tuesday, the White House proposed its own $916 billion plan, which would include more than $400 billion for small businesses.But Democrats and Republicans still disagree on important issues, including aid for state and local governments and liability protection for businesses. Even if the two sides do reach a deal, it could be weeks before money starts flowing.Many small businesses say they can’t wait that long. A survey from the National Federation of Independent Business on Tuesday showed optimism falling and uncertainty rising as the nationwide surge in coronavirus cases leads governments to reimpose restrictions and consumers to pare their spending. Separate data from the Census Bureau shows an increasing share of small businesses cutting jobs, and other surveys have shown large numbers of businesses in danger of failing.If that happens, it could be a disaster for both state economies and state budgets. Local businesses are major sources of tax revenue — both directly and through their employees — and major drivers of economic activity. If they fail in large numbers, it will slow the economic recovery once the pandemic is over.“It becomes almost a death spiral if you can’t keep these businesses running,” said Tim Goodrich, executive director of state government relations for the National Federation of Independent Business.Kirk Meurer was on track to have one of his best years ever in his business installing office furniture in the Cleveland area. But when companies began sending their workers home last spring, his business dried up practically overnight.“Even though we didn’t have to shut down like the restaurants and bars and the travel industries, it didn’t matter,” he said. “The business wasn’t there.”After some delays, Mr. Meurer got money through the federal Paycheck Protection Program, which he thought would be enough to sustain him until business rebounded. But as the pandemic dragged on and offices pushed back their reopening dates to the summer, then to the fall, then into next year, it became clear the company would need more help to survive.“It’s amazing how fast you can burn through money when you’ve got nothing coming in and all the overhead to maintain,” Mr. Meurer said.In recent weeks, his company, Modular Systems Technicians, received a $10,000 grant from a new state fund to help small businesses. He also got money under a program that refunded $8 billion from the state workers’ compensation fund.“It helped,” Mr. Meurer he said. “It’s not nearly enough, but they did what they could.”The money for the Ohio grant program, and from some other recent state aid efforts, actually came from the federal government. As part of the $2.2 trillion CARES Act last spring, Congress created a $150 billion fund that states could tap in responding to the virus. They were given wide latitude in using the money — as long as they did so before the end of the year.As the pandemic has flared anew, however, it has become clear that the economic crisis will last well into next year, by which point the federal money will be gone and state budgets will be unable to pick up the slack. So states are racing to use what’s left of the CARES Act money to shore up their economies and build a buffer for the winter.“I think they’re terrified,” said Joseph Parilla, a fellow at the Brookings Institution who has studied state responses to the pandemic. “If they’re paying attention, they should be.”Eden Stein isn’t sure how much longer her San Francisco gallery and boutique can continue.Credit…Christie Hemm Klok for The New York TimesGov. Jared Polis of Colorado, a Democrat, recalled the legislature for a special session late last month to pass several relief measures, including a $57 million grant program for small businesses. In an interview, he cited Colorado’s slow recovery from the last recession a decade ago, when the failure to contain the foreclosure crisis left lasting scars on the state’s economy. Without further assistance — including federal aid — he fears a wave of business failures that would set off an equally damaging chain reaction, he said.“If we don’t help them get through this, will it ever come back?” Mr. Polis asked. “Sure, but it means years of boarded-up stores and restaurants on Main Streets across America if Democrats and Republicans can’t come together now to act.”Some states are trying creative ways to stretch resources. California last month established a “rebuilding fund,” which will use a comparatively small amount of public money to provide loan guarantees to encourage for-profit and nonprofit lenders to make low-interest loans to small businesses.The California program is aimed at the smallest businesses — most with fewer than 10 employees — and those in low-income and minority neighborhoods. Many were left out of the federal aid programs like the Paycheck Protection Program, which primarily helped somewhat larger employers.“P.P.P. never really served these kinds of businesses very well,” said Laura D. Tyson, an economist at the University of California, Berkeley, who helped design California’s program. “More and more of them are boarding up and closing down, and it’s a real hit to the community, a real hit to the quality of life in these communities.”Ms. Tyson said the loans should help businesses make investments to adapt to life during the pandemic — like investing in online ordering technology or outdoor dining — or to position themselves for the post-pandemic world. But the state can’t afford to cover day-to-day expenses the way the federal government did in the spring.Secession Art & Design, a gallery and boutique in San Francisco, has survived the first nine months of the pandemic through a combination of loans, donations from customers and an aggressive shift in strategy toward online sales, which had been only a small part of the business.But Eden Stein, who owns the 13-year-old business, said she wasn’t sure how long that could continue. California is reimposing restrictions on retail businesses, which could hurt sales during what she calls a make-or-break holiday season. Her lease is up in the spring, and she hasn’t decided whether to renew it.Ms. Stein is thinking of applying for a rebuilding loan from the state but is nervous about taking on more debt. She is applying for a grant under a separate state program, but that won’t be enough to sustain the business. She doesn’t know what the local economy will look like after the pandemic, she said, but it is essential for small businesses to have enough confidence to renew leases and plan for the long term.“I’m not concerned about how hard I can work, how I can connect with my customers or my community,” Ms. Stein said. “I am concerned that I will eventually run out of money.”AdvertisementContinue reading the main story More
#masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesC.D.C. Shortens Quarantine PeriodsVaccine TrackerFAQAdvertisementContinue reading the main storySupported byContinue reading the main story‘This Is Insanity’: Start-Ups End Year in a Deal FrenzyInvestors are tripping over one another to give hot start-ups money. DoorDash and Airbnb are going public. The good times are baaack.Credit…Mark WangBy More
