Will cutting off federal unemployment benefits shake up the job market?

Daily Business Briefing

Aug. 5, 2021, 8:45 a.m. ET

Aug. 5, 2021, 8:45 a.m. ET

Economists in Wall Street and in Washington will be parsing employment data Friday for any hint at whether workers are prodded back into the labor market as federal unemployment insurance benefits are cut off.

This will be the first jobs report that may reflect an increase in labor supply and hiring from the loss of benefits, because about half of the states had ended a $300-a-week federal supplement by the time of data collection. That money expires at a federal level on Sept. 6, but some states — all but one led by Republicans — began to curtail the federally funded support in mid-June, at the tail end of that month’s labor market survey.

Friday’s report will only offer high-level numbers, figures on industries and data on demographic groups, so analysts may have to wait until state-by-state data are released in mid-August to compare the places that cut off the $300 supplement with those retaining it.

Many businesses have blamed generous unemployment benefits for inducing workers to remain out of work. That is why many states chose to end the benefit early. The Biden administration has been loath to say that the added benefit discouraged work, but is allowing it to lapse. The infrastructure plan being considered by the Senate would be funded in part by unused appropriations for jobless benefits.

But it’s unclear to what extent the aid cutoff will prod people back into the job market. It has been difficult to judge from up-to-date data — like jobless claims — whether more workers are searching for positions as the help ends.

“So far, the claims data don’t show overwhelmingly clear evidence that there is a meaningful reaction in the labor market when states have ended the pandemic-related unemployment insurance programs,” Daniel Silver at J.P. Morgan wrote in a recent note, while adding that some places cutting off federal aid have seen continuing claims fall “more noticeably” than elsewhere.

Analysts at Goldman Sachs found little difference in the June jobs data between states that ended federal jobless benefits early and those that did not. While the cutoff in federal benefits by some states had just begun when the June survey was conducted, the prospective loss of income might have nudged workers to search for jobs.

“While workers in these states knew the policy was ending soon and could have responded pre-emptively, the full effect of expiration on official employment measures should not be fully visible until the July report,” Ronnie Walker, a Goldman economist, wrote in a research note on July 17. At the time, Goldman thought the cutoff might add as many as 150,000 jobs to the data being released Friday, based on early state-level figures.

Some economists are skeptical that the loss of benefits will greatly affect the labor market.

Deutsche Bank analysts have said that the role of unemployment insurance benefits in discouraging people from returning to work seems limited.

“There is limited evidence that U.I. benefits have been a primary factor weighing on employment,” Matthew Luzzetti and his colleagues wrote in a recent analysis, pointing out that job growth has been strong in low-wage sectors where employers should be competing with the benefit, and that those sectors have similar patterns in job openings relative to new hires that other sectors have shown.

Mr. Luzzetti said in an email that he did not expect the early cutoff of federal benefits in some states to have a meaningful effect on the July jobs figures.

And Luke Tilley, Wilmington Trust’s chief economist, wrote in a research note that employment numbers released by the payroll and data company ADP on Wednesday — which showed disappointing job growth — suggested that “the expiry of federal unemployment insurance benefits (which has now occurred in nearly 50 percent of states) will not be an immediate panacea for labor shortages.”

While ADP figures are often out of line with the monthly Labor Department numbers, and may be especially so this time because of seasonal adjustments, they can signal direction.

Still, many economists will watch hiring categories like leisure and hospitality this month for any sign that people are surging back to work as benefits end.

Luke Pardue, economist at the payroll platform Gusto, found in a recent analysis of the company’s data that hiring in small service businesses hadn’t been helped overall in states that ended federal benefits early — though it may have tilted toward older workers and away from teenagers.

Credit…Henry Nicholls/Reuters

Inflation in Britain will rise to 4 percent in the last quarter of the year, according to the new projections by the Bank of England, a level that is double the central bank’s target.

But policymakers said they expected the increase to be temporary, and voted to keep interest rates at a record low 0.1 percent and continue the central bank’s enormous bond-buying program.

The Bank of England has been under pressure to offer more clues into how policymakers plan to reverse the emergency stimulus they adopted during the pandemic, when they cut interest rates to just above zero and began spending 450 billion pounds, or $625 billion, on its bond-buying program.

The debate facing the Bank of England and other central banks, including the Federal Reserve, is how much more stimulus the economy needs to ensure that the recovery continues without overheating and losing control of inflation.

The bond-buying program is set to run until the end of the year. But one member of the Monetary Policy Committee, Michael Sauders, voted on Thursday to end the bond-buying program early.

The central bank also updated markets on what it expects to do once it stops buying bonds. It has said it would raise interest rates to 1.5 percent before it started selling the assets from the bond-buying program, a threshold that has never been reached. On Thursday, the bank said it would instead begin to reduce the stock of assets once it raises the interest rate to 0.5 percent.

Part of the reason for lowering this threshold is because the central bank can now enact negative interest rates. In February, it gave banks six months to prepare for below-zero rates so that it could make that policy change if needed. A negative interest rate would mean charging banks to store cash at the central bank, which would also lower the other interest rates in the economy, for example, on loans to businesses and households. In theory, this would encourage more borrowing and investment.

Since asking the banks to prepare, the British economy has moved into an upswing, albeit an uneven one, which has diminished the case for negative interest rates. But now, the Bank of England would have this policy tool in its pocket.

Bill Gates and Melinda French Gates in 2015. Their divorce became final this week.
Credit…Pearl Gabel/Reuters

In an interview on CNN on Wednesday evening, Bill Gates acknowledged that his relationship with the disgraced financier Jeffrey Epstein was “a huge mistake,” and he told the host, Anderson Cooper, that his divorce, which became final this week, was “definitely a very sad milestone.”

The New York Times reported in 2019 about Mr. Gates’s relationship with Mr. Epstein, begun after Mr. Epstein had been convicted of sex crimes. The two men met on numerous occasions starting in 2011 — including at least three times at Mr. Epstein’s Manhattan townhouse, The Times reported, citing interviews with over a dozen people and related documents.

“His lifestyle is very different and kind of intriguing, although it would not work for me,” Mr. Gates emailed colleagues in 2011, after their first meeting. A spokeswoman for Mr. Gates told The Times that he “was referring only to the unique décor of the Epstein residence — and Epstein’s habit of spontaneously bringing acquaintances in to meet Mr. Gates.”

On Mr. Cooper’s show, Mr. Gates said: “I had several dinners with him, hoping that what he said about getting billions of philanthropy for global health, through contacts that he had, might emerge. When it looked like that wasn’t a real thing, that relationship ended. But it was a huge mistake to spend time with him, to give him the credibility of being there.”

He added, “You know, there were lots of others in that same situation, but I made a mistake.”

Mr. Cooper asked Mr. Gates about another article in The Times, which this year reported on his wife’s concerns about his workplace behavior. In 2018, before their divorce, Melinda French Gates had raised issues about her husband’s relationship with Mr. Epstein and a harassment claim against his money manager. On at least a few occasions, Mr. Gates pursued women who worked for him at Microsoft and the Bill and Melinda Gates Foundation, according to the reporting.

Asked on Wednesday if he had regrets, Mr. Gates replied: “Certainly, everyone does.” He added later, “Within the family, we’ll heal as best we can, and learn from what’s happened.”

Mr. Gates, the Microsoft founder, has a net worth estimated at $130 billion, and the Gates Foundation now has an endowment of $65 billion, by most measures making it the largest private charitable foundation in the world. Both Mr. Gates and Ms. French Gates have pledged to keep working at the foundation on issues including global health, poverty reduction and gender equality.

“We are communicating and working at the foundation, so that partnership, we’re going to try and continue,” Mr. Gates said on CNN. “Melinda has incredible strengths that she brings that help the foundation be better. We’ve always enjoyed our work together. The two of us can go out and work with leaders and help build the organization. That would definitely be the best thing for the foundation.”

For much of the interview, Mr. Cooper asked Mr. Gates about his views of the state of the pandemic. Mr. Gates praised the efficacy and mass production of the Covid-19 vaccines, but expressed worry about how easily the Delta variant of the coronavirus can be spread.

“We wanted to be nearer the end than we are,” he said, “but Delta’s very bad news.”

Electric vehicles at a charging station in Lakewood, Colo.
Credit…David Zalubowski/Associated Press

The White House said on Thursday that it was aiming for half of all new vehicles sold by 2030 to be electric powered, portraying the shift to battery power as essential to keep pace with China and to fight climate change.

President Biden plans to announce the target on Thursday afternoon, a White House statement said, as part of a plan that will also include construction of a nationwide network of charging stations, financial incentives for consumers to buy electric cars and financial aid for carmakers and suppliers to retool factories for electric vehicles.

“The future of the auto industry is electric — and made in America,” Mr. Biden wrote on Twitter.

The president also plans to tighten fuel economy standards that were rolled back by President Donald J. Trump.

Electric vehicles account for a much higher share of auto sales in Europe and China because of incentives for consumers and government regulation. In June, less than 4 percent of the new cars sold in the United States were pure electric vehicles or plug-in hybrids, according to Argonne National Laboratory.

“Despite pioneering the technology, the U.S. is behind in the race to manufacture these vehicles and the batteries that go in them,” the White House said in a statement. “Today, the U.S. market share of electric vehicle sales is only one-third that of the Chinese electric vehicle market.”

The Biden administration’s target is generally in line with what the major American carmakers have set for themselves. Virtually all major U.S. automakers as well as numerous foreign automakers endorsed the plan, though they described the target as 40 percent to 50 percent electric vehicles and said it would be possible only with enough charging stations for millions of cars.

“We look forward to working with the Biden administration, Congress and state and local governments to enact policies that will enable these ambitious objectives,” Ford, General Motors and Stellantis, which owns Jeep and Chrysler, said in a joint statement.

The United Automobile Workers union expressed support for the plan, as did BMW, Honda, Volkswagen and Volvo.

Credit…Dustin Chambers/Reuters

A federal official’s recommendation for a new union election at an Amazon warehouse in Alabama is just one aspect of the broadening pressure to rein in the power the company wields over its employees and their workplace conditions, our labor reporter, Noam Scheiber, reports.

The officer recommended the dismissal of many of the union’s objections to the election, including the contention that Amazon illegally threatened workers with a loss of pay or benefits if they unionized. But she found that a collection box that Amazon pressured the U.S. Postal Service to install near the warehouse entrance gave workers the impression that the company was monitoring who was voting, thereby tainting the outcome.

A union brief described how Amazon surrounded the collection box with a tent, on which it printed a company campaign message (“Speak for Yourself”) and the instruction “Mail Your Ballot Here.” The union noted that Amazon’s surveillance cameras could record workers entering and leaving the tent. The company did not respond to a request for comment on Tuesday.

The board’s regional office will rule on the recommendation in the coming weeks. If it leads to a new election, as seems likely, the union would face long odds of victory.

Efforts to challenge Amazon’s labor practices include a campaign by the Teamsters that would generally circumvent traditional workplace elections and pressure the company through protests, boycotts and even fights against its expansion efforts at the local level. Legislation in California would force Amazon to reveal its productivity quotas, which unions contend are onerous and put workers at risk.

And in April, the general counsel of the labor board found merit to charges that Amazon fired two white-collar workers who had raised concerns last year about the conditions facing the company’s warehouse workers during the pandemic.

  • Democrats in Congress want to tax Exxon, Chevron and a handful of other major oil and gas companies, saying the biggest climate polluters should pay for the floods, wildfires and other disasters that scientists have linked to the burning of fossil fuels. The draft legislation from Senator Chris Van Hollen of Maryland directs the Treasury Department and the Environmental Protection Agency to identify the companies that released the most greenhouse gases into the atmosphere from 2000 to 2019 and assess a fee based on the amounts they emitted. That could generate an estimated $500 billion over the next decade, according to Mr. Van Hollen.

  • Uber is recovering from the pandemic and the driver shortages that followed, the company said on Wednesday. The company’s revenue in the second quarter grew 105 percent from the same period last year, to $3.9 billion, slightly higher than analysts expected. Uber also recorded a rare profit of $1.1 billion, thanks to the initial public offering of the Chinese ride-hailing company Didi, of which Uber owns an 11 percent stake. Excluding that one-time gain, Uber said its adjusted losses were $509 million. Uber last recorded a profit in the first quarter of 2018, when it sold off parts of its businesses in overseas markets where it faced challenges.

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