Additional financial aid given to those who lost their jobs amid the coronavirus outbreak has boosted spending, with Americans buying more than when they were working, recent research has found.
US citizens are eligible to receive an extra $600 in weekly payments until the end of July, in addition to their regular unemployment benefits, under the CARES Act – a federal relief law aimed at helping households to weather economic hardship during the pandemic.
It turns out that the supplement has not only helped unemployed people to stay afloat, but also allowed them to increase spending. After analyzing the transactions of 61,000 households that received unemployment benefits between March and May, JPMorgan Chase Institute analysts concluded that households spent 10 percent more than they did before the pandemic.
The researchers noted that such consumer behavior is different to that seen during a typical recession. Those receiving jobless payments usually cut spending by seven percent, as typical unemployment compensation only covers a small part of a person’s previous earnings.
However, the additional assistance under the program expires at the end of the month, and thus benefits will decrease substantially for over 30 million Americans. Aside from being a huge blow to households, this could pose a huge risk for the whole US economy as consumer activity may fall dramatically, the research warned.
“Our estimates suggest that expiration will result in large spending cuts, with potentially negative effects on both households and macroeconomic activity,” JPMorgan Chase Institute analysts said, as cited by Reuters.
Another 1.25 million Americans are expected to have filed for unemployment last week in the soon-to-be-announced jobs report by the US Labor Department. Over 50 million US citizens have filed jobless claims since the beginning of the coronavirus crisis.
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