Jobless Workers Built Up Some Savings. Then the $600 Checks Stopped.

on Oct16
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The $600 weekly unemployment benefit the federal government funded this year was a remarkably effective expansion of the safety net. It helped pay many workers more than their lost wages. It enabled families to spend more than during normal times. It even allowed households to put away savings as the economy was teetering.

Then the money stopped at the end of July. And it’s clear, looking back, what happened next: Workers quickly burned through the reserves that the aid had given them. Of the savings many households were able to build up over the course of four months of unusually generous government help, much of it was gone by the end of August.

Unemployed workers — and the economy at large — were effectively living off the exhaust fumes of the CARES Act heading into the fall, said Peter Ganong, an economist at the University of Chicago who studied the data.

The researchers can’t yet tell what happened to these workers’ finances in September. But the reality is probably grim. If the $600 checks created something of a life preserver for jobless workers — protecting them for a time from Washington’s political dysfunction — that life preserver deflated quickly, Professor Ganong said.

“Perhaps it’s entirely deflated now,” he said.

Two and a half months after the benefits ended, Congress and the White House have been unable to reach an agreement on a broad stimulus package to revive them. President Trump signaled this week that he wants a big deal, against the wishes of many Senate Republicans, but hopes have dimmed for an agreement before the election.

“It’s honestly kind of staggering to me that Congress could leave us in this position,” said Daniel Lawson, who has been without a job in New York City since early in the pandemic. He believes he caught the coronavirus while working at a Trader Joe’s in March and is still living with its effects: the fatigue, the brain fog, the sense of smell that hasn’t returned to normal yet.

He has to find a job he can do remotely because of his lingering health problems, he said. And to do any remote work, he had to replace a computer that stopped working this summer. That took a chunk of his savings. Now, without the extra federal payments, he’s receiving just $180 a week from the state of New York.

“Right now I’m in a position where I’m worried about being able to continue paying rent,” Mr. Lawson, 32, said. “I’m in a position right now where even grocery shopping is pretty scary.”

Faced with dwindling savings and constant bills, most households face a dilemma.

“The choices are to stop spending on regular everyday purchases, or stop making payments like mortgages, student loans, auto loans, credit cards,” Professor Ganong said. “That’s a terrible choice for a family to have to make. It’s a terrible choice for the macro economy.”

The analysis found unemployed workers did cut their spending after the $600 supplement ended, but by a relatively small amount in August, an average of $93. Professor Ganong suspects that the decline in spending might have continued in September, based on the dwindling savings workers had left.

Even modest-seeming drops in spending by the unemployed reflect difficult decisions at this stage. Charissa Ward, who lost the well-paying job she’d had for 15 years as a server at Disney World in Florida, has replaced some grocery store runs with trips to a food bank. And the school supplies she would normally buy for her three children were donated by co-workers from Disney instead, when the $600 dried up on the eve of a new school year.

“It’s a mental strain on people emotionally, especially for someone like me that has worked since I was 15,” said Ms. Ward, who is 37. “I’ve never been in this situation.”

Allegra Troiano, who lives in Milwaukee, believed she was a few years away from retiring from her job preparing foreign students to study at American schools when the pandemic crushed the international education industry. Those students aren’t coming anymore, and it’s hard to know when they’ll be back. Ms Troiano, who is 64, was laid off in May, and for a while over the summer she believed that the extra federal aid would keep her going until she could return to work.

“When they announced that they’ve cut off the $600, I said ‘This is unsustainable,’” she said. Now she fears she may be forced into early retirement, collecting pensions and Social Security earlier than she’d planned.

Those $600 checks, in retrospect, were for a time prolonging her career.

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