Some States Are Cutting Federal Unemployment Benefits. But Should They?

It has documented that 20 of the 50 U.S. states have announced they will cut the $300 additional federal unemployment benefits. Many have cited their low unemployment and blamed these extra benefits for creating labor shortages. But is the really the case? We take a look.

Data & Methodology

We reviewed the unemployment rate for each state and the U.S. and reviewed the unemployment trends. Often many would cite a slowing unemployment rate itself as justification but we feel this would be too simplistic. Instead we looked at the baseline monthly unemployment change over the pandemic and compare that to the last 3 months for both the U.S. and each state, using the U.S. as the baseline. We then compared the state difference to the national difference. If the state difference improved less than the national, this meant that the state was improving slower than the national average. This indicates that more action may need to be taken in order to incentives workers, one of which would be withdrawing federal aid.  

Findings

We found that 17 of the 20 states were in a situation where they were improving less than the nation as a whole. The remaining 3 were improving better than the nation, and these measures may not be required at this time. These states included Alaska, Ohio and Texas.

On the other side of this story, we also found 15 states that are improving more slowly than the U.S. as a whole and may want to consider these measures, or some other creative measure to incentivize workers to return to work. These states are California, Colorado, Connecticut, Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota, Nebraska, New Mexico, North Carolina, Rhode Island, Virginia and Washington.