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Unemployment Claims Are Up for the Second Week in a Row

By Maurie Backman – Jul 30, 2020 at 1:22PM

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And the timing couldn't be worse.

The number of Americans filing a first-time unemployment claim rose for the second week in a row. Roughly 1.4 million new unemployment claims came through as lawmakers continued to debate a second COVID-19 relief package whose unemployment boost is perhaps the most controversial component.

What's happening with boosted unemployment?

Under March's CARES Act, workers on unemployment were entitled to an extra $600 a week in benefits -- a provision that was set to expire by July 31, and has, in fact, already expired in practice due to the way states pay unemployment benefits. Meanwhile, tens of millions of Americans are now stuck in a situation in which, at least for the immediate future, they'll be facing a hit in weekly income until lawmakers hammer out an agreement.

In May, Democratic lawmakers proposed the HEROES Act, which called for the $600 weekly unemployment boost to remain in effect through January of 2021 rather than expire in July. But the HEROES Act effectively stalled out in the Senate when Republican lawmakers made it clear that they weren't happy with its terms.

Unemployment claim document on table with open pen resting on it.

Image source: Getty Images.

Instead, Republicans introduced their own version of a COVID-19 relief plan this week. Known as the HEALS Act, it, too, contains a provision for boosted unemployment -- but a much smaller one than the HEROES Act. Specifically, the HEALS Act seeks to boost unemployment by $200 in the near term, with the ultimate goal of providing benefits that replace 70% of jobless workers' lost wages. By contrast, under the CARES Act, many unemployed workers were able to replace their lost wages in full. Some even got a raise.

It's the latter fact, however, that was a point of contention among Republicans, who strongly feel that jobless Americans shouldn't be coming out ahead financially by not working. Also, Republicans have argued that upholding the $600 weekly unemployment boost will disincentivize workers to return to a job, whereas a lower wage replacement rate might help jobless folks stay afloat while also helping to push them back into the workforce.

But discontinuing that $600 boost and replacing it with a smaller one could have dire consequences not just for jobless Americans but for the economy as a whole. If unemployment benefits are slashed, spending is apt to decline, which could have a severe impact on the economy and result in even higher unemployment numbers through the latter part of 2020.

Lawmakers should act quickly

As lawmakers argue over boosted unemployment and other relief measures, jobless Americans now sit in limbo and will have just their regular unemployment benefits to live on until an agreement is reached. Some lawmakers, meanwhile, have suggested a temporary extension of the $600 boost to tide unemployed workers over while a final relief package is hammered out. That way, lengthy negotiations won't cause millions to suffer. But as of now, no such measure has been implemented.

Either way, if boosted unemployment ultimately falls short, it could set the stage for an even lengthier recession. While maintaining the $600 weekly boost might not be the answer, lawmakers probably need to do a lot better than a $200 boost to avoid pushing the economy into an even deeper hole.

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