U.S. Senate Report Says Tennessee Economy Will Suffer From End Of Federal Unemployment Benefits

Photo: Tennessee Governor Bill Lee

Photo Credit: Gov. Bill Lee / Instagram

Published June 10, 2021

By Jon Styf [The Center Square contributor] –

Critics question a new report from the U.S. Senate Joint Economic Committee that says Tennessee will miss out on $486 million going into its local economy when Gov. Bill Lee ends the state’s participation in the federal unemployment pandemic relief program.

The calculations, attributed to JEC Senate Democrats and federal unemployment statistics, indicate about $302 million in supplemental unemployment payments, in many cases $300 a week per unemployed Tennessean, is being rejected by the state.

The funds lost to a local economy was calculated by using a study from Princeton economist Alan Blinder and Mark Zandi, chief economist of Moody’s Analytics, stating that every $1 paid in unemployment benefits ultimately results in $1.61 in local spending.

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“This report ignores the reality of economic incentives,” Beacon Center of Tennessee President and CEO Justin Owen said. “The fact is that businesses nationwide are struggling to find workers right now, and enhanced unemployment benefits mean that some people can make more by staying at home than they would going back to work. This not only hurts small businesses, but it hurts the economy at large.”

Tennessee will stop participating in the federal program July 3 – nine weeks before it is set to end Sept. 5. The state is one of 24 that has elected to end involvement in the program early, a decision Lee said is meant to provide incentive for those unemployed to actively seek one of the 250,000 jobs posted on the state’s Jobs4TN.gov site.

The governor’s office did not immediately respond to request for comment on the report, but Lee said “families, businesses and our economy thrive when we focus on meaningful employment and move on from short-term, federal fixes” when he announced the state would be ending its participation in the federal program.

“This is a partisan Democrat report that overstates the estimated impact of ending the Federal Pandemic Unemployment Compensation benefits because it cherry-picks data from when the unemployment rate was 9 percent and rising, instead of factoring in the success of Operation Warp Speed and that the unemployment has already fallen to 5.8 percent,” said Judd Deere, deputy chief of staff for communications for Tennessee U.S. Sen. Bill Hagerty. “Senator Hagerty strongly believes that hardworking Tennesseans will do more for the economy than handouts from Washington.”

Democratic leaders who wrote the JEC report disagree.

“Despite UI’s measurable role in stabilizing consumption and supporting struggling households, some are claiming – without sufficient evidence – that UI benefits are suppressing reemployment,” the report reads. “Claims of worker scarcity are largely anecdotal and not supported by national data. If a widespread labor shortage were holding back job recovery, employment data would show large payroll gains and accelerating wage growth. This pattern is not showing up across sectors.”

The report estimates that about $12.3 billion won’t go into local economies because of the 24 states exiting the federal program early. Of the 24 states, only Arizona plans to cut off involvement later than Tennessee. Twenty-two of the states will end participation in the federal program between June 12 and June 26.

Tennessee had 164,312 unemployment claims when the data was created, accounting for 4.9% of the labor force age 16 and older, using numbers from May 13.

“These numbers, while rough estimates, nonetheless probably understate the extent of the economic loss caused by this decision,” the report reads. “By ending these programs early, states are refusing billions of already appropriated federal dollars that could be spent in local groceries, restaurants, and retail shops.”