CNYCA’S COVID-19 Economic Update: 750,000-800,000 New York City residents will lose all Federal unemployment benefits after Labor Day

COVID-19 Economic Update is a bi-weekly column prepared by economist James Parrott of the Center for New York City Affairs (CNYCA) at The New School, whose research is supported by the Consortium for Worker Education and the 21st Century ILGWU Heritage Fund. Read past installments here. 


Payroll employment data released August 19th showed that New York City’s rebound stalled in July, even before the latest Covid-19 case surge. (The joint U.S.-New York  Labor Department survey for July ended July 17th, whereas the upward turn in the seven-day Covid case average did not become fully apparent until later in the month.) The July jobs report showed no seasonally adjusted overall employment increase for the first time since January, a smaller restaurant recovery than in prior months, and a lone bright spot from job growth in arts and recreation. The city’s July unemployment rate declined only because people left the labor force.

With moderate job gains for the five months prior to July, New York City is still 510,000 payroll jobs (plus tens of thousands of self-employed and independent contractor jobs) short of its pre-pandemic peak level. Even more concerning, however, than a one-month lull in the city’s job rebound is the looming expiration of Federal pandemic unemployment benefits on September 6th. An estimated 750,000 to 800,000 city residents will see all their unemployment benefits abruptly stop, and the remaining 120,000 city residents receiving regular State unemployment insurance benefits will lose a $300 federally funded weekly supplement.

In the pandemic’s early days, the Federal CARES Act responded with several bold actions to assist workers harmed by pandemic-induced job displacements resulting from mandated business restrictions. Three major programs comprised the Federal unemployment assistance response:

  • Pandemic Unemployment Assistance (PUA), extended to the self-employed, independent contractors (including gig workers), and others ineligible for regular State unemployment insurance (UI);
  • Federal Pandemic Unemployment Compensation (FPUC), providing a weekly supplement to compensate for meager unemployment benefits provided by many states. A $600 weekly supplement was provided from April-July 2020. A $300 weekly supplement was included in Federal relief legislation enacted in late December; it was extended by the American Rescue Plan Act (ARPA) in March of this year; and
  • Pandemic Extended Unemployment Compensation (PEUC) providing Federal-funded extended benefits to workers still jobless after exhausting regular State UI benefits.

Congress also acted to provide 100 percent Federal funding for the existing Federal-State Extended Benefits (EB) program (an extra 13 to 20 weeks of benefits in high unemployment states). As Covid-19 vaccination efforts were still gearing up in early March, ARPA extended these Federal unemployment benefits for roughly six months through Labor Day (September 6th).

The expectation at the time was that widespread vaccinations would consolidate the employment recovery that was just beginning around that time, and that the six-month extension would be a sufficient bridge until the recovery could be self-sustaining. What was unanticipated was significant vaccine resistance, and a case resurgence beginning in mid-July, largely among the unvaccinated, that has slowed the economic recovery.

Since there does not appear to be a sufficient political appetite to further extend unemployment assistance, we are facing a sudden unemployment benefits cliff that will hit hardest in New York City since our proportionate Covid job loss is more than three-and-a-half times the national average. Nationally, The Century Foundation estimates that 7.5 million workers will lose all unemployment benefits on Labor Day. Our estimate for New York City of 750,000 to 800,000 city residents losing unemployment benefits then is roughly 10 percent of the national total, and over three times the city’s 3.08 percent share of pre-pandemic U.S. employment.

Which New Yorkers will be most affected by this impending benefit cutoff? Not surprisingly, those who have borne the brunt of the Covid job displacement will be disproportionately impacted. This will primarily be lower-paid workers of color, including large shares previously working in leisure and hospitality, local services, retail, and in arts and entertainment industries. As the Center for New York City Affairs recently reported, the second quarter (April-June) unemployment rate for Black New Yorkers was 12 percent, 12.4 percent for Latinx New Yorkers, 10.7 percent for Asian and others, and 9.6 percent for White workers.

The cutoff of Federal unemployment payments will not only cause substantial economic hardship among those not able to return to work; it will also almost certainly further slow and complicate New York City’s economic recovery. At this writing, unemployed New Yorkers are currently receiving a total of about $500 million weekly in unemployment benefits. The impending expiration of Federal benefits will drain over 90 percent of these benefits (an estimated 93 percent or $463 million to be more precise) from the local economy. Much of these benefits have been going directly into the local economy as spending at neighborhood stores and businesses and as rent and mortgages payments.

Here’s how the numbers break down.

  • 750,000-800,000 city residents will lose $200-$300 in average weekly PUA or PEUC benefits PLUS the $300 weekly supplement (FPUC). Result: $375 million – $480 million in reduced benefits.
  • 120,000 residents will continue to receive regular State unemployment benefits averaging $290/week but will lose the $300 weekly supplement: That’s $36 million in reduced benefits.
  • TOTAL reduction in unemployment benefits coming into New York City weekly: $411 million-$516 million. Midpoint of this range = $463 million.

For the past 17 months, April 2020-August 2021, New York City residents received an average of $3.15 billion each month in unemployment benefits. Following the September 6 expiration of federal unemployment benefits, the monthly amount will plummet to $156 million.