Question

As of July, 2020 the unemployment rate fell to 11.1%. The U.S. unemployment rate is at its lowest level in months and the economy added a record number of jobs in June. How do you interpret this rate? Identify at least two changes to the Unemployment Insurance Policy that were instituted in March 2020 in response to the COVID-19 crisis. What might be some of the short-term and long-term consequences of this change.

Answer 1

The unemployment rate at 11.1% as of July 2020 is lower than the unemployment rate of 14.7% as recorded in April 2020, but it is still significantly higher the normal unemployment rate of 3-4% that was witnessed in the period before April 2020

However, the unemployment rate in July 2020 reduced due to easiness in the lockdown that the US government allowed quite recently. The improvements in the labor market as of June 2020 reflected the continued resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it. In June, employment in leisure and hospitality rose sharply. Notable job gains also occurred in retail trade, education and health services, other services, manufacturing, and professional and business services.

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The changes introduced to the Unemployment Insurance Policy that was instituted in March 2020 in response to the COVID-19 crisis are as follows:

1) The Pandemic unemployment insurance (UI) programs, including Pandemic Unemployment Assistance (PUA), are extended to those not typically eligible for UI, such as gig workers, eligible individuals who are self-employed, seeking part-time employment, or who otherwise would not qualify for UI benefits under state or federal law.

2) Under the Federal Pandemic Unemployment Compensation (FPUC) program, eligible individuals who are collecting certain UI benefits, including regular unemployment compensation, will receive an additional $600 in federal benefits per week for weeks of unemployment ending on or before July 31, 2020.

3) Pandemic Emergency Unemployment Compensation (PEUC) program allows those who have exhausted benefits under regular unemployment compensation or other programs to receive up to 13 weeks of additional benefits.

The short-term consequences of such encouraging measures would bring immediate relief to those who are badly affected by the lockdown situation in the United States and would help unite the efforts of every citizen in their fight against the COVID-19 pandemic.

The long-term effect would be high pressure on the government budget. The United States government may raise taxes, or impose duties to make up for this expenditure. The burden of paying may fall on the future generation.