The New Year’s Cliff: How the Expiration of Unemployment Benefits Will Affect Families

The New Year’s Cliff: How the Expiration of Unemployment Benefits Will Affect Families

December 15, 2020

On December 31, 9.4 million individuals are expected to lose unemployment insurance (UI) benefits in the absence of new federal legislation. The majority—9 million individuals, primarily non-traditional workers such as self-employed and gig economy workers—are currently receiving Pandemic Unemployment Assistance (PUA). Another 400,000 individuals are expected to lose Pandemic Emergency Unemployment Compensation (PEUC, a federal program that provides additional weeks of UI during the pandemic), and not be able to replace it with another benefits scheme1

The expiration of unemployment benefits is likely to undermine the well-being of unemployed workers. As data from the JPMorgan Chase Institute demonstrate, this impact will extend to unemployed workers’ families and could be reflected in their spending patterns and debt payments alike. Three findings describe the likely effects of expiration.

  1. Spending is likely to drop sharply should families lose unemployment benefits as a result of the benefits cliff. Ganong and Noel (2019) observe in the pre-pandemic period that non-durable spending drops by 12 percent when jobless benefits expire. During Covid-19, we also observe that spending among jobless workers fell by 14 percent when the $600 pandemic unemployment supplement expired at the end of July 2020 (Farrell et al., 2020a). Altogether, these results imply that families experiencing unemployment could likely cut spending—including spending on items such as groceries and medical expenses—if jobless benefits expire at the end of December.
  2. Families also may fall behind on mortgage payments after losing unemployment benefits. Although unemployment usually causes increased mortgage delinquency, the pattern during the pandemic thus far has been reversed: only 5 percent of UI recipients in our sample missed mortgage payments between April and August, compared with 8 percent of the population as a whole (Farrell et al., 2020b). The most plausible explanation for this phenomenon is that generous unemployment benefits during the pandemic have enabled the unemployed to continue making mortgage payments. When families lose unemployment benefits, however, some may cease to make mortgage payments in full.
  3. It goes without saying that losing unemployment benefits impacts not just jobless workers but also their dependents. Among Chase checking account customers, we observe that one in three workers who received unemployment benefits in September 2020 has dependent children2, though this estimate is likely a lower bound.3 As such, changes in unemployment insurance are likely to impact the livelihoods of millions of children, as well as those of their parents.



The estimate of 9.4 million individuals is based on an analysis of Department of Labor unemployment claims data as of the first week of November 2020 (Daniel Silver, JPMorgan Markets Global Data Watch, Nov. 25, 2020). 9 million individuals are expected to lose PUA, while 4.5 million will lose PEUC. However, of the 4.5 million who will lose PEUC, 4.1 million will be able to replace it with a federally-funded, state-coordinated program called Extended Benefits. This leaves just 400,000 individuals who will lose PEUC without a replacement; these 400,000 individuals live in the 16 states where Extended Benefits are not available. The Center on Budget and Policy Priorities offers further program details, and an analysis by the Century Foundation also estimated the number who will lose benefits on December 31 to be roughly 9.1 million, after taking into consideration Extended Benefits.


We examined the subset of Chase checking account customers who received direct-deposited UI in September 2020 and for whom we also observed receipt of an Economic Impact Payment (EIP). We then inferred whether a customer has children based on EIP amount, and found that 32 percent of the customers in our sample have one or more dependent children. Specifically, we restricted to the set of UI recipients who receive an EIP, either via paper check or via direct deposit, of one of the following amounts: $1200, $1700, $2200, $2700, $3200, $2400, $2900, $3400, $3900, $4400. These amounts correspond to families with between zero and four children. We exclude non-round EIP amounts that were paid out to families whose adjusted gross income is in the EIP phase-out range (see the IRS’ FAQs for further details). 


Based on benchmarking to the Current Population Survey (CPS), we believe that our estimate that one in three UI-recipient families has a dependent is a lower bound. The CPS reveals that 41% of people unemployed in October 2020 whose reason for separation was layoff have kids; this sample is similar to the sample of Chase customers that we examined (Chase checking account customers who received direct-deposited unemployment insurance in September 2020).    


Diana Farrell

Founding and Former President & CEO

Fiona Greig

Former Co-President

Daniel M. Sullivan

Consumer Research Director

Chen Zhao

Housing Finance Research Lead

Max Liebeskind

JPMorgan Chase Institute, Consumer Research Associate