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Unemployment benefits have played an unprecedented role in the U.S. economy as a result of record high job losses and the authorization of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. We present evidence that the increased unemployment benefits boosted both spending and savings among the unemployed. We also demonstrate that upon the expiration of the $600 benefit supplement in August, families receiving unemployment benefits sharply cut spending and dipped into savings. The spending of jobless workers in August had fallen back to pre-pandemic baseline but not yet plateaued. Eventually, without further government support or significant labor market improvements, jobless workers may exhaust their accumulated savings buffer, leaving them with a choice to further cut spending or fall behind on debt or rent payments.
Diana Farrell, Peter Ganong, Fiona Greig, Max Liebeskind, Pascal Noel, Daniel Sullivan, Joseph Vavra