News of the Day

Federal Unemployment Insurance Benefit Slowed Employment Growth

Shortly after the advent of the COVID-19 pandemic, Congress passed the CARES Act, a $2.2 trillion bill designed to alleviate the negative economic consequences of government-mandated shutdowns. Included in the bill was a $600 weekly federal unemployment bonus payment on top of the state benefits that unemployed workers already could receive.

Since the combined federal/state unemployment insurance benefit was greater than the weekly wages of many employees, some economists worried that it might depress employment growth. The Badger Institute decided to examine whether the federal bonus payments served as a disincentive to workers returning to jobs once the economy rebounded.

During the throes of the crisis, when many restaurants, retail establishments and other businesses were closed, the boost helped people weather job losses. But to prevent the supplemental benefits from discouraging a return to the workforce, lawmakers set them to expire after six months.

That changed in August 2020 when the Trump administration, via executive order, extended the benefit at half of the original $600 rate. The American Rescue Plan, which passed in March 2021, extended this $300 weekly benefit until Sept. 6, 2021 — although states had the discretion to end it earlier, and many did.

We first examined what happened to labor markets when the federal benefit decreased from $600 to $300 a week. We find no evidence that this affected the labor markets to a significant degree.

In June, a number of governors took steps to end the federal portion of unemployment insurance in their states. Ultimately, 22 states ceased to provide the supplemental benefits. The remaining 28 states and the District of Columbia kept the federal supplement in place after July 1.

The variation between states that extended benefits to September and those that did not gave us a second opportunity to measure the supplement’s impact on labor markets.

We compared the two sets of states to see if their labor markets differed during the three months when the unemployment insurance benefits differed.

Our early analysis showed that there is a modicum of evidence that the higher benefits did affect employment levels, at least once labor market demand picked up. We compared the unemployment rate and its changes across the two groups of states and observed that in the three months before the July 1 cutoff, the states that were to continue to provide supplemental benefits saw their unemployment rate fall by 0.26%, while the states that would soon end the benefits saw theirs fall by an average of 0.07%.

In Wisconsin, which maintained the federal bonus until it expired on Sept. 6, the unemployment rate has remained virtually unchanged for the past six months at 3.9% even as the national unemployment rate fell an entire percentage point, from 6% to 5%.

Overall, in the 22 states that did eliminate the supplemental benefits earlier, the unemployment rate fell by 0.33% over the next three months, compared to a 0.22% drop for the states that continued providing the supplement.

The differences are modest but statistically significant.

 

Annual Inflation Hits 30-Year High

Consumer prices grew far faster than expected in October, according to data released Wednesday by the Labor Department.

The consumer price index (CPI), which tracks inflation for a range of staple goods and services, rose 0.9 percent last month and 6.2 percent in the 12-month period ending in October, the highest rate in the U.S. in 30 years.

Much of the year’s inflation had been driven in specific sectors hit hard by the pandemic and related shortages, such as automobiles, lumber, rented housing and energy. But price growth picked up broadly across the economy in October, and accelerated sharply for energy and food.

“The monthly all items seasonally adjusted increase was broad-based, with increases in the indexes for energy, shelter, food, used cars and trucks, and new vehicles among the larger contributors,” the Bureau of Labor Statistics explained.

Energy prices rose a staggering 4.8 percent in October, led by a 1.6 percent increase in gasoline prices, while food prices rose 0.9 percent. Most of the higher food inflation came from sharp increases for meat prices, while shelf-stable goods saw lower price growth.

DWD Awarded $3 Million U.S. Department of Labor Grant for Job-Seeker IT upgrades

The Wisconsin Department of Workforce Development (DWD) has been awarded a $3 million grant from the U.S. Department of Labor to support its comprehensive upgrade and modernization of the Job Center of Wisconsin system and an internal case management system to better connect job seekers with employment opportunities.

The Comprehensive and Accessible Reemployment through Equitable Employment Recovery National Dislocated Worker grant will benefit workers affected by the COVID-19 pandemic and subsequent labor market disruption. DOL announced the availability of $43 million nationwide for the grant in June 2021, with a maximum award of $3 million.

The projects are expected to be implemented by late 2023. The work represents another major component of DWD’s comprehensive effort to improve service for customers – employers, job seekers, current employees and those experiencing disruption in their employment. In recent months, DWD also has introduced improvements to its virtual Job Center of Wisconsin, added a chatbot feature to help job seekers and employers connect, entered into a partnership with Google Cloud to expedite processing of unemployment insurance claims; and contracted with Flexion to overhaul its legacy Unemployment Insurance processing system.

Federal Appeals Court Blocks COVID-19 Vaccine-or-Test Mandate for Employers

A federal appeals court Saturday temporarily halted the Biden administration’s COVID-19 vaccine requirement for businesses with 100 or more workers.

The U.S. 5th Circuit Court of Appeals granted an emergency stay of the requirement by the federal Occupational Safety and Health Administration that those workers be vaccinated by January 4, 2022, or submit to masking and weekly testing requirements.

Louisiana Atty. Gen. Jeff Landry said the action stops President Biden “from moving forward with his unlawful overreach.” Such circuit decisions normally apply to states within a district — in this case, Mississippi, Louisiana and Texas — but Landry said the language employed by the judges gives the decision a national scope.

The 5th Circuit, based in New Orleans, said it was delaying the federal vaccine requirement because of potential “grave statutory and constitutional issues” raised by the plaintiffs. The government must provide an expedited reply to the motion for a permanent injunction on Monday; petitioners must reply Tuesday.

Wisconsin Businesses Sue Biden Administration Over Vaccine-or-Test Mandate

Yesterday, the Wisconsin Institute for Law & Liberty (WILL) sued the Biden administration in federal court, on behalf of two Wisconsin businesses, challenging the Occupational Safety and Health Administration’s (OSHA) sweeping new vaccine-or-test mandate for businesses with 100 or more employees. OSHA’s emergency rule, issued November 4, requires businesses of a certain size to require proof of vaccination or regular COVID-19 tests for their employees. Companies that do not comply face penalties of over $13,000 per violation, or over $136,000 for a willful violation.

The lawsuit was filed in the Seventh Circuit Court of Appeals. Federal law requires lawsuits that challenge OSHA emergency rules to be filed in the Court of Appeals, rather than in a federal district court, where lawsuits typically originate.

The Quotes: WILL President and General Counsel, Rick Esenberg, said, “This new rule is illegal and unconstitutional. It circumvents the normal legal process, along with Congress, to claim emergency powers to impose a mandate on American business. However you feel about the COVID vaccine or even the very different question of a vaccine mandate, the Biden administration is claiming an extraordinary power to rule by decree that could be used in the future in almost unlimited and unforeseeable ways.”

Steve Fettig, Secretary and Treasurer of Tankcraft and Plasticraft, said, “The order is unconscionable. OSHA does not know how to run our companies. We do. OSHA does not know how to keep our employees safe. We do. And we have done so successfully since the start of the pandemic without the interference of a federal bureaucracy. We respect our employees’ fundamental right to make their own private, difficult medical choices.”

OSHA Issues COVID-19 Vaccination and Testing Emergency Temporary Standard

Earlier today, the OSHA issued a COVID-19 Vaccination and Testing Emergency Temporary Standard (ETS) which require employers with 100 or more employees (i.e., “covered employers”) to:

  • Ensure that their employees have received the necessary shots to be fully vaccinated – either two doses of Pfizer or Moderna, or one dose of Johnson & Johnson – by January 4, 2022. After that, all covered employers must ensure that any employees who have not received the necessary shots begin producing a verified negative test to their employer on at least a weekly basis, and they must remove from the workplace any employee who receives a positive COVID-19 test or is diagnosed with COVID-19 by a licensed health care provider. The ETS does not require employers to provide or pay for tests. Employers may be required to pay for testing because of other laws or collective bargaining agreements.
  • Provide paid-time for their employees to get vaccinated and, if needed, sick leave to recover from side effects experienced that keep them from working.
  • Ensure that unvaccinated employees wear a face mask while in the workplace.

Employers are subject to requirements for reporting and recordkeeping that are spelled out in the detailed OSHA materials available here. While the testing requirement for unvaccinated workers will begin after January 4th, employers must be in compliance with all other requirements – such as providing paid-time for employees to get vaccinated and masking for unvaccinated workers – on December 5, 2021.

The Federal Reserve is About to Set its Post-Pandemic Policy Course

When the Federal Reserve adjourns its meeting Wednesday, it will be doing more than scaling down its economic aid. The central bank will be charting a course for its post-pandemic future. The process, know as “tapering,” probably will commence before November ends.

In doing so, the Fed will be stepping away from a historic level of support for the economy and into a new regime in which it will still be using its tools to a lesser degree.

Talk up the tapering too much, and investors will get nervous that interest rate hikes are coming. Soft-pedal the move too much, and the market could think the Fed is ignoring the inflation threat. There’s risk to both too much optimism and too much pessimism that the FOMC and Chairman Jerome Powell will have to avoid.

“There’s just a very wide range of possible outcomes. They need to be nimble and responsive,” said Bill English, a former senior Fed advisor and now a professor at the Yale School of Management. “I worry that the markets will think that they’re on a steady track to run purchases down and then begin raising rates when they may just not be. They may have to act more quickly, they may have to raise them more slowly.”

As things stand, the market is betting the first rate increase will come in June 2022, followed by at least one — and perhaps two — more before the year is out. In their most recent projections, FOMC members indicated a small likelihood of pulling the first hike into next year.

U.S. Reaches Deal with European Union over Steel and Aluminum Tariffs

The United States has agreed to reduce tariffs on EU steel in return for a relaxation of counter-tariffs on US products, both sides said.

The European Union and the United States have reached an agreement to rein in tit-for-tat tariffs that date back to the Trump administration, officials announced on Saturday.

More European-made steel will enter the United States while the EU will tax motorcycles, bourbon whiskey, peanut butter and jeans at only 25% instead of a proposed 50%.

The agreement would make sure “that all steel entering the US via Europe is produced entirely in Europe,” US Commerce Secretary Gina Raimondo added. This would stop Chinese subsidized steel being processed in Europe before being sent to the US.

While US officials did not say how much steel would be imported from the EU, sources told Reuters news agency that annual volumes above 3.3 million tons would be subject to tariffs.

New DOL Rules Set Limits on Amount of Non-Tipped Worked Tipped Employees Can Do When Tip Credit Applied

On Thursday, the United States Department of Labor (DOL) announced a final rule that sets reasonable limits on the amount of time tipped employees can spend in non-tipped activities when the employer receives a tip credit. The rule clarifies that an employer may only take a tip credit for the hours when an employee is doing work that is tip-producing or engaged in tasks that directly support tip producing work.

Under the final rule, an employer can take a tip credit only when the tipped employee is performing tip-producing work or when the tipped employee is performing work that directly supports tip-producing work as long as the tipped worker does not spend a substantial amount of time doing tip-supporting work. The rule defines substantial amount of time as more than 20 percent of the hours worked during the employee’s workweek or a continuous period of time that exceeds 30 minutes.

The final rule becomes effective December 28, 2021.

U.S. Economy Grew 2% in Third Quarter

Gross domestic product – the broadest measure of economic performance – grew at a 2% annual rate during the three months through September, the weakest of the recovery, according to an advance estimate released Thursday by the Commerce Department.

Personal consumption grew at a 1.6% pace after accelerating 12% during the second quarter. Businesses have since the reopening of the global economy struggled to keep store shelves stocked due to supply-chain bottlenecks and labor deficiencies. The supply shortages have resulted in higher prices for the consumer.

Core personal consumption expenditures, the Federal Reserve’s preferred inflation measure, increased 4.5% in the third quarter. While that was below the 6.1% increase in the second quarter, it remained well above the Fed’s 2% long-term target.

Increases in private inventory investment, personal consumption expenditures, state and local government spending, and nonresidential fixed investment were partly offset by a drop in residential fixed investment, federal government spending, and exports.

Weaker motor vehicle expenditures subtracted 2.39 percentage points from GDP during the quarter.

Record imports of foreign goods resulted in net exports deducting 1.14 percentage points from growth.