12 million Americans to lose unemployment benefits after Christmas

Elizabeth Pancotti, Policy Advisor at Employ America, joins Yahoo Finance Live to break down November’s jobs report and the cliff that millions of jobless Americans face with CARES Act support expiring after Christmas.

Video Transcript

ZACK GUZMAN: Right now, all three major indices still holding in the green despite that weaker-than-expected November jobs report we got. Employers adding just 245,000 jobs last month. That was the smallest number of gains we've seen in the last seven months and also less than half than the more than 600,000 we got in the month of October.

So let's break down how we should be reacting to that report a little bit more here with our next guest. Liz Pancotti is Policy Advisor at Employ America. She joins us today from Washington, DC, alongside Yahoo Finance's Brian Cheung as well.

And, Liz, I mean, we heard from the White House today kind of stressing that it's still jobs being added to the economy. You can applaud that. But there are a lot of signs and a lot of worry here in this report as well as we see more Americans leaving the labor force. What was your reaction to the headline number?

ELIZABETH PANCOTTI: Yeah, I think this was not a very rosy jobs report. So that small decline in the unemployment rate was driven entirely by folks leaving the labor force as opposed to those kind of small number of jobs added. Especially in kind of November, December, we expect quite a few jobs to be added in that kind of temporary and seasonal-hire space, and we did not see the gains in those that we would hope to see, especially in this kind of downturn in the economy. And so, you know, I don't think it was a great picture to see at this point.

BRIAN CHEUNG: Hey, Liz, it's Brian Cheung here. Great to speak with you. Now, there's something really important at stake here. There are a number of CARES Act programs that are set to expire shortly after Christmas. So those under 10 million people still on the sidelines, as we saw this morning, will continue to need help though. Tell us a little bit about your estimates on what's at stake here with some pandemic unemployment assistance in addition to other types of CARES Act programs expiring this month.

ELIZABETH PANCOTTI: Yeah, so the morning after Christmas, about 12 million people will be kicked off of their unemployment-insurance benefits, and that's as a result of federal programs expiring. But prior to then, about 4 million workers will be kicked off those benefits. And so we're looking at a pretty grim picture for many American workers given that once those benefits expire, they'll have no income coming in the door unless they can find a job opportunity, which we know there aren't many.

BRIAN CHEUNG: Now what's really important here too is that this is a much bigger difference than losing that extra $600 that we had earlier in the summer. This is essentially going from having unemployment assistance to having no income at all whatsoever. What would that do longer term to the job market? We saw the weekly claims in yesterday showing that there are still people turning to these really important services. What's the bigger picture, I guess, issues that are at stake here?

ELIZABETH PANCOTTI: Yeah, so I guess I'll go back to your first point of kind of this is not like the $600 cliff which was very bad for many families. But this-- if we kind of go back to Econ 101 and think about the marginal value of these dollars, having some income versus no income is a really big difference. And these checks typically only replace about 40% of workers prelayoff income, so it's a very big jump for many families.

That said, I think, you know, we would expect big declines in consumer expenditures, which we know are a big percentage of our GDP and often-- you know, we've seen good recovery numbers in those, and so we would hope that that trend would continue, but it doesn't look like it will with this many people facing no income.

Additionally, at the end of the year we have eviction moratoriums, student-loan forbearances, all sorts of other programs that are expiring that have also stabilized household finances, many of those who, you know, have unemployed workers in them. And so given kind of the combination of all of those things, it seems like a pretty grim picture for the American economy in the coming months, especially with the new administration coming in. It's not a great economy to inherit.

AKIKO FUJITA: So, Liz, let me counter that with what we heard from Joseph LaVorgna, who's the economic advisor to the president, this morning who said essentially that the recovery is not in jeopardy. He said a coronavirus stimulus would be an insurance policy, not necessarily a necessity. How do you respond?

ELIZABETH PANCOTTI: Yeah. Yeah, I think the risk here is pretty clear. I don't know. It seems weird to bet on just an insurance policy being for 12 million Americans that are going to have no income-- that that's an insurance policy I would buy, I guess, if that's the way we're going to phrase it.

But I think, you know, I would counter that with stimulus is certainly needed to stabilize our economy, both unemployed workers, small businesses, and larger sectors of the economy.

BRIAN CHEUNG: Liz, now I want to ask about the accounting-- I know we might lose a few viewers here-- when it comes to how the Labor Department is reporting some of these things. An interesting Government Accountability Office report that showed there may have been actually some misreadings on the weekly unemployment claims that we get every Thursday morning. What is the proper way to be looking at that data going forward? I know that there's a lot of seasonal, nonseasonal adjustments. I mean, are we understating or overstating the numbers on a weekly basis?

ELIZABETH PANCOTTI: Honestly, we're probably doing both. So the GAO report, kind of the headline was that we're overcounting people because some people are applying several times given the backlogs. And, you know, you get frustrated that no one's replied to you, so you submit another application, or states are just processing these in such an untimely manner that the backlog numbers also aren't getting accounted into that week's claims numbers. And so it's kind of an undercounting and an overcounting issue.

That said, given that we don't know the extent and that, you know, the GAO and the Department of Labor have both conceded that we don't know how large either of those numbers are, it's difficult to figure out how to net those numbers and kind of see what the true picture of claims is.

Given the new federal programs for some of these, we have a lot more people that are eligible for unemployment insurance than have ever been before. And so it's also-- not only is it difficult to say this is how many people are claiming or trying to claim benefits but also to compare to the Great Recession or prior recessions and what claims looked like then, these programs weren't in place and these workers weren't eligible, and so it's difficult to compare on a lot of ends.

I hope that we'll get, you know, investments in UI data. And I know the nerds are cheering now and most people are glossing over it, but I hope that this is a wake-up call that we really do need better federal investments in our data structures for labor-market data and all kinds of other stuff.

AKIKO FUJITA: Liz Pancotti, policy advisor at Employ America, thanks so much for joining us today, and our Thanks to Brian Cheung as well.