More than $542 million has flowed into Vermont since March, when the federal government started supplementing Vermonters’ unemployment checks with $600 a week to help them through the COVID-19 pandemic.
With those payments due to stop at the end of July, Vermont business leaders are weighing the likely impact of a sharp drop in income that will affect thousands of people at once. It will most likely affect lower-income households that have had less of a chance to accumulate savings over the years, as well as people in the service industry who don’t have the opportunity to return to work, said legislative economist Tom Kavet.
“There will definitely be a downdraft from that,” Kavet said. “There will be people who are then on 45% of their prior income, or whatever their (state) unemployment benefits work out to be, and that will be a drastic reduction in income. It’s going to be that much less money pumped into the state.”
The state has paid out more than $286 million in unemployment benefits to a record-breaking more than 90,000 people since the COVID-19 emergency began in March, according to a Department of Labor dashboard on the impact of the crisis. And another $542 million in federal money has also flowed to those unemployment recipients as part of the federal stimulus package.
The state unemployment rate, and the duration of the emergency, recently triggered the DOL’s extended benefits program, which was last used between May 2009 and July 2010, during the Great Recession.
Congress passed the $600 federal unemployment payment as part of the $2 trillion CARES Act in late March with no idea how long the pandemic would last, or how the economy would be affected. The July 31 expiration date for the money was created at that time. Vermonters will see their last $600 payment on claims filed for the week ending July 25.
There is talk now of restoring or replacing the federal unemployment benefit when it runs out. But there are no firm expectations about what will be approved, or when. U.S. Senate Majority Leader Mitch McConnell, R-Ky., has signaled that the benefit, the equivalent of a $15-an-hour paycheck, has discouraged people from returning to work and shouldn’t be continued.
“We’ve heard that instead of extending the $600 benefit, McConnell wants to do a back-to-work incentive,” said David Carle, a spokesman for U.S. Sen. Patrick Leahy, a Vermont Democrat. “So it soon will be a work in progress involving negotiations between Republicans and Dems, as well as with the House.”
Vermont employers, too, believe the benefit has discouraged people from returning to work.
“Given the 14% unemployment we have, I am shocked at the paltry results we get from the ads we’re running,” said Walt Blasberg, who owns the North Hero House inn and restaurant in Vermont’s Lake Champlain Islands. Blasberg, who has about 40 employees this summer, is having trouble finding housekeepers and cooks. “I thought they would be knocking down the door.” Unemployment hit 15% in April; it dropped to 9% in June.
Despite Vermont’s record-setting unemployment rate, some retail sectors have boomed this spring and summer, including those that offer outdoor recreational equipment such as kayaks and bikes. Yet food shelves are also experiencing record demand.
This shows that the federal money, hastily deployed as the scale of the emergency started to become clear in March, wasn’t targeted to land with the people who needed it most, said Kavet. He noted the $1,200 went out to millions of adults this spring.
“There’s a lot of money sloshing around, but it’s not necessarily in the hands of the people who most need it,” he said. “I think you’ll see the lines at the food banks growing.”
The extra money has given people confidence to keep buying things, and that’s good for local businesses, said Cathy Davis, the executive vice president of the Lake Champlain Regional Chamber of Commerce.
“I think it would be really damaging if it went away altogether, just for people personally and for the economy,” Davis said. But “as businesses are able to sort of reopen and bring people on, in order for the economy to recover, we need people to fill those jobs,” said Davis. “So there is a balance there.”
Jesse Putnam, a part-time actor and part-time school employee who lives in Brattleboro, mostly saved his weekly $600, knowing he would probably need it as he looks for school jobs.
“Personally I think the $600 was more than people needed to begin with,” said Putnam. “I think it was very generous.”
The unemployment insurance system was not designed to be used for economic relief in an extended disaster, Kavet said. While individual governments have response plans in place for pandemics, they don’t have comparable plans for economic shutdowns.
“There’s nothing that says, ‘What is the most effective way to get money to people and keep businesses afloat? That’s been haphazard and different across different nations,” Kavet said.
In the absence of such a plan, state officials rapidly expanded the Unemployment Insurance  system as claims increased more than tenfold over a few weeks. The system worked inefficiently, with thousands of payments delayed because of logjams. The Department of Labor hired a Virginia firm to help and brought on hundreds of workers to answer phones.
As for the next few weeks, Kavet said he hadn’t heard talk of a better approach from Congress. While Vermont has slowly reopened many of its businesses, hospitality businesses in particular are still struggling to survive. Restaurant owners say few people are willing to be seated indoors. The COVID-19 rate is rising sharply in many other U.S. states, and that will have an economic impact on Vermont.
“It seems very chaotic in terms of what they are proposing, in terms of further measures,” Kavet said of Congress. That said, “given it’s an election year, there are likely to be further measures.”