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2 States Cease Participation In Federal Unemployment, Citing Labor Shortage

The South Carolina Statehouse

The disappointingly slow job growth this spring has led some to blame federal unemployment benefits for keeping potential workers at home.

Montana Gov. Greg Gianforte announced on Wednesday that the state will cease federally funded unemployment payouts of $300 per week provisioned in the American Rescue Plan, the $1.9 trillion stimulus package proposed by President Joe Biden and passed by Congress in March, Yahoo reports. On Thursday, South Carolina followed suit in canceling its participation in federal unemployment benefits.

Both states claimed that they are in the midst of a labor shortage and called the federal unemployment an incentive not to seek new jobs for those laid off over the course of the coronavirus pandemic, Yahoo reports. Multiple studies last summer found that the $600 per week unemployment benefits disbursed as part of the CARES Act did not have a meaningful impact on employment rates.

While the previously established state unemployment programs will continue to operate in both states, those systems have been notoriously backlogged and prone to error since the outbreak of the pandemic, in some cases leaving millions still waiting for state assistance.

The states ending their participation in federal unemployment benefits also are opting out of the Pandemic Unemployment Assistance program, which covered contractors and gig workers, Yahoo reports. Such workers are ineligible for most state unemployment programs.

Montana will institute a one-time $1,200 return-to-work bonus, using funds from the American Rescue Plan, for anyone who gets a job in the coming weeks, Yahoo reports. Workers will only become eligible to receive the payment once they have been employed for four weeks. South Carolina has announced no such program.

Though reports of labor shortages have been frequent in the past few weeks, especially for the restaurant industry, job growth in the U.S. for the month of April badly missed projections — 266,000 jobs were added to the workforce, according to the U.S. Bureau of Labor Statistics, when many expected the number to crack 1 million. The unemployment rate increased marginally to 6.1%, and other indicators even more strongly underscored the ongoing negative effects of the pandemic on employment.