Despite or Because of?
By David Henderson
The unemployment [rate] was expected to fall to 5.8% and the economy was predicted to add 978,000 jobs, but that didn’t happen despite mass vaccinations and government stimulus…. not by a long shot.
So writes Matt Margolis in “Biden Bust: Unemployment Rate Up, Numbers ‘Way Worse Than Expected,” Inflation May Be Coming,” PJ Media, May 7, 2021.
No, no, no!
The increase did not happen despite the Biden “stimulus” bill; it happened in large part because of the bill, which was not mainly about stimulus. When the federal government pays people an extra $300 a week to be unemployed, a few million people who would have taken the many jobs available will instead take a summer holiday.
Here’s what I wrote in “An Unnecessary ‘Stimulus’“, Defining Ideas, March 5, 2021:
Of course, what we would really like to know is the effect of the double whammy of extending unemployment benefits through August and increasing them by $400 per week. The latter measure would cause millions of unemployed people to make more money by being unemployed than by being employed. My own admittedly intuitive guess is that if the bill passes with those benefits, at least two million workers who would have been working will be out of work. That one provision of the “stimulus” bill, in short, would create a drag on the economy.
There shouldn’t have been much a surprise at all. And remember that the reason was Biden’s $1.9 trillion bill.
So no, not despite but because of.
UPDATE: The governors of Montana and South Carolina have stated that because the $300 per week extra federal unemployment benefit is discouraging people from working, they will end the benefit next month.