Much larger unemployment checks as part of the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act may be hindering the U.S. economic recovery from the worst of the COVID-19 pandemic, suggests researchers at Goldman Sachs.
“While the $600/week benefit top-up has been instrumental in stabilizing U.S. household income so far, it has also pushed the replacement ratio — benefits as a share of prior income — above 100% for many low-paid workers. If the measure is extended beyond its current July 31 end date, this will reduce the incentive to seek work as the economy opens up,” writes Goldman Sachs Chief economist Jan Hatzius in a new note to clients.
Under the CARES Act, those unemployed are allowed to claim an extra $600 a week in benefits. The “top-up” as it’s called on Wall Street has meaningfully supported households during the pandemic — consider that the average unemployment