Sunday, September 24, 2023

Region prepares for drag in economic activity as extra jobless benefits come to a close

Thousands of Virginians have filed for unemployment benefits due to the coronavirus. (WYDaily file/Courtesy of Unsplash)
Thousands of Virginians have filed for unemployment benefits due to the coronavirus. (WYDaily file/Courtesy of Unsplash)

The extra unemployment benefits provided by the government during the pandemic are set to run out soon and the economic impacts locally could be detrimental. 

Congress in March passed a $2 trillion stimulus package known as the Coronavirus Aid, Relief and Economic Security Act that provides an additional $600 per week on any state-provided unemployment benefits.

Those extra funds since then have been supporting thousands of families in Hampton Roads who have been impacted by the pandemic, said Robert McNab, professor of Economics and director of Dragas Center for Economic Analysis and Policy at Old Dominion University.

The extra benefits are set to run out on July 31 and so far, Congress hasn’t created a new plan to soften the economic blow.

“Because every dollar given out in unemployment insurance recirculates in the economy and because we know those receiving unemployment benefits are spending all of that money…when the pandemic assistance is scheduled to end, you’ll see those funds disappear,” McNab said. 

McNab said the benefits helped nearly 86,000 people in Hampton Roads, which means about $50 million was being recirculated into the economy from additional benefits each week. 

But when the extra benefits end, McNab said economic activity is going to contract by at least 2 percent on a weekly basis.

The first big question to address when that occurs is what happens to the economic activity in the region.

“When you look at the simple number, you can conclude it will act as a drag on economic activity,” he said. “We will see evictions and food insecurity increase because these payments have essentially provided income for about 10 percent of the pre-COVID labor force in the region.”

Another issue: The high extra dollar amount associated with the unemployment benefits means those in the labor force were most likely receiving more money on unemployment than they were for their original jobs.

McNab said that shouldn’t have prevented employees from returning to work because those using unemployment benefits are required to actively seek a job.

Debi Schafer, director of the Williamsburg Area Restaurant Authority, said the extra funds have caused an issue for those making more from unemployment than their pre-pandemic job.

“WARA was not in favor of the Government additional $600 per week for [unemployment],” Schafer wrote in an email. “We knew that once people were receiving such large weekly incomes for not working, and in some cases more than they would make in a week, they wouldn’t want to return to work for less.”

McNab said that could turn into an issue because employees who would earn more from pandemic unemployment benefits might seek higher-paying jobs instead of returning to their previous positions.

That situation also brings up the issue of wages and whether people should be getting paid more to begin with.

“It’s a chicken and egg problem,” McNab said. “If people are receiving more benefits than their jobs pay, should they return to their jobs and get less? Also it’s an argument to say the wage people are getting is declining…so if people are receiving more money from benefits and not incentives to go back to work, is the problem the wages or the benefits?”

However, Schafer said she won’t know if people will return to the workforce once the extra benefits run out until the end of the month.

McNab said the current economic system in Hampton Roads, and across the country, is very fragile so there has to be “extraordinary” solutions to prevent evictions, foreclosures and help businesses sustain activity.

With the clock on benefits ticking to a close, McNab predicts the current health crisis is going to inflate the economic issues even more.

“COVID-19 is not a public health issue by itself, it’s an economic issue,” he said. “It’s all wrapped in together so the more we can do to stop the spread, the better off we are.”


Alexa Doiron
Alexa Doiron
Alexa Doiron is a multimedia reporter for WYDaily. She graduated from Roanoke College and is currently working on a master’s degree in English at Virginia Commonwealth University. Alexa was born and raised in Williamsburg and enjoys writing stories about local flair. She began her career in journalism at the Warhill High School newspaper and, eight years later, still loves it. After working as a news editor in Blacksburg, Va., Alexa missed Williamsburg and decided to come back home. In her free time, she enjoys reading Jane Austen and playing with her puppy, Poe. Alexa can be reached at

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