Economists react to end of federal unemployment benefits in Iowa

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AMES, Iowa – Over the weekend, federal pandemic unemployment benefits ended in Iowa. 

Gov. Kim Reynolds announced she was cutting off the extra payments in May, saying they discouraged Iowans from getting back to work. 

Economists say it’s not the unemployed they’re worried about, but the lack of labor force.

“One of the big differences in Iowa relative to the rest of the nation is actually that our unemployment is pretty low,” John Winters, an associate economics professor at Iowa State University, said. “But if you look at where a lot of the job losses, at least from a measurement perspective where the job losses are, it’s that a lot of people have decided to exit the labor force. In other words, not only are they not working but they also decided they’re not going to look for work or you know, try to work at this time.”

Economists agree people left the workforce for a variety of reasons. The big challenge is trying to figure out how to entice people on the sidelines back into working.

Winters says Iowa’s recovery will be slow and gradual, and we won’t see a response from taking away unemployment benefits overnight.

Iowa State University Economist Dave Swenson agrees it will take a while to recover economically, but thinks taking away unemployment benefits was a political action rather than a strategic one and might do more harm than good.

“Logic says if you take money away from people, people are going to seek money,” Swenson says, “but if you can’t find suitable work, taking away unemployment assistance doesn’t provide you with the job if you can’t find suitable work. And you and I can’t do any job. And any person, an unemployed manufacturer can’t become a cook. An unemployed cook may not be suitable for being an assemblyperson or a truck driver or a nurse, which is the top category of jobs that we’re needing right now. So you see a lot of this stuff, we just have to wait and see how it works out.”

Winters says there’s a lot of uncertainty surrounding inflation. Swenson mentioned the one we’re dealing with right now when it comes to economic growth is wage inflation. He says, generally speaking, economists like workers to get more money because they spend it and put it right back into the economy.

As we watch the economy recover, Swenson will be looking for two things: the rest of the country’s well-being to see the demand for goods made in Iowa, as well as the health of metropolitan economies including Des Moines, Ames, Iowa City, and Cedar Rapids which he says will lead the state in growth.

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