Did SC ending federal pandemic unemployment benefits early curb the labor shortage?

COLUMBIA, S.C. (WIS) - South Carolina put out some of its best jobs numbers of the year this month.

The state’s unemployment rate dropped from 4.5% in June to 4.3% in July. According to the Department of Employment and Workforce, 10,217 more people were working in July than in June of 2021

“South Carolina has been at or under full employment for the last four months,” said S.C. Department of Employment and Workforce Executive Director Dan Ellzey.

Nationally, unemployment was higher at 5.4% for the month of July.

But for many South Carolinians these are just numbers, what they want to see is fewer ‘Help Wanted’ signs and consistently have the type of service they were used to at restaurants and stores before the pandemic.

The labor shortage and the view that people are unlikely to go to work if they can make more by receiving unemployment was one of Gov. McMaster’s main reasons for ending federal pandemic unemployment benefits earlier than the national deadline.

However, University of South Carolina economist Joey Von Nessen said while Gov. McMaster’s decision “likely” helped curb the labor shortage, it’s hard to quantify.

“There are multiple factors driving this increase in the labor force,” Von Nessen said. “We have seen a steady increase in demand in the service sector all summer and this is also the first employment report where students have been out of school and so this has freed up some of the resources for parental supervision. They’ve been having to stay home and observe their children while they go to school virtually and now they don’t have to do that as much”

Von Nessen says that by looking at how the leisure and hospitality sector is doing, one of South Carolina’s biggest industries, he can get a better idea of the Governor’s move impacted the job market.

Of the 20,100 jobs added from June to July in South Carolina, 46.3% were in leisure and hospitality, according to DEW data.

“[Leisure and hospitality] is typically the sector that pays below $16 an hour and that was how much workers were receiving with the federal unemployment benefits,” he said. “So it likely did have a disincentive and we are seeing those workers come back.”

But there is some bad news in the data.

Von Nessen points out that the last time South Carolina’s unemployment rate was at 4.3% was November 2016. At that time, the job opening rate was 4% according to Von Nessen, but now it is at 6.5%.

“About half of the reduction in the labor force over the last year was a result of baby boomers retiring. That’s not likely to change especially the stock market is doing well,” he said. “The wealth of baby boomers hasn’t eroded so they had an incentive to stay retired and out of the labor force.”

But with kids going back to school, freeing up some parents to go into the labor force, and unemployed people’s savings accounts going down, Von Nessen said more people may be heading back to the workforce.

Von Nessen says one of the biggest unknowns in the state’s continued economic recovery is the coronavirus itself. He explained that if cases spike to the level that students can no longer go to school, the economy could suffer because parents may have to stay home.

“It could blunt some of the momentum of the good economic recovery that we’ve seen so far this year but I don’t see a major threat on the horizon in terms of a contraction I think we are going to continue to recover but the question is at what pace,” he said.

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