A new study released on Thursday revealed that Americans, who received unemployment benefits, spent more than when they were working.

Americans buying in a grocery strore
Reutersconnect

The unemployment benefit is part of the CARES Act signed into law by President Donald Trump last March. The CARES Act helps qualified unemployed Americans to receive a federal check of $600 aside from the unemployment claim they received from their respective state.

The federal unemployment check is set to end this month, with many states already next week. However, there is no report yet on when will be the second round of stimulus that Republican lawmakers promised to deliver.

A recent study by the JPMorgan Chase Institute revealed that Americans who received federal unemployment checks spent more than when they were working. Researchers found out that households spend 10 percent more after receiving $600 from the government.

The researchers further noted that household spending dropped during the coronavirus outbreak due to the closure of different businesses. However, household spending started to rise when they began receiving the stimulus.

The JPMorgan Chase analyzed the data using the transactions of 61,000 households, who received unemployment benefits or checks worth $600 from March to May. The weekly supplement has helped millions of Americans, but it will end this month.

In an article published in Reuters, a research said typically, a household who received unemployment check, cut their spending by seven percent. However, the study is contrary to what was expected to happen.

It estimated that around 30 million Americans received the unemployment benefits and they could face bigger problems once the stimulus ends this month. Additionally, the analysis of the research highlighted how unemployment benefits help to prop up the U.S. economy and consumer spending.

Researchers of the study also said the expiration of the unemployment benefit this month will lead to large spending cuts and will have negative effects on macroeconomic activity.

While it is true that unemployment benefit have helped many individuals, the data also showed that many states faced financial pain due to the delay of the weekly supplement. One factor seen is that some states were overwhelmed by the number of those who filed unemployment claims.

It was also found out that in some cases many households have to wait for several weeks before they received their first unemployment benefit. This has become one of the issues, which have been raised since the unemployment benefits began.

Meanwhile, it is still unclear whether Congress will approve a second stimulus check and who will be eligible for one. However, Republican lawmakers said if there will be a second round of the stimulus, it will be given to wider groups.

A Democratic-led HEROES Act was passed last May that aims to expand the CARES Act. However, it does extend the expanded unemployment benefit provisions and there are other provisions that are not the same with the CARES Act.

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