Recovering from Job Loss : The Role of Unemployment Insurance

In this report JPMorgan Chase Institute assembled a de-identified sample of 160,000 regular Chase customers who received unemployment insurance (UI) between 2014 and 2016 across 18 states to evaluate the role that UI plays in mitigating the financial impacts of job loss. Our results show that UI is remarkably effective at preventing large spending drops among the short-term unemployed. First, UI softens the drop in family income due to job loss from roughly $1,826 a month — a 46 percent drop in monthly income — to just $617 a month — a 16 percent drop. Second, spending drops by just 5 percent upon job loss because UI benefits boost spending dramatically, averting 74 percent of the drop. Third, spending declines coincide with income losses. Income and spending recover within 18 months for the short-term unemployed but remain depressed for the long-term unemployed. When UI benefits are less generous, the long-term unemployed experience more economic hardship but also go back to work sooner. Fourth, among all UI recipients, job loss causes a drop in discretionary spending and student loan payments, but the long-term unemployed cut nearly every category of spending when UI runs out. And finally, families with high liquid assets reduce their spending upon job loss by roughly half as much as families with low liquid assets. With just 27 percent of the unemployed receiving UI — a record low recipiency rate — this report provides a critical fact base to inform efforts to reform UI