By Howard Schneider

WASHINGTON (Reuters) – The August slowdown in U.S. job creation hit harder in states that pulled the plug early on enhanced federal unemployment benefits, places where an intense summertime surge of coronavirus cases may have held back the hoped-for job growth.

The Bureau of Labor Statistics released new state-level data Friday showing that the majority of Republican-led states which dropped the $300 weekly unemployment benefit in the summer created jobs less quickly than those that kept the benefits.

(Graphic: Job growth and unemployment insurance, https://graphics.reuters.com/USA-ECONOMY/UNEMPLOYMENT/lbpgnglorvq/chart.png)

Elected leaders in those states argued the payments, in place since spring of 2020 to help families through the pandemic, were discouraging people from work and holding back an economic recovery that seemed to be gathering steam earlier this year when the impact of vaccines was taking hold and coronavirus cases were falling.

Some of these same states like Texas and Florida are hotbeds for opposition to health mandates such as mask wearing. The surge in infections that occurred there in July/August appeared to have impacted hiring at the kinds of businesses with close contact who were most affected by the crisis.

The overall employment rate in leisure and hospitality declined by 0.5% in 26 of the 26 states which ended their benefits and increased by 1% in other places.

(Graphic: Leisure and hospitality jobs, https://graphics.reuters.com/USA-ECONOMY/PAYMENTS/xmvjoknlbpr/chart.png)

In Florida, where the weekly average of new cases per 100,000 residents jumped from less than 50 in June to more than 700 in August, employment in the sector declined by 4,000 after rising steadily this year.

Texas had 25,000 fewer infections than usual in August. This was despite a drop of 30 cases per 100,000 residents in June. In Texas, however, this number rose to more than 400 during August. Georgia also experienced a sharp rise in infection rates and lost almost 7,000 positions in this sector.

California and New York saw a less severe epidemic of coronavirus Delta and have since added about 33,000 and 7K jobs respectively.

Data from the data show that there is much debate over how end to pandemic unemployment benefits will affect the economy. It will determine whether people will take up jobs or remain cash strapped due to a new wave of viral infections and problems finding childcare.

Some economists noted that the transition from public benefits to private income might not be fast enough to prevent a significant impact on the economy.

Analysts see the low August unemployment rate of 235,000, which many believe is a sign of how the Pandemic continues to threaten recovery.

The unemployment problem has been hard to analyze by economists. This is partly due to difficulties in separating the effects of payments and larger shifts in labor or the potential offsetting damages caused by the pandemic.

Goldman Sachs (NYSE) analysts looked at the individual levels of data to find that the payment ended did increase the chance of someone going from unemployment to work. The national expiration will result in the creation of an additional 1.3million jobs.

Joseph Briggs (Goldman Sachs) wrote Friday that “The behavior response to UI benefit expiration is highly uncertain due the unprecedented size to the benefit swings as well as the extremely unusual economic or health situation.”