Important, policy-relevant research released by JPM Institute today on the importance of of unemployment benefits in stimulating aggregate demand. Especially the $600 supplement: https://institute.jpmorganchase.com/institute/research/labor-markets/unemployment-insurance-covid19-pandemic

Main take-aways: Supplement helped boost spending of the unemployed even above prior year spending levels. Marginal propensity to spend out of supplement looks to be 0.73 cents on the dollar. This is huge.

This means that unemployment supplement is more about stimulating aggregate demand than it is about helping the unemployed "smooth" consumption. That is, the unemployed are actually spending more than they did before they were unemployed. This has helped boost aggregate spending.

Huge ramifications for what happens if supplement is eliminated. Take the 0.73 cent on dollar estimate. 18.1 million receiving benefit. ($600*0.73*18.1M) = $7.9B. So completely cutting supplement leads to weekly decline of $7.9B in spending.

Total weekly spending about $230B, so this $7.9B would be 3% drop in spending. This is enormous (obviously). All of this is partial equilibrium, and some assumptions are needed. Policy-relevant research can be quick and dirty.

But it is hard to imagine that in the short-run, if the $600 supplement is allowed to expire completely, and there is nothing put in its place, then we will see a large decline in household spending.

The authors of this super important study are: Diana Farrell, @p_ganong , Fiona Greig, Max Liebeskind, @pascaljnoel , @JoeVavra.

and for the thread: CC:
@Austan_Goolsbee
@HBoushey
@AtifRMian
@ludwigstraub
@ProfJAParker
@GregWKaplan