Does Extra Unemployment Tempt People to Stay Home? Sometimes

Beyond the Headlines: Personal finance news and research you may have missed

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Financial news headlines these days have a similar theme: The tide is turning. With vaccines vanquishing the pandemic, jobs are coming back, albeit more slowly than economists had predicted, and initial unemployment claims are steadily falling each week. In fact, unprecedented numbers of job openings have employers scrambling for workers, perhaps signaling a shift in the balance of power and the prospect of higher wages

Then there’s the housing market—one of the few bright spots throughout the pandemic economy. It’s finally coming down to earth, with surging sale prices and a massive shortage of homes for sale finally taking its toll on demand. Even the latest thinking on rising inflation may be starting to turn, at least in the Federal Reserve’s eyes. Plus, as households digest the massive government stimulus packages of the last year, people are spending more on travel and eating out (and cars) and less on things like clothing and furniture.

But here’s what you may not have heard as you’ve tried to keep up with it all. Did you know that even in today’s frenzied housing market, some choices can still hurt sellers? Or that paying Tulsa’s Black residents back for the city’s infamous massacre a century ago could send nearly every Black Tulsa resident to college? Or how about what a new study says about the unemployment benefit controversy splitting Red and Blue state governors?

To reach beyond the biggest headlines, we scoured the latest research, surveys, studies, and commentary to bring you the most interesting and relevant personal finance news you may have missed.

What We Found

Benefit Boost Tempts Some Unemployed to Stay Home, But Not Many

If you get paid pretty well to be on unemployment insurance, is there any reason to get a job? Special federal unemployment programs designed to help those who lost their jobs during the pandemic are putting this question to the test, with many politicians pointing to them as the source of an unexpected labor shortage

In fact, citing the need for workers, governors in at least half the states in the country (all Republican) are backing out early from a federal program giving a $300 weekly boost to regular state-administered unemployment checks, and in most cases, other pandemic unemployment programs, too. 

But are the programs really deterring people from returning to the workforce? A recent analysis by two economists at the Federal Reserve Bank of San Francisco suggests yes, though not by that much. In fact, the findings could probably be used to support the argument of both the Republican governors and those who’ve called the aid a much-needed lifeline.

The two researchers examined weekly earnings, job-finding rates, and other unemployment data from the government’s Current Population Survey to determine just how likely the federal supplements to unemployment insurance were to discourage people from accepting work. They looked mostly at the $600 weekly supplements the government distributed in the early days of the pandemic, but also extrapolated their results on the more recent $300 payments.

The analysis showed that “only a small share of job seekers” would choose to remain unemployed and, in the case of the $300 payments, the aid has impacted job finding in a “small but likely noticeable” way, the economists wrote in a working paper published in June.

Put another way: In each month in early 2021, seven out of every 28 unemployed people received job offers that they would normally accept, and of those seven, one would reject the job offer because of the extra $300 unemployment supplement. Not surprisingly, low-paid occupations, such as food services and janitorial staff, were more likely to find themselves in a position where unemployment was preferable to working, the study said. (The analysis took into account how long the job would last and how likely someone was to get another offer in calculating how people determined which was more worth it—the job or the benefits.)

In This Frenzied Housing Market, Are There Still Seller Mistakes? 

If you’re selling your house, it would seem you hold all the cards in today’s unusual real estate market. With sky-high prices and buyers literally lining up to look at homes—sometimes even waiving the house inspection or offering all cash—is there any need to strategize on things like when to list the property for sale? 

Absolutely, according to an analysis by Zillow. The online real estate marketplace found that houses listed on Sunday typically sit on the market eight days longer than those listed on the best day—Thursday. Eight days might not seem like a big deal, but in a market where half of homes are selling within a week, it’s an eternity, and could send a signal to buyers to lowball their offer.

"A home sitting even for one week without a sale in this market can signal to buyers that they may be able to get a small discount," said Jeff Knipe, president of Knipe Realty in Portland, Oregon, in a press release issued by Zillow. "A good strategy for buyers who want to avoid getting into a bidding war could be to target homes that have been on the market for a week or two, or even those listed over the weekend that are less likely to sell quickly."

Indeed, Thursday listings are more likely to sell above their asking price than those listed on any other day of the week, according to the analysis. And the reason it’s best to list on Thursday? Buyers are looking to fill their weekend schedule with house viewings, Zillow says. 

One other piece of advice for sellers from Zillow: Put your home up for sale before Labor Day. Despite the frenzied housing market during the pandemic, the normal seasonal patterns are bound to return to some degree, and the fall is typically when families with children in school stay put, leaving homes on the market longer.

What the Lost Wealth in Tulsa Massacre Could Pay for Today 

The Tulsa Massacre, a once-obscure outburst of racist violence in which White rioters destroyed a thriving Black-owned business district in Oklahoma, has been brought fully back into the spotlight. President Joe Biden even commemorated the 100th anniversary of the atrocity with a speech at the site of the attack, which killed 300 people and destroyed 35 acres of property. 

But it’s one thing to acknowledge an injustice, another to make it right, according to researchers at the Brookings Institution think tank, who recently examined what Tulsa’s Black community could build if it were paid back for the cost of the property damage alone. 

The researchers went by a 2018 estimate that more than $200 million in property was destroyed, between the homes, commercial property, and other assets. They then calculated what Tulsa’s Black residents today could gain if they were compensated for the lost wealth and “undeniable economic injustices” caused by the massacre.

If invested in education, that amount of money could buy college education for nearly all of Tulsa’s Black residents, Brookings said. If invested in housing, it could buy more than 4,000 median-priced homes in Black-majority neighborhoods, turning renters into homeowners and allowing homeowners to invest in their properties. If invested in a program for Black entrepreneurs, it could allow Black Tulsans to start more than 6,000 businesses (based on 2008 startup costs.)

On a national level, the Biden administration announced last week it is taking a series of actions aimed at reducing the racial wealth gap. These include directing government agencies to combat housing discrimination, having the government contract with more disadvantaged small businesses, and asking Congress to fund community revitalization programs and grants and investments in low-income neighborhoods.

Flood Zones Are a Bigger Deal Than Buyers Think

Worrying about global warming isn’t just for environmentalists anymore. The far-reaching effects of climate change have become so alarming that the vast majority of economists in a recent poll saw the wisdom in taking “immediate and drastic action” to counteract the threat. But people who buy homes in floodplains have underrated the risk that climate change poses, according to a new study.

Homebuyers pay on average 2.1% less for single-family homes located within floodplains, according to the study by Stanford University researchers who analyzed data on floodplain maps and real estate transactions.

But if buyers factored in the costs of fully insuring those homes against flood damage, they would actually pay somewhere between 4.7% and 10.6% less, the researchers said in an article published in April in the Proceedings of the National Academy of Sciences, the academy’s official journal. 

And the risks of flooding are only growing more severe, due to climate change, the researchers wrote. Overall, homes in flood zones are overvalued by about $43.8 billion, the researchers estimated.

One possible reason for the discrepancy is that the real estate market is full of “amateurs,” some of whom are uninformed or optimistic enough to drive prices higher than they should be, the researchers said. (In contrast to the overall market, business buyers, assumed to be more sophisticated, tend to pay 6.9% less for homes within flood zones on average.) The market could be improved if buyers knew more about climate risks, the researchers wrote. 

The federal government now is making efforts along those lines. Recently, the National Flood Insurance Program, the main provider of flood insurance in the country, updated its pricing methodology to more clearly reflect the flooding risk of individual properties. Starting in October, new flood insurance policies will be subject to new rates under the Federal Emergency Management Agency’s “Risk Rating 2.0” system, which will take effect for all policies renewed in April 2022 or later.