/Stimulus checks, unemployment benefits lift 1.6 million from poverty
Stimulus checks, unemployment benefits lift 1.6 million from poverty

Stimulus checks, unemployment benefits lift 1.6 million from poverty

A woman walks past tents for the homeless lining a street in Los Angeles, Calif. on Feb. 1, 2021.

FREDERIC J. BROWN | AFP | Getty Images

More than one million Americans were lifted out of poverty in January as a result of federal stimulus checks and additional unemployment benefits, according to economists at the University of Chicago and University of Notre Dame.

It’s the first drop in poverty since the summer, they said, though they cautioned the gains may quickly erode absent of more relief.

Federal lawmakers in December passed a $900 billion Covid-19 relief measure that offered $600 stimulus checks and a $300 weekly boost in jobless benefits. It also extended unemployment benefits to those who don’t typically qualify, like self-employed and gig workers.

More from Personal Finance:
Relief bill would make health insurance more affordable for millions
Covid relief may trigger cuts to Medicare, higher student loan fees
You may be able to get more college aid this year

That cash infusion led the U.S. poverty rate to fall to 11.3% in January, from 11.8% in December, according to Bruce Meyer, James Sullivan and Jeehoon Han, who co-authored the report.

That means about 1.6 million people fell from the ranks of the poor as the government began distributing payments.

The reduction marks a turnaround from the growing hardship that emerged after CARES Act pandemic relief began to dry up last year. More than 8 million people fell into poverty between June and December, the researchers found.

“Our latest poverty estimates, for January 2021, indicate that this relief has reversed the recent trend of rising poverty,” they wrote in a paper issued Friday.

In 2021, the federal poverty line is $12,880 in annual income for a single adult and $26,500 for a family of four.

Poverty fell sharply for groups like Blacks and those without college degrees, who had experienced a steep rise in poverty since the summer.

However, rates are still high for such groups. The poverty rate for Blacks is more than double that of whites, and it’s nearly three times higher for those with a high school degree or less, relative to those with more education, according to the economists.

Unemployment benefits are set to expire by March 14 for millions of Americans absent more pandemic aid. Congress may soon issue more relief, however.

The Democrat-led House passed a $1.9 trillion measure on Saturday. The bill offers $1,400 stimulus checks for individuals who make up to $75,000. (It scales down the check amount after that, for those who make up to $100,000.) The bill raises the unemployment supplement by $100 a week — to $400 — and extends payments through August.

More than 19 million people are receiving jobless aid, according to the Labor Department.