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Tennessee Gov. Bill Lee speaks with reporters Tuesday, June 8, following an event at wholesale restaurant food supplier Sysco Nashville. (Photo by Andy Sher/Chattanooga Times Free Press.)

NASHVILLE — Gov. Bill Lee on Tuesday defended his decision to end federal unemployment benefits early for thousands of jobless workers after a congressional report warned that the economic impact on local economies in Tennessee could reach $486 million.

Asked about the estimates and concerns cited in the report, issued by Congress' Joint Economic Committee, the governor stood by his decision to accelerate the expiration for state participation in the Federal Pandemic Unemployment Compensation program and its $300 weekly benefit for jobless workers.

When the program ends July 3 in Tennessee, it will also cut off contract and gig workers who have multiple clients and don't qualify for traditional unemployment.

"While the state might lose economic dollars associated with that benefit, the businesses across this state are losing massive numbers of economic activity," Lee told reporters. "The businesses are more important to me than the government money, and that's why we made the decision."

Lee is one of 25 Republican governors who are ending the program weeks before the federal coronavirus pandemic is set to expire on Sept. 6.

According to the Joint Economic Committee report, an estimated $301 million has been paid out to jobless Tennesseans.

State legislative Democrats, including Rep. Yusuf Hakeem of Chattanooga, last week blasted Lee over the move to end the federal program here, citing the governor's intention to distribute $44.6 million in other federally funded pandemic economic aid to 1,250 struggling small businesses.

Despite Tennesseans "still hurting," Hakeem said, the governor "has lost sight of who he represents. Tennessee is not strapped for money. We have money oozing, with the federal monies coming in, oozing all over the place. There's no reason that both [jobless Tennesseans and businesses] cannot be taken care of."

State Sen. Heidi Campbell, D-Nashville, recently charged it amounted to an "immoral double standard" for the governor's administration to prioritize paying businesses over idled workers.

Back in 2020, Lee's administration was overwhelmed by the numbers of people seeking unemployment benefits.

Speaking on Tuesday, Lee cited a recent conversation he said he had in Memphis with the matriarch of a minority-owned restaurant who he said told him she could only operate three days a week instead of seven.

The governor said when he asked why, "she said she couldn't find workers. And I asked what about the workers that were in your restaurant before the pandemic? And she said they are sitting at home getting a check. It reminded me of exactly what the problem is in this country and specifically in Tennessee.

"When we have 250,000 job openings in the state and we are paying people to stay home, that needs to change," Lee added.

In its report, the Joint Economic Committee stated that local economies nationwide stand to lose more than $13 billion due to early cancellation of the enhanced unemployment benefits.

"Despite [Unemployment Insurance's] measurable role in stabilizing consumption and supporting struggling households, some are claiming — without sufficient evidence — that UI benefits are suppressing reemployment. Claims of worker scarcity are largely anecdotal and not supported by national data."

Unemployment Insurance, the report says, has "played an important role in the recovery by stabilizing consumption and keeping jobseekers from dropping out of the labor force entirely."

The report has several links, including one to a report issued by the liberal Economic Policy Institute. The EPI link notes "there are signs of a short-term worker shortage in isolated sectors, namely leisure and hospitality. There is, however, no evidence of a widespread labor shortage, and the isolated shortages that do exist are not a reason for concern."

The Tennessee Department of Labor and Workforce Development reported last week it paid 113,807 unemployment claims during the week ending May 29. Payments totaled $66 million, with Uncle Sam picking up $57.5 million, a figure including the pandemic-related $300-a-week support, and Tennessee paying $8.57 million.

Continued claims for workers receiving state benefits were 49,280, with the remaining 74,627 receiving federal support only. Those receiving federal aid include self-employed contractors and "gig workers" who are independent contractors or freelancers who may work for multiple companies.

Legislative Democrats, meanwhile, believe that Lee's assertions of 250,000 job openings right now are exaggerated and outdated.

Tennessee pays a maximum of $275 per week to jobless workers, but many claims are below that, Democrats say.

State Labor Commissioner Jeff McCord recently said the state has shifted in the past year from a lack of jobs to a lack of workers.

"A year ago, we had a job crisis when the pandemic hit and thousands of Tennesseans lost their jobs," McCord told the Tennessee Valley Corridor Summit last week.

Over the past 14 months, nearly a third of all Tennessee workers have applied for unemployment assistance at some point during the coronavirus pandemic.

But McCord said the state's employment market has completely switched over the past year.

"We have a job crisis today — we have more jobs than people," he said. "You can see the labor shortage not only in the skills mismatch in the market but also in the job market in general. We have a labor force participation rate in our region that is very low, especially among 25- to 54-year-olds."

From the pandemic low reached in April 2020, Tennessee employers added back 478,866 jobs, boosting employment in the state by 17.9% in the past 12 months, according to job estimates by the Tennessee Department of Labor and Workforce Development.

But total employment in April in Tennessee was still down by 68,720 workers from the pre-pandemic high reached in late 2019, even as Tennessee has attracted more residents and lured billions of dollars of additional business investment in the past year and a half.

Before the pandemic, 62% of all adults were in the workforce, either on the job or looking for work. In April the share of adults in Tennessee's workforce had dropped to 60.7%.

Lee's decision to cut off the $300 weekly supplemental federal jobless benefits paid to unemployed Tennesseans on July 3 was praised by U.S. Rep. Mark Green, R-Tenn., during a panel discussion at the Tennessee Valley Corridor summit meeting. Green quoted former Reagan economic advisor Arthur Laffer, who moved to Tennessee from California to be in a more pro-business environment.

"When you pay people not to work and tax those who do, don't be surprised if fewer people go to work," Green said.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550. Follow on Twitter @AndySher1.

Contact Dave Flessner at 423-757-6340 or dflessner@timesfreepress.com. Follow on Twitter @dflessner1.

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