USA TODAYPublished 12:35 AM EDT Jul 22, 2020Americans face a steep drop in their unemployment benefits at a time when coronavirus cases are spiking again and more states are abruptly pausing their reopenings, trends that threaten to derail the nation’s economic recovery when millions are already out of work. The cause of the shrinking unemployment checks? That extra $600 in weekly unemployment benefits that was passed under the CARES Act in March is set to end this week, dealing a blow to millions if Congress doesn’t pass new legislation. Another coronavirus relief package likely won’t be approved until after July, policymakers have warned. More than 25 million workers will lose the $600 federal unemployment supplement, to the tune of more than $15 billion per week, according to The Century Foundation, a nonprofit think tank. In many states, benefits could be cut by more than half. State benefits average just $370 a week, according to Goldman Sachs estimates. That’s down from about $970 per week with the extra $600 benefit. There are two COVID Americas: One hopes for an extension of federal unemployment and stimulus. The other is saving and spending.Moment of truth: Some homeowners expect struggle to pay mortgage when extra unemployment endsThe additional money allowed a substantial portion of Americans to have either no pay cut at all or a small one, helping to support the economic recovery through improved consumer spending, according to Josh Bivens, the director of research at the Economic Policy Institute. “The extra unemployment benefits were exactly what the economy needed, and it provided a huge support by preventing the public-health driven recession from turning into a much broader financial problem,” says Bivens. “But now we’re threatening to strip that away. People won’t have money to spend to help restart the economy, which is a huge threat to growth in the coming months.” Workers are set to see a benefit drop of between 50% to 85% depending on the state they live in, with the largest cuts coming in states with large shares of Black claimants like Georgia, Delaware, Louisiana, Mississippi, Alabama, Arkansas and North Carolina, data from The Century Foundation shows.States with the least generous benefits will experience the largest dropoff in support once the additional $600 in benefits ends. In Arizona, the maximum weekly benefit is just $240, and is just $275 per week in Florida, Alabama, and Tennessee. The minimum Pandemic Unemployment Assistance, which provides benefits to individuals who are unable to work because of a COVID-19 related reason but aren’t eligible for traditional unemployment, is just half of state unemployment insurance, and will run as low as $112 per week in Alabama and $107 per week in Louisiana once the $600 per week is taken away.Cutting back on groceries, doctor visitsUnemployed Americans who have lost substantial income during the pandemic are worried about how they will get by in the coming months once the enhanced benefits end. Nearly one-third of Americans receiving unemployment benefits claim they couldn’t live more than a month without the additional $600, and almost 90% say they can’t make it more than six months, according to a new study by The Ascent, a Motley Fool company.Americans have spent the majority of their total benefits to keep a roof over their heads and to cover day-to-day expenses, according to a recent survey from consumer finance company Credit Karma. Nearly one-third of respondents applied the money to their mortgage or rent, while close to another third spent the money on necessities like groceries and utilities.Losing a job only leads to about a 2.5% cutback in spending on groceries as long as unemployment is received. When that’s exhausted, grocery spending tends to fall by another 15%, according to Bivens, who analyzed unemployment data in the years leading up to the pandemic.Medical co-pays typically drop by 17% even when getting unemployment, followed by another 11% decline when benefits are exhausted, he added.So far during the pandemic, just 2% of Americans were using unemployment to pay down their medical debt, according to Credit Karma. They have turned to food stamps to help buy groceries. More than 6 million people enrolled to receive food stamps in the first three months of the pandemic, according to an analysis from The New York Times. From February to May, the program grew by 17%, about three times faster than in any previous three months, the report shows, an expansion that is likely to continue as jobless aid expires this month.The extra bonus had disqualified most people from the Supplemental Nutrition Assistance Program, or SNAP. Others may skip rent, mortgageThe expiration of enhanced benefits comes at a crucial time for mortgage borrowers, and many of them are concerned about paying that debt once the extra $600 ends, according to LendingTree.Just over two-thirds of mortgage borrowers facing a loss of income would consider defaulting on a debt payment to make ends meet, according to LendingTree. Mortgage (24%) and credit cards (23%) are the top two bills respondents say they’d be most likely to default on, followed by student loans (15%) and auto loans (5%). Borrowers will oftentimes skip their mortgage payments relatively quickly to prioritize other bills, according to Tendayi Kapfidze, chief economist at LendingTree. “People realized after the housing crisis that they can miss mortgage payments and remain in their house for months or even years because the foreclosure process takes such a long time in some states,” says Kapfidze. “People tend to pay their auto loans first so that they’ll have a car to get to work.”Bivens of the Economic Policy Institute agrees. “If the extra $600 in unemployment is gone or substantially reduced, many people will have trouble paying their rent and mortgages,” says Bivens. “We’ll likely see a rise in evictions and mortgage delinquencies.” A federal eviction moratorium that protected millions is about to expire. Tenants of apartment buildings financed by a federally backed mortgage, such as Fannie Mae or Freddie Mac, could not be evicted for failing to pay rent for 120 days, a grace period that ends July 25, under the CARES Act. After that, landlords can issue a notice to evict but can’t remove tenants for another 30 days. The grace period for renters of single-family homes ends Aug. 31.At least 34 states and dozens of cities issued broader moratoriums that apply to all rental units. But some of those bans have ended.More stimulus could boost growthAn extension of the $600 in benefits could help accelerate growth in the coming months, experts say. Oxford Economics estimates that an extension of the unemployment compensation through the end of the year could lift gross domestic product by around 2% by the fourth quarter and preserve 1 million jobs compared to a sudden-stop policy.Critics of expanding unemployment insurance argue that the extra money discourages Americans from finding new work, especially since many low-wage workers in hard-hit industries like restaurants and retail have received more money in unemployment.More than two-thirds of workers on jobless benefits are making more in unemployment than they did while working, and one out of five eligible unemployed workers will receive benefits at least twice as large as their lost earnings, according to economists at the University of Chicago.Still, economists caution that a failure to provide additional fiscal aid would put the recovery at risk with many Americans lacking the financial buffer to weather a long jobless spell as more states halt reopenings.Low-wage industries have led the way in the rebound, accounting for 56% of the total job loss but 63% of employment growth since the recovery started in May, according to Oxford Economics. But the recovery is still in its initial stage, and low-paid workers continue to suffer disproportionately. Employment in the low-paid group of industries was still down 16.1% compared to its February peak, nearly twice that for the middle-paid industries (-9.2%) and over three times more than the highest-paid industries (-5.4%).