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US poverty fell in April and May due to federal relief programs, even as COVID-19 ravaged the economy, new study suggests

Poverty in the US dropped in April and May, even as the economy cratered due to the pandemic, a new study from researchers at the University of Notre Dame and the University of Chicago suggests.

FILE PHOTO: People who lost their jobs wait in line to file for unemployment following an outbreak of the coronavirus disease (COVID-19), at an Arkansas Workforce Center in Fayetteville, Arkansas, U.S. April 6, 2020. REUTERS/Nick Oxford
  • Researchers estimate the poverty rate fell 2.3 percentage points to 8.6% in April and May, from 10.9% in January and February.
  • The remarkable findings highlight the broad reach of the federal intervention and its effectiveness in shoring up people's finances during a downturn, particularly low-income workers.
  • Visit Business Insider's homepage for more stories .
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Poverty in America fell in April and May, even as the US plunged into its worst economic crisis in nearly a century, a new study from researchers at the University of Chicago and the University of Notre Dame suggests.

The reason for the drop: a massive infusion of government cash into the economy to aid struggling people.

The two key elements, researchers say, were the one-time, $1,200 stimulus checks sent to millions of households and the federal $600 weekly boost to unemployment payments under the CARES Act in March. Another key factor was expanding eligibility to gig workers to receive unemployment.

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The study estimates the poverty rate fell to 8.6% in April and May from 10.9% in January and February, the outset of the pandemic. The authors pulled data from the monthly Current Population Survey to calculate poverty estimates near real-time.

Dr. Bruce Meyer and postdoctoral scholar Jeehon Han of the University of Chicago and Dr. James Sullivan at the University of Notre Dame said the decline in the poverty rate could be attributed to provisions of the CARES Act aimed at keeping struggling people afloat during the pandemic.

"It is an impressive and rapid response," Meyer said in an email, adding that "government clearly has an important role in insuring risks that the private market cannot insure."

But he said the unemployment payments could have been "better targeted" since the ramped-payments was "overly generous for many and too little for others."

The remarkable findings underscore the reach of the sweeping federal intervention and its effectiveness shoring up people's finances during an economic downturn, particularly for lower-income workers.

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Earlier this month, the Commerce Department released data that showed people's incomes had surged 10% in April at the height of the economic shutdown.

The poverty rate is calculated based on yearly income, and a family of four is considered poor if they earn less than $28,000 a year. Still, even with a rate decline, experts warn that many people will continue living paycheck-to-paycheck even if they earn above the poverty line.

Democrats are pushing for another stimulus bill that would keep beefed-up unemployment payments to out-of-work Americans through January, as well as another round of stimulus checks for people.

But Republicans argue that any additional spending should be more targeted, and some say it may not be necessary if the economy displays signs of a quick rebound.

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Much of the federal aid in place is set to expire , however, this summer.

Another study from researchers at Columbia University indicated that the wave of federal aid would end up being successful in keeping 12 million Americans from falling into poverty.

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