Overview
The health of the general economy affects the use of USDA's food
and nutrition assistance programs. Caseloads for the Food Stamp Program
(FSP) tend to follow the unemployment rate, which is a key indicator of
the health of the general economy. The relationship is less pronounced
for the other food assistance programs. The food assistance programs affect
industry and the general economy. Demand for farm and processed food products
increases when program spending increases, and FSP participation rises
during economic downturns, which can have a stabilizing effect on the
economy.
The Food Assistance and Nutrition Research Program at ERS studies and
evaluates the relationship between the food and nutrition assistance programs—including
the FSP, WIC,
and the child nutrition programs—and
the general economy. It also studies program
outcomes, program operations
and integrity, vulnerable
populations, and food security in
the United States.
Features
 Tracking
recent monthly data on the unemployment rate and Food Stamp Program caseload—The
figure presents monthly food stamp caseload in relation to monthly unemployment
rates, both seasonally adjusted and unadjusted. Fiscal 2000 marked the end
of a period of economic prosperity, with the seasonally adjusted unemployment
rate hovering around 4 percent and food stamp caseload around 17.1 million
people (7.3 million households). During the March-November 2001 recession
(determined by the National
Bureau of Economic Research, Business Cycle Dating Committee), the
seasonally adjusted unemployment rate rose by 1.3 percentage points and
food stamp caseload by 1.25 million people (500,000 households). From November 2001 through June 2003, the unemployment rate fluctuated and rose slightly, but food stamp caseload continued its recessionary growth trend. Since June 2003, the unemployment rate has been trending downward while the food stamp caseload has continued upward through October 2004. According to FNS, the spike in food stamp caseload during October 2004 was due to hurricane disaster relief in Florida and Alabama. Since November 2004, the food stamp caseload has leveled off as the unemployment rate continues to fall.
 Title
IV: Nutrition Programs of the 2002 Farm
Act reauthorizes the Food Stamp Program through fiscal year 2007.
The Congressional Budget Office cost estimate for changes to the FSP under
the Farm Act amount to about $760 million of additional benefits to recipients
per year for 10 years, 2002-12. By making assumptions about how recipients
adjust their budgets and increase food consumption with food stamp benefits,
we estimate that the additional annual spending will increase farm sales
by $73 million and farm value added by $24 million and add 700 farm jobs.
Given the pay-as-you-go requirements of the Budget Enforcement Act on
Federal Government budgeting, these additional expenses are not expected
to stimulate the general economy. (For more information about these calculations,
see links to the general
economy).
Recommended Readings
Food Assistance Research Brief—Importance of Child Nutrition Programs to Agriculture—This
research brief estimates the impact of specific USDA child-nutrition programs
on U.S. agriculture, in terms of farm sector production, value added,
and jobs. The child-nutrition programs considered are the Special Supplemental
Nutrition Program for Women, Infants, and Children (WIC), the Child and
Adult Care Food Program, and a combined group of school programs (the
National School Lunch, School Breakfast, Special Milk, and Summer Food
Service Programs). The “additional” $2.3 billion to $3.1 billion
of food expenditures due to the child nutrition programs in 2001, generate
$1 billion to $1.5 billion of additional farm cash receipts.
Issues in Food Assistance:
Effects of Changes in Food Stamp Expenditures Across the U.S. Economy—Counter-cyclical
changes in food stamp spending can help stabilize the economy by stimulating
activity during a recession. The extent of stabilization depends on how
the program is financed. The Budget Enforcement Act requires that Federal
programs be funded through budget-neutral (does not add to the deficit)
means except in emergencies. Whether the Food Stamp Program stimulates
the economy during a recession depends on whether emergency or budget-neutral
financing is used. This issues brief shows that, in both cases, the additional
food stamps help stabilize recipient food consumption and well-being during
economic downturns and stimulate production in the agriculture and food
sectors, thereby stabilizing economic activities in key rural sectors.
Issues in Food Assistance:
How Unemployment Affects the Food Stamp Program—There is a strong
historical relationship between the unemployment rate and food stamp caseloads.
During economic expansions, the number of people receiving food stamps
falls; during recessions, the number of recipients increases. The relationship
is often muted or obscured by changes in policy, administrative practices,
and other unobserved factors. This issues brief suggests that the current
period (1-year) effect of a 1-percentage-point increase in the unemployment
rate results in about 700,000 more food stamp recipients. In the longer
run, a 1-percentage-point increase in the unemployment rate leads to about
1.3 million more food stamp recipients.
See
all recommended readings…
Recommended Data Products
Consumer Expenditure Survey—Data
from the Bureau of Labor Statistics on household spending, including information
on age, income, and participation in the Food Stamp Program.
Food and Nutrition Assistance Program—Data
from USDA's Food and Nutrition Service on program caseload and expenditures.
Input-Output
Accounts—Data from the Bureau of Economic Analysis on industry
production and commodity demand. Used for calculating multipliers and
farm sector impacts from food consumption due to the food and nutrition
assistance programs.
Unemployment—Data
from the Bureau of Labor Statistics on unemployment.
Related Links
Food and Nutrition Service—Administers
USDA's food and nutrition assistance programs and provides program guidelines,
data, and research on the Food Stamp Program, WIC, and child nutrition
programs.
Image Gallery
Charts and tables that
show relationships between food assistance programs and the general economy.
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