Economic Linkages

Supplemental Nutrition Assistance Program (SNAP) Linkages with the General Economy

This page provides the following information:

SNAP Stimulates Economic Activity During an Economic Downturn

SNAP is one of the Nation's primary counter-cyclical government assistance programs. It provides assistance to more low-income households during an economic downturn or recession and to fewer households during an economic expansion, serving as an automatic stabilizer to the economy.

The rise in SNAP participation during an economic downturn results in greater SNAP expenditures which, in turn, stimulate the economy. During a recession, some households that lose part or all of their incomes become eligible and participate in SNAP. Moreover, for households that were already participating before the recession, SNAP benefits increase if their income falls.

Not only do SNAP benefits support a household’s food purchasing needs, benefits also augment the incomes and spending of others (such as farmers, retailers, food processors, and food distributors, as well as their employees); this, in turn, has ripple effects for other parties. Thus, SNAP benefits start a multiplier process that supports macroeconomic spending and production. SNAP participation and benefits can automatically expand when the economy weakens and contract when it strengthens. ERS research has estimated a multiplier of SNAP benefits on Gross Domestic Product (GDP) of 1.79, that is, an increase of $1 billion in SNAP benefits increases GDP by $1.79 billion and results in an increase of 8,900-17,900 full-time equivalent jobs. See:

The Food Assistance National Input-Output Multiplier (FANIOM) Model and Stimulus Effects of SNAP

Economic Conditions Affect SNAP Caseloads and Expenditures

There is a strong historical relationship between the unemployment rate—a key indicator of economic conditions—and SNAP caseloads. However, the relationship between SNAP caseloads and the unemployment rate is influenced by changes in program policy and other factors.

The influence of program policy and other exogenous factors on SNAP caseloads is accounted for in statistical methods that estimate the impact of economic conditions on caseloads. ERS research shows that the rise in SNAP participation in recent years has been largely driven by the poor economy and high unemployment. The magnitude of the response of the SNAP caseload to rising unemployment in the most recent recession is consistent with the response in earlier recessions; a 1-percentage point increase in the unemployment rate is associated with an additional 2 to 3 million additional participants.

ERS research also shows that the SNAP caseload decreases as the economy recovers, with a typical lag of 2½ to 3 years after the unemployment rate falls. The primary reason for the lag between falling unemployment and the ensuing SNAP caseload decline is that there has been a tendency for slow job growth and lower real wages following a recession, particularly for low-skilled jobs.

ERS research has also found that changes in program policy and administrative practices during business cycles tend to augment the rise in SNAP participation during economic downturns and contribute to the continued rise in the SNAP caseload during the early stages of economic recovery. See:

How Economic Conditions Affect Participation in USDA Nutrition Assistance Programs

and What's Behind the Rise in SNAP Participation?