Congress Can't Let Emergency Unemployment Expire

The labor market isn't yet healthy enough to warrant an end to unemployment benefits.

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Chad Stone is chief economist at the Center on Budget and Policy Priorities.

Friday's jobs report for August is expected to show that private sector employers expanded their hiring for the 30th straight month. That's the silver lining, but a cloud still hangs over the unemployed, as job creation remains modest compared with the jobs deficit from massive job losses in the Great Recession (see chart below). To add insult to injury, further cuts to emergency federal unemployment insurance benefits kicked in this week and those benefits are scheduled to expire altogether at the end of this year.

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Here's some background: In normal economic times, people with work experience who lose their job through no fault of their own can get regular state unemployment insurance benefits—typically up to 26 weeks, although several states have cut that number recently—while they look for a job. During recessions and while unemployment remains high during recoveries, the federal government has created temporary, wholly federally funded programs providing more weeks of benefits.

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As the economy slowed in mid-2008, President George W. Bush and Congress enacted the Emergency Unemployment Compensation program to provide additional weeks of federally-funded unemployment insurance. In light of the recession's severity, President Barack Obama and Congress expanded the maximum number of weeks available through Emergency Unemployment Compensation and provided temporary full federal funding for another program, Extended Benefits, for which states normally must provide half the funding.

From late 2009 through 2011, the maximum number of weeks of unemployment insurance available in states with very high unemployment rates (8.5 percent or higher) was 99 (26 of regular unemployment insurance, 53 of Emergency Unemployment Compensation, and 20 of Extended Benefits). Critics complained that that many weeks discouraged jobless workers from looking for work. That's not what the evidence says, and the number of unemployed jobseekers remains more than three times higher than the number of available job openings. That's down from nearly seven times in mid-2009, but it's still higher than at any point during or after the 2001 recession. Nor was the maximum number of weeks excessive for the long-term unemployed who face particular hurdles finding a new job in a weak labor market.

Notwithstanding the plight of the long-term unemployed and the economic benefits of the additional spending that federal emergency unemployment insurance benefits support, efforts to keep these programs from ending prematurely have been contentious. The latest extension, in February, began a process of cuts in the maximum number of weeks of federal unemployment insurance and called for all benefits to end abruptly at the end of this year. 

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All states have now "triggered off" Extended Benefits—not because their unemployment rate is low, but because the February agreement did not allow Extended Benefits to remain available in states with protracted high unemployment. In June, the unemployment rate thresholds for receiving the last 19 weeks of Emergency Unemployment Compensation went up, and this week the number of weeks available fell by a minimum of six weeks for all states and 10 weeks for many states. Workers in states that have cut their regular unemployment insurance program below 26 weeks get proportionally fewer weeks of Emergency Unemployment Compensation as well.

Federal emergency unemployment insurance programs are meant to be temporary and to expire once the labor market returns to reasonable health. But since policymakers first created an emergency federal unemployment insurance program in 1958, they have never allowed one to end when unemployment topped 7.2 percent. With unemployment expected to be around 8 percent at the end of this year, letting Emergency Unemployment Compensation expire abruptly would deal a cruel and unprecedented blow to people struggling to find a job.

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