The number of jobless workers has fallen from over 15 million in early 2010 to about 13 million now, but the share of unemployed workers collecting jobless benefits has dropped more sharply. It was about two out of three in 2010, but it’s less than one in two now. Next year only about one in four will receive payments, according to the National Employment Law Project (NELP).
“There’s going to be lots of people without any income still unable to find a job,” says George Wentworth, a senior staff attorney for NELP. “You’re going to see these people not be able to feed their families and not able to pay their mortgages. It will have a devastating impact on a lot of local economies.”
Wentworth, like other advocates for the unemployed, says Congress was largely settled on some scaling back of benefits. The federal government spent $59 billion on extended unemployment benefits last year and the up-to-99-week periods of subsidies are unprecedented in any economic downturn.
The February legislation was seen as a compromise that kept payments flowing but phases them out as state unemployment rates fall from near-record levels. Yet the cutoffs are coming as job growth has slowed to an average monthly pace of 75,000 in the second quarter from 225,000 in the first quarter. Unemployment rates rose in 27 states in June. The government is expected to report today that the U.S. gained 100,000 jobs in July and the unemployment rate stayed at 8.2%, according to a consensus forecast of economists.
States eye ways to save
Some states, including Illinois, Michigan and South Carolina, have trimmed even initial benefits to less than 26 weeks, and some have cut the size of payments and restricted eligibility. Florida residents must apply online and take a lengthy skills test, keeping some from receiving unemployment insurance.
Under the federal compromise, states are truncating the second phase of benefits, which helps people unemployed from 27 to 79 weeks, when their jobless rate falls below certain levels. The reduction in so-called emergency unemployment compensation will affect about 600,000 recipients through December and 2 million more at year’s end, NELP says.
The biggest impact so far has been on the final phase, known as extended benefits, which provides an additional 13 to 20 weeks to those who have been jobless as long as 79 weeks. Benefits in that phase depend on a formula that requires state jobless rates to be higher than the past three years — a tough standard to meet with unemployment falling from recent peaks. So far this year, more than 500,000 Americans in 32 states and Washington, D.C., have lost extended benefits. This month, Idaho will end the program, effectively eliminating it nationwide.
Economists worry most about the likely suspension of all benefits past 26 weeks at year’s end. The average unemployed American has been out of work 40 weeks, according to the Labor Department, and there are still about three jobless people for every job opening.
“We’re still in a world where you can’t expect anybody to find a job within a specific period of time because there aren’t enough jobs out there,” says Jesse Rothstein, economist at University of California-Berkeley. “I think it still calls for pretty long extensions.”
Workers who lost jobs in the recession and exhausted their benefits by January 2010 had a poverty rate of nearly one in five, and about 40% had incomes below 200% of the poverty threshold, according to a Government Accountability Office study this year.