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Failing to Extend Emergency Unemployment Benefits Would Be Unprecedented

Job applicants

SOURCE: AP/Bebeto Matthews

Patricia Mazza, left, meets job seekers during a National Career Fairs job fair in New York, Wednesday, October 24, 2012.

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See also: Congress Should Extend Emergency Unemployment Benefits by Sarah Ayres

At the end of the year, nearly 2 million unemployed workers are scheduled to lose their unemployment benefits—followed shortly thereafter by another 900,000 who will lose benefits in the first three months of 2013. If Congress does not take action to prevent this, its failure to do so will be unprecedented in the history of national recessions.

Congress has offered emergency unemployment benefits in every major recession since the 1950s, and it has never failed to extend benefits when the unemployment rate was higher than 7.2 percent. Nor has Congress ever let benefits expire when facing a major long-term unemployment problem as severe as the current one. Today the unemployment rate; the percent of unemployed who have been out of work long term; the average duration of unemployment; and the percent of unemployed who have exhausted their benefits are all higher than they were when Congress has let emergency unemployment benefits expire in the past.

At times of high unemployment during and immediately following recessions, unemployment benefits provide crucial income support to those out of work as well as a much-needed boost to the overall economy. By covering some of unemployed workers’ lost income while they search for a new job, unemployment benefits have kept millions of Americans from falling into poverty.

Moreover, by putting money into the hands of people who spend it at their local businesses, unemployment benefits boost economic growth and job creation. The nonpartisan Congressional Budget Office analyzed 13 fiscal policies and found that unemployment benefits are the most effective policy to increase economic growth and employment. Failing to extend emergency unemployment benefits would hurt both the unemployed and the national economy.

Congress has enacted legislation providing emergency unemployment benefits eight times since the 1950s. (see Table 1)

After the start of the Great Recession, former President George W. Bush and Congress approved the Emergency Unemployment Compensation Act in June 2008. Since then subsequent legislation has increased the maximum weeks of benefits available to unemployed workers and extended emergency benefits into 2010, 2011, and 2012. Unemployed workers today are now able to receive up to 47 weeks of emergency unemployment benefits once they have exhausted the 26 weeks of unemployment benefits provided by their states.

These benefits are scheduled to expire at the end of 2012, and there are a number of reasons Congress should extend them. One of these reasons is that the long-term unemployment problem is much worse today than it has been in past recessions. Below are four charts that demonstrate the severity of today’s unemployment and long-term unemployment problem compared to the previous seven times Congress has allowed emergency unemployment benefits to expire.

Unemployment rate

The unemployment rate is the number of unemployed Americans as a percent of the labor force. Congress has never allowed emergency benefits to expire when the unemployment rate was above 7.2 percent. The unemployment rate today stands at 7.9 percent. (see Figure 1)

Percent of unemployed who are out of work long term

In addition to recording the number of unemployed workers, the Bureau of Labor Statistics tracks how long people have been out of work. Previously, when Congress has allowed emergency unemployment benefits to expire, the percent of unemployed workers who had been unemployed for six months or more had never been more than 23 percent. Today more than 40 percent of unemployed Americans have been out of work for more than six months. (see Figure 2)

Duration of unemployment

The duration of unemployment is the time in weeks an unemployed person has been looking for work. In previous recessions Congress has never allowed unemployment benefits to expire when the median duration of unemployment has been more than 10.2 weeks. The median duration of unemployment today is nearly twice that long at 19.6 weeks. (see Figure 3)

Exhaustion rate

The exhaustion rate is a measure of the percent of unemployed who have exhausted their unemployment benefits. When Congress has previously allowed emergency unemployment benefits to expire, the exhaustion rate has never exceeded 43 percent. Today nearly half of all unemployed workers (47.5 percent) have run out of unemployment benefits. (see Figure 4)

Conclusion

There are many reasons to be optimistic about U.S. economic growth. The economy has now added private-sector jobs for 32 months straight, creating a total of 5.4 million jobs during that period. But despite the uptick in the jobs numbers, the United States continues to face a long-term unemployment problem that is unlike anything we have experienced since the Great Depression. Compared to the seven times Congress has allowed emergency unemployment benefits to expire in the past, today there are more Americans unemployed for longer than ever before.

Due to the high rates of long-term unemployed workers, the long average length of unemployment, and the large number of unemployed workers who exhaust their benefits, it is now more important than ever for Congress to take action to extend emergency unemployment benefits.

Sarah Ayres is a Research Associate at the Center for American Progress.

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