While Presidents Bush and Obama have done many things differently, they used one common tool to help stimulate the economy: unemployment benefit extensions. Still, the efforts of both presidents may not have been enough to hold over millions of American workers until they find their next jobs. More than a half-million Americans are expected to fully exhaust their benefits by the end of September.
With longterm unemployment streaking higher, the job market shows no signs of real recovery. The declining number of people filing initial unemployment benefit claims is evidence that companies are slowing their job shedding, but they don't appear to be ramping up hiring yet. Here are five things to know about benefit exhaustion:
Some 540,000 Americans are expected to fully exhaust their unemployment benefits by the end of September, and another 1.5 milllion by the end of the year, according to an analysis by the National Employment Law Project. Fully federally funded benefits extensions are covering 2.8 million workers, the NELP reports.
States with the highest unemployment rates will see workers begin to exhaust their benefits the soonest, because benefit extensions kicked in at higher unemployment rates. States that reached those rates the earliest will see the relief run out the most quickly. Some states' rates went high enough to trigger the relief later, so their relief will now be exhausted later. Indeed, no workers will have exhausted their benefits by September in Massachusetts, Maine, New York, Delaware, Colorado, Virginia, Kansas, Louisiana, New Hampshire, New Mexico, and Oklahoma, according to the NELP data.
Unemployment benefits can be an effective stimulus. A $1 increase in unemployment benefits generates about $1.64 in near-term GDP, according to a Moody's Economy.com report. Unemployment benefit recipients tend to be so in need of the funds they receive, they spend them right away. "The benefit of extending unemployment insurance goes beyond simply providing financial aid for the jobless, to more broadly shoring up household confidence," economist Mark Zandi reports. "Nothing is more psychologically debilitating, even to those still employed, than watching unemployed friends and relatives lose benefits."
The ranks of long-term unemployed are growing. The Labor Department reports that 4.4 million Americans were out of work for 27 weeks or more in June.
Congress may extend benefits again. Reuters quoted House Majority Leader Steny Hoyer as saying last week: "It is appropriate to extend unemployment (benefits) when it runs out. We've done that in the past. My expectation would be we will do it ... when it becomes necessary."