A Good Jobs Report Might Be Bad For The Jobless
December 7, 2012
The Labor Department's glad tidings Friday about the uptick in job creation last month might morph into bad news next month for many of the long-term unemployed.
That's because the boost in November hiring, with employers adding 146,000 jobs, might make it more difficult for Democrats to argue in favor of having Congress renew the extension of benefits for people out of work more than six months.
As things stand, four in 10 Americans who receive unemployment insurance will lose their extended benefits if federal aid expires as scheduled on Dec. 29.
If that were to happen, "it would be devastating for these unemployed workers and their families; in many cases, this is the only income they have," says Judy Conti, a lobbyist with National Employment Law Project, a group that advocates for low-wage workers. "It's the middle of winter — when people need heat and food and shelter."
But conservatives now have a stronger argument to make when they say the job market is healthy enough to offer opportunities to those who have been out of work a long time. In November, the unemployment rate dropped two-tenths of a point to 7.7 percent, the lowest level in four years.
A Cutoff Looms
The future of unemployment benefits for the long-term unemployed is part of the ongoing budget negotiations in Congress. Lawmakers are trying to sort out a complicated cluster of tax-break expirations and automatic spending cuts. Collectively, those budget problems are commonly called the fiscal cliff.
One of the issues involved in the negotiations is the federal Emergency Unemployment Compensation program. Unless Congress reauthorizes it for 2013, more than 2 million long-term unemployed workers will be cut off from federal benefits.
In November, the number of people who have been looking for work for more than six months was little changed at 4.8 million, the Labor Department said.
Many economists say it's difficult to sort out exactly what the state of the job market was last month because of distortions caused by the hiring of election-related workers and Hurricane Sandy, the superstorm that knocked out power for millions of homes and businesses as it hit the Northeast in late October.
A Cloudy Outlook
Even with some distortions, the jobs report seemed encouraging. But no one doubts that the labor market's future remains dicey as long as the outcome of the fiscal-cliff negotiations remains uncertain.
Evidence of concerns about uncertainty showed up in the Wells Fargo/Gallup Small Business Index survey. The November survey, released Thursday, found that small-business owners plan to add fewer new jobs over the next 12 months than at any time since the depths of the 2008-2009 recession.
The survey's key finding was that "there is the potential for a serious decline in jobs early next year."
That's what has advocates for the unemployed worried. They want the extended benefits to keep coming in 2013 to give the job market more time to heal.
Sen. Richard Blumenthal, D-Conn., said Friday that in the aftermath of Hurricane Sandy, extended benefits are crucial for his region. "We just suffered a major catastrophe," he said in a phone interview. "The recovery will be a long slog, so there are people who will be unemployed for a long time."
As the budget negotiations continue, "I'm willing to go to the mat for this," Blumenthal said.
Usually, the responsibility for providing workers with unemployment benefits lies with the states. The typical program gives laid-off workers up to 26 weeks of financial support, replacing up to half of their previous weekly wages. For the most part, the states set the rules for providing help and carry the costs.
But when the Great Recession slammed into the job market, Congress agreed to provide additional federal funds to help states extend benefits, in some cases up to 99 weeks.
When the authorization for federal unemployment benefits was set to expire in February 2012, Congress renewed the program, saying the help was needed because the unemployment rate was still over 8 percent at the time. But that extension, part of the Middle Class Tax Relief and Job Creation Act of 2012, set into motion a phase-out timetable. Currently, the maximum length of benefits is 73 weeks in states where the jobless rate exceeds 9 percent.
As 2013 begins, the federal program will end, so jobless workers will have to go back to relying on their 26 weeks of state aid. People who already have exhausted that amount will suddenly stop getting checks.
Reducing The Deficit
Many Republicans want to stick to the fast-approaching expiration date, saying that would help reduce the budget deficit. The nonpartisan Congressional Budget Office confirms that "the expiration of those benefits will lower spending by $26 billion in fiscal year 2013."
Not only would ending the program reduce the budget deficit, but the change also would help the economy by spurring the long-term unemployed to search harder for new jobs, conservatives argue.
They say the labor market has improved since the 2009 depths of the recession when the unemployment rate hit 10 percent. And they note that jobs are in fact available for many workers willing to make necessary changes, such as moving, retraining or accepting lower wages.
"Unemployment insurance makes unemployment last longer," Casey Mulligan, a professor of economics at the University of Chicago, concluded in a written assessment of the impact of extended benefits.
Giving The Economy More Time To Recover
But other economists say the job market is still so bad that many people need much more than six months to find jobs. Moreover, the extended benefits help keep the economy from worsening by allowing jobless people to continue to spend money at grocery stores and gas stations, and to keep paying their rent or home mortgage. Having food, gasoline and a home with a working phone can make a job candidate more attractive to an employer.
Ending federal extended benefits would reduce economic growth by about $48 billion and trigger the loss of hundreds of thousands of jobs, according to the Economic Policy Institute, a liberal-leaning research group.