By Chad Stone, chief economist at the Center on Budget and Policy Priorities
Today’s jobs report makes clear that, despite improvements this year, the labor market is still not strong enough for policymakers to let emergency federal unemployment insurance expire as scheduled during Christmas week. In particular, long-term unemployment and its programs remain much higher than in each of the previous seven major U.S. recessions had expired.
That means more hardship for the families of workers who are still struggling to find a job, and it also means that families that lose Emergency Unemployment Compensation will have less to spend. Reduced spending, in turn, will hurt the recovery and slow job creation. The Congressional Budget Office estimates that extending EUC through 2014 would boost employment by up to 300,000 jobs by the end of 2014.
There have only been four months since the end of the recession with job growth that good.
Labor market conditions are significantly better than in the depths of the Great Recession in 2008-09. Nevertheless, nonfarm payroll employment has not yet returned to where it was at the December 2007 start of the recession, unemployment is still much too high, and the share of the population with a job remains well below what it would be in a normal labor market.
Policymakers enact emergency federal programs like the current Emergency Unemployment Compensation program to address the reality that, under such conditions, a much-larger-than-normal percentage of jobless workers will exhaust their regular state benefits (typically after 26 weeks) before they can find a new job. Like its predecessors, EUC is designed to phase down as labor market conditions improve and eventually expire.
Therefore, the phasing down is underway. The maximum number of weeks of EUC plus regular benefits that’s available has fallen from 99 to 73 but, more significantly, that maximum is available in only a handful of states with very high unemployment rates. But, it’s too soon for the program to expire.
As benefits become less available and their maximum duration shrinks, the number of long-termed unemployed workers who are receiving benefits is falling faster than is the number of long-term unemployed, according to the National Employment Law Project.
Stone was the acting executive director of the Joint Economic Committee of the Congress in 2007 and before that staff director and chief economist for the Democratic staff of the committee from 2002 to 2006. He was chief economist for the Senate Budget Committee in 2001-02 and a senior economist and then chief economist at the President’s Council of Economic Advisers from 1996 to 2001.
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