The state Employment Security Department estimates that 25,000 jobless Washington workers, including 1,007 in Clark County, will get cut off from unemployment insurance benefits when the federal program ends Saturday.
WASHINGTON — More than 1 million Americans are bracing for a harrowing, post-Christmas jolt as extended federal unemployment benefits come to a sudden halt this weekend, with potentially significant implications for the recovering U.S. economy. A tense political battle likely looms when Congress reconvenes in the new, midterm election year.
For families dependent on cash assistance, the end of the federal government’s “emergency unemployment compensation” will mean belt-tightening as enrollees lose an average monthly stipend of $1,166.
Jobless rates could drop, but analysts say the economy may suffer with less money for consumers to spend on everything from clothes to cars. Having let the “emergency” program expire as part of a budget deal, it’s unclear if Congress has the appetite to start it anew.
An estimated 1.3 million people will be cut off when the federally funded unemployment payments end Saturday.
Started under President George W. Bush, the benefits were designed as a cushion for the millions of U.S. citizens who lost their jobs in a recession and failed to find new ones while receiving state jobless benefits, which in most states expire after six months. Another 1.9 million people across the country are expected to exhaust their state benefits before the end of June.
Gene Sperling, the director of the White House’s National Economic Council, said Friday that President Barack Obama wants an extension as soon as Congress returns next month, warning the abrupt cut-off will deliver a blow to the U.S. economy.
“It defies economic sense, precedent and our values,” Sperling said.
But Obama has no quick fix. He hailed this month’s two-year budget agreement as a breakthrough of bipartisan cooperation while his administration works with Democratic allies in the House and Senate to revive an extension of jobless benefits for those unemployed more than six months.
The Obama administration says those payments have kept 11.4 million people out of poverty and benefited almost 17 million children. Since 2008, they have cost $225 billion.
At the depth of the recession, laid-off workers could qualify for up to 99 weeks of benefits, including the initial 26 weeks provided by states. The most recent extension allowed a total of up to 73 weeks.
Restoring up to 47 extra weeks of benefits through 2014 would cost $19 billion, according to the Congressional Budget office.
House Democrats led by Reps. Sander Levin of Michigan and Chris Van Hollen of Maryland sought an extension through March, offsetting the costs with potential farm bill savings. They were rebuffed.
Senate Democrats and some Republicans plan another push in 2014. Sens. Jack Reed, D-R.I., and Dean Heller, R-Nev., have introduced a bill for a similar three-month extension.
The effect of jobless benefits on the unemployment rates has been fiercely debated for decades. To qualify, people have to be seeking work. The benefits allow some jobseekers to hold out for higher wages. Without the benefits, they might accept lower-paying jobs, reducing the unemployment rate. Others may be looking for work only to keep the benefits flowing and will drop out of the job market entirely once the checks stop. In theory, that also would push the unemployment rate lower.
The flip side is that the benefits — in addition to alleviating suffering — get spent on consumer goods, stimulating the economy and creating jobs.
Michael Feroli, an analyst at JPMorgan Chase, said ending the extensions will lower the unemployment rate by half a percentage point as the long-term unemployed leave the labor force. While that statistical change may look good, Feroli cautioned the drop could mean a similar decrease in consumer spending.
Extending the program would boost GDP growth by some 0.2 percent and increase full-time employment by 200,000 next year, the Congressional Budget Office estimated, but increase the nation’s debt.
Extension advocates cite troublesome figures: three jobseekers competing for each opening; some 4 million long-term unemployed people; unemployment lasting on average 37 weeks, 11 weeks longer than most states provide insurance.
