Source: Bureau of Labor Statistics, January 2008
● State labor legislation enacted in 2007
● Changes in State unemployment insurance legislation, 2007
● Older workers: increasing their labor force participation and hours of work
Working families are bracing for major layoffs amid growing signs that the nation may be heading toward a serious recession. Despite their compelling concerns and strong evidence that federal jobless benefits will immediately stimulate the economy, the U.S. Senate recently came one vote short of the 60 votes needed to pass an economic stimulus package (Economic Stimulus Act of 2008) that included a 13-week federal extension of unemployment benefits. That leaves an estimated three million workers without any additional federal support when they run out of their 26 weeks of state jobless benefits this year.
Now, the attention shifts to Congressional efforts to promptly enact separate legislation to extend federal jobless benefits to help boost the economy. This paper makes the case for an immediate extension of jobless benefits and federal reforms to modernize the unemployment insurance program. It provides new state estimates of the number of workers who will exhaust their state unemployment benefits this year as well as a rebuttal to the argument of Bush Administration officials that unemployment has not reached high enough levels compared to prior recessions to justify an extension of jobless benefits. Underscoring the harshness of the downturn on long-established workers and the consequences of inaction by Congress for moderate-income families, the paper also finds that the unemployed include a disproportionately large number of older workers who are looking for work for longer periods of time in today’s struggling economy.
This paper investigates the value of employment data as real-time recession indicators. Among popular monthly labor measures, the unemployment rate is the most useful as an indicator of recession, whereas two top measures of employment growth -payroll jobs and civilian employment -have little value. Two other series, the labor force participation rate and the employment-population ratio, also provide little or no value in anticipating a recession. The best pre-recession employment indicator is actually weekly claims for unemployment insurance (UI). The paper reviews a new technique for predicting recessions, and develops an employment recession probability index. The index indicates a 35.5 percent chance that the U.S. economy is in recession, sharply up from 10 percent last month.
Recessions hurt. And they hurt the poor and socially marginalized populations the most. As we face the prospect of the second recession of the decade and consider the merits of various stimulus packages, it is useful to examine what a recession would mean for black America.
The late 1990s produced a full employment economy and significant absolute and relative economic gains for blacks. This Issue Brief contrasts the benefits of a national full-employment economy with the harm caused by the 2001 recession and the weak job growth that followed.
… Maintaining living standards immediately after job loss, the original focus of UI, is no longer the major difficulty associated with unemployment. In the twenty-first century economy, the situation has changed in at least three key ways. First, job loss is now more likely to be permanent, and associated with drops in long-term wages, not just short-term income loss. Second, unemployment duration has increased. Third, people have greater ability to borrow to tide over short periods of unemployment. These three facts – more permanent job loss with large wage losses, longer unemployment durations, and greater ability to borrow – suggest a shift in resources towards larger, longer-term consequences of unemployment should be the top priority of efforts to modernize the UI system.
Source: Cynthia M. Fagnoni, Managing Director Education, Workforce, and Income Security Issues, United States Government Accountability Office, Testimony Before the Subcommittee on Income Security and Family Support, Committee on Ways and Means, House of Representatives, GAO-07-1243T, Wednesday, September 19, 2007
The overall rate of UI receipt has increased modestly from the mid-1980s to 2005, but still remains below the near-50 percent rate of the 1950s.
A comparison of UI receipt by earning levels shows that low-wage workers were less likely to receive UI benefits than higher-wage workers. Moreover, the gap between the two groups has not narrowed over time. Between 1992 and 1995–the period covered in GAO’s previous analysis–low-wage workers were about half as likely to receive UI benefits as higher-wage workers. For the years 1998 and 2003–the years added for this analysis–they were about one-third as likely.
Unemployment Insurance (UI) is a joint federal-state program designed to provide temporary income support to workers who have a demonstrated attachment to the labor force and lose their jobs due to a lay-off or for other economic reasons, or who must leave their jobs through no fault of their own. (See the box on page 2 for an overview of the UI system.) Unfortunately, the UI system is not performing as well as it should in meeting this goal. Many workers who lose their jobs — especially low-income and part-time workers — end up not receiving any unemployment benefits; many others exhaust their benefits before finding a new job.
The need to modernize UI has been evident for some time, and many states have made progress reforming their UI laws over the past decade or so. It is time for the federal government to lend its support and encouragement to these efforts, and such reform may be on the Congressional agenda this year.