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, entailing potentially significant implications for the recovering US economy.
For families dependent on cash assistance, the end of the federal government’s “emergency unemployment compensation” will mean some difficult belt-tightening as enrollees lose their average monthly stipend of US$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 is unclear if Congress has the appetite to start it anew.
An estimated 1.3 million people were set to be cut off when the federally funded unemployment payments ended yesterday.
Started under former US president George W. Bush, the benefits were designed as a cushion for the millions of US 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 US are expected to exhaust their state benefits before the end of June.
“When Congress comes back to work, their first order of business should be making this right,” President Barack Obama said at his year-end news conference.
However, 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, where Republicans have a majority, 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. The cost of them since 2008 has totaled US$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, depending on the state.
Restoring up to 47 extra weeks of benefits through next year would cost US$19 billion, according to the US Congressional Budget office.
The effect of jobless benefits on the unemployment rates has been fiercely debated for decades. To qualify, people have to be seeking work. Some argue that the payments aggravate rather than relieve unemployment.
The flip side is that the benefits — in addition to alleviating suffering — get spent on consumer goods, stimulating the economy and creating jobs.