Republicans have been claiming that ending the unemployment benefits extension, was the reason for the recent drop in short-term unemployment in the June and July jobs reports. They also now have the research to back-up their assertion the National Bureau of Economic Research concluded in a recent study released this past spring that "unemployment benefit extensions can account for most of the persistently high unemployment after the Great Recession." Additionally, researchers at "Federal Reserve banks in Dallas and St. Louis" have also determined in their regional studies that long-term unemployment benefits perpetuate unemployment, the unemployed have less of an incentive to get a new job or even actively look for work.
The Emergency Unemployment Compensation (EUC) program expired on Dec. 28, 2013 there has been one bipartisan bill passed by the Senate the Emergency Unemployment Compensation Extension Act of 2014 and co-authored by Senators Jack Reed, D-RI and Dean Heller, R-NV. Their first bill however, passed its deadline after Speaker of the House John Boehner failed to put the bill to vote because it did not include job creation measures. On Tuesday, June 24, 2014 they unveiled a new bill, extending benefits for five months without a deadline and the retroactive element included in the first bill, but there is still no job creation measures. The House also introduced its own bipartisan unemployment extension bill co-authored and sponsored by Representatives Frank LoBiondo, R-NJ-02 and Dan Kildee, D-MI-05 and introduced on Wednesday afternoon, June 25, 2014. There has been no action in the House or Senate on either bill prior to the August Congressional recess.
The "senior research economist for the Federal Reserve Bank of Dallas," Anil Kumar in determined in his study published in "the second-quarter issue of the Southwest Economy publication" that "Generous unemployment benefits subsidize the cost of a lengthy job search and have long been linked to longer joblessness periods. Part of the increase in the unemployment rate was due to the unemployed either reducing job search efforts or declining some job offers in order to prolong benefit receipt." Jumar also concluded that long-term benefits increased the average length of unemployment from 17 to 20 weeks and unemployed was increased in general by 0.8 percent.
The study conducted by the Federal Reserve Bank of St. Louis examined a hypothetical situation, theoretically determining if the EUC program had expired earlier how it would have affected the unemployment rates. The researchers Canon and Liu concluded that "Without extended UI benefits, these unemployed workers would have been more likely to be employed… and on average 1.9 percent less likely to remain unemployed in the following period."
These studies battle the Democrats' claim that extended unemployment benefits helps economic growth and job creation. The rivaling Congressional Budget Office (CBO) study found a full year unemployment benefits extension would provide 0.2 growth to the economy for 2014. Even a five-month extension would serve beneficial to the economy. If extended for a full year the CBO study concludes extending benefits would add 200,000 jobs and the program would cost $26 billion.
The June jobs report and the July jobs report released by the Bureau of Labor Statistics on Friday morning, Aug. 1 have been misleading and assisting Republican opponents of the unemployment benefits extension. The July jobs report showed good news about the economy, specifically regarding short-term term unemployment and job creation. According to the report, however, the unemployment rate rose slightly from 6.1 percent to 6.2 percent, still 209,000 jobs were added and 238,000 created.
The numbers were less than originally suspected, but are still considered a victory for the economy because it marks the sixth month that the economy has added more than 200,00 jobs. As President Obama pointed out it at his press conference on Friday, Aug. 1; "That's the first time that has happened since 1997." The Associated Press analyzed that that the unemployment rate increase was due to the improved economy and more people actively looking for jobs.
The bad news of the July jobs reports remains persistent long-term unemployment rate. Over three million long-term jobless Americans have been unemployed for more than 27 weeks; they need the benefits to survive. Although the total unemployment rate keeps falling each month, the long-term jobless rate remains virtually the same with high numbers at 3.2 million for July. The long-term unemployment fell by 293,000 and in total has dropped 700,000 in the past three months since March, and dropped by 1.1 million since July 2013.
Short-term unemployment keeps falling however, making more headlines than the increase in the number long-term unemployed. The Labor Department released their weekly report on unemployment applications for the first week in August on Thursday, Aug. The number of applications fell by 14,000 for the week and for the season that number was 289,000. The report also indicated that the "four-week average" of new applications "fell 4,000 to 293,500." The AP pointed out that "That's the lowest average since February 2006, almost two years before the Great Recession began at the end of 2007."
- July 2014 Employment Situation Summary, Bureau of Labor Statistics, Aug. 1, 2014
- Anil Kumar, Strength of Economy, Limited Benefit Eligibility in Texas Curb Long-Term Unemployment Rate, Southwest Economy, Federal Reserve Bank of Dallas, Second Quarter 2014
- S. 2532: A bill to provide for the extension of certain unemployment benefits, June 25, 2015, Referred to Committee -- Full Text -- Video of Press Conference
- H.R. 4970: To provide for the extension of certain unemployment benefits, June 25, 2014, Referred to Committee
Bonnie K. Goodman is the Editor of the Academic Buzz Network, a series of political, academic & education blogs which includes History Musings: History, News & Politics. She has a BA in History & Art History & a Masters in Library and Information Studies, both from McGill University, and has done graduate work in Jewish history at Concordia University as part of the MA in Judaic Studies program. She covers US, Canadian & Israeli politics, with a particular focus on the Obama presidency, Congress, domestic policy, and elections.