U.S. Job Growth Slows As Jobless Face Benefit Cuts

Apr 5, 2013
Originally published on April 6, 2013 3:55 pm



Hopes for an improved labor market in 2013 soared in February when job creation surged to a revised 268,000 positions, even stronger than the original estimate of 236,000.

But the momentum reversed in March, and a lot of people dropped out of the search for work. That allowed the unemployment rate to dip slightly to 7.6 percent, down from 7.7 percent.

For the 4.6 million long-term unemployed Americans, the disappointing March report comes just as life gets even tougher. Rules differ from state to state, but in general, government checks for the unemployed are shrinking as extended federal benefits dwindle.

'It's Very Frustrating'

Megan DeYoung lost her extended benefits last week. A chef in southeast Wisconsin, DeYoung has been depending on her unemployment insurance checks since losing her job in January 2012.

"The economy is still so bad in our area," she said in a phone interview. Despite her constant search for employment, she keeps being told she is "overqualified" for the restaurant work available. "It's very frustrating."

Now without extended benefits, the economic impact will be brutal. "It makes it hard for us to have a life," she said.

Here's what's going on:

The Bureau of Labor Statistics defines the long-term unemployed as workers who have not gotten paychecks for 27 weeks.

Traditionally, states manage their own unemployment-insurance programs, setting the rules and carrying the costs for providing 26 weeks of checks, averaging $300 a week.

Benefits Grow, Then Get Trimmed

But when the Great Recession started deepening in 2008, lawmakers became alarmed at the pace of job destruction and agreed to provide additional federal funds to help states extend aid to the unemployed.

Those benefits were extended again, up to 99 weeks, in 2009 when the unemployment rate peaked at 10 percent. The goal was to help people hang on to their homes and hopes through the worst of the economic downturn.

But then in 2012, the job market started improving. In February of last year, Congress reauthorized the extended-benefits program but began trimming it, setting the limit at 73 weeks even in the states with the worst unemployment problems.

This year, the cuts will deepen again thanks to the "sequestration" process, a series of automatic, across-the-board federal spending cuts. Because Congress failed to reach a budget compromise by March 1, the automatic reductions are now kicking in and will cut federal emergency unemployment checks by up to 10.7 percent in this fiscal year, which ends Sept. 30.

The roughly 2 million people who get extended benefits will see their incomes shrink by up to $450 between now and the end of September, according to Labor Department estimates.

The reductions will vary because each state calculates benefits under its own rules. Some states are making the cuts immediately, and others are holding off for now. The longer a state waits to begin implementing the cuts, the deeper they will be this summer.

For Many, A 'Theoretical' Recovery

Advocates for the unemployed say the cuts will have a brutal impact on people who can't find jobs. One such advocacy group, the National Employment Law Project, says the average duration of unemployment is still at 37 weeks, nearly four months longer than during the worst of the recession in the '80s.

"For millions of America's workers, the economic recovery remains more theoretical than real," says Christine Owens, the group's executive director. Cuts in benefits will not only harm the jobless now, but also weaken the economy over time because the changes will mean "lower consumer spending, and higher demand for publicly funded social services for decades to come," she contends.

A report last year by the Congressional Budget Office said extending benefits can help the economy because unemployed workers spend every additional dollar they receive.

But many conservative economists argue that the labor market has improved enough to create employment opportunities for those willing to make needed changes, such as moving to another city, accepting lower wages or learning new skills.

Testifying before Congress, James Sherk, a labor policy analyst with the conservative research group The Heritage Foundation, said people getting unemployment insurance (UI) benefits have less incentive to make the adjustments needed to find jobs.

"UI payments make being unemployed less costly, causing UI recipients to take longer to find new work," he said.





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But first, Friday morning, the Labor Department announced that employers created just 88,000 jobs in March, down from the past year's average of 169,000 jobs per month. The news hits the unemployed hard, especially during sequestration budget cuts that reduce federal benefits and shrink government unemployment checks across the board.

NPR's senior business editor Marilyn Geewax is here to update us on the jobs numbers across the country and what this means for unemployment benefits at the state level. Marilyn, thanks for joining us.


LYDEN: So here, we have the set of figures from February - 268,000 jobs created - lots of excitement. It's a month later, a backslide. What's going on?

GEEWAX: Well, it was a big backslide, and it was very disappointing. Economists reacted very badly, so did investors. This just was not good news, and a lot of people just sort of lost confidence in the economy.

Back in December, Congress agreed to hike taxes. And all Americans - anyone who pays that payroll tax - is seeing their paycheck get a little smaller. So there are real problems with consumer spending and concerns about going forward. Also, we had cutbacks in government spending, so there's some job losses, particularly at the postal service. So we're down 14,000 federal jobs.

LYDEN: Let's take another look at the numbers from Friday state by state. What states have the lowest and highest jobs numbers right now?

GEEWAX: If you look at California, Mississippi, Nevada, the unemployment rate is still terrible. It's like 9.6 percent. But other states - North Dakota - unemployment is at 3.3 percent, so, you know, really talking about full employment in the areas where the energy sector is booming. So most states are doing sort of a middling, you know, seven, 8 percent unemployment rate. But there really are these boom areas, and there are these real bust areas.

LYDEN: How do these benefit rules vary state by state?

GEEWAX: These programs have always been designed and run by the states. That's because, as we've just said, there's a great deal of variability in the unemployment rate. But now, generally speaking, states would give 26 weeks of unemployment benefit.

But, you know, when the recession was so bad back in 2008 and '09, Congress decided to extend them. But last year, Congress decided to focus more on reducing federal deficit, so they started cutting those extended benefits. Now, even in the worst states, the most you can get is 73 weeks. And actually, many states are down to about 40 weeks.

But there's one other thing here, Jacki. Sequestration is now cutting in, so even people who do still have their extended benefits will see them shrink by up to 10.7 percent.

LYDEN: You interviewed a young chef in southeastern Wisconsin this past week who had recently finished her extended benefits. What was the story there?

GEEWAX: Well, she had been working as a chef at a private country club, and she got laid off. And she's been looking for work. But every time she goes into a place to apply, they say you're over qualified. And she's been living on an unemployment check of $363 a week, and now that's about to go away.

LYDEN: What do advocates for the unemployed say about the budget cuts? And I'd also like to know what conservative economists say.

GEEWAX: Well, there's two ways of looking at it. Most economists believe that the extended unemployment benefits helped the economy. That is they serve as a stimulus because as soon as you get that paycheck, you spend it. There's a different way of looking at it. Conservatives say the problem is that when you extend benefits up to 99 weeks, people take their time. And then in the end, it actually hurts the unemployed because it keeps them out of the job market longer.

LYDEN: Well, we've been talking about a lot of volatility, so it seems unfair to ask you to project where this goes from here. But what do you think?

GEEWAX: Well, really, right now, we're on this edge where we had hoped for great momentum moving forward. And, in fact, we seem to be on the knife edge again wondering which way it's going to go.

LYDEN: Marilyn Geewax is NPR's senior business editor. Thank you very much.
