As Jobless Claims Hit 16-Year High, Congress Mulls Extending Unemployment Benefits

The Labor Department reported today that new claims for unemployment jumped to a 16-year high last week, with 542,000 new claims for jobless benefits filed. Unemployment is currently at a 14-year high of 6.5 percent.

The Senate will vote this week — “and very likely today,” according to Bob Geiger — on “legislation already passed by the House that would extend unemployment insurance for those whose benefits have run out.” In an about-face, the White House announced today that it would support the extension.


“Because of the tight job market, the President believes it would be appropriate to further extend unemployment benefits, and he would sign the legislation now pending in Congress,” White House spokeswoman Dana Perino said. Previously, the White House’s position was that the “the best way to help” the economy and unemployed people is for the unemployed to simply “get back to work.”

Extending unemployment benefits is a crucial step that Congress must take. The National Employment Law Project estimates that more than 800,000 people have already exhausted their benefits, and that “more than one million will do so by the end of the year.” Without benefits, “the Congressional Budget Office finds that about 50% of the long-term unemployed fall under the poverty line.”

As the Wonk Room has noted before, extending unemployment benefits is also a vital first step towards getting the economy back on track. The Center for American Progress Action Fund has found that extending benefits “would significantly boost the economy in those communities hardest hit by layoffs while also investing in a 21st-century economic security system”:

[A] major study of several recent recessions found that unemployment benefits contribute $2.15 in economic growth for every dollar of benefits circulating in the economy. With the health of the U.S. economy so dependent on consumer spending, unemployment benefits are especially important to maintain purchasing power and to boost spending in those communities hit hard by unemployment.

Longer-term reform to the unemployment system is also necessary, as eligibility laws are unfair and outdated. Currently, “only an average of 37 percent of unemployed workers actually collect benefits at all, with low-wage, part-time, and female workers particularly harmed by outdated state eligibility rules.”


Thus, Congress and the administration should work to enact the Unemployment Insurance Modernization Act. The Act “would provide $7 billion in incentive funding for states to cover more than 500,000 workers who now fall through the cracks of the unemployment program and to support those states already doing a better job with coverage.”

There are both immediate and long-term advantages to altering unemployment insurance benefits. There is a lot of hoopla being generated about auto industry bailouts and TARP reversals, but something aimed at helping Americans weather the current economic storm is also in order.


The Senate approved the unemployment benefit extension, sending it to President Bush. The bill “extends benefits by seven weeks. It would extend them for 13 weeks in states with unemployment rates higher than 6%.”


,President Bush signed the bill into law.