Long-Term Unemployment Ticks Back Up, But Several States Are Moving To Cut Unemployment Benefits

Our guest blogger is Heather Boushey, Senior Economist at the Center for American Progress Action Fund. You can follow her on Twitter at @HBoushey

While job gains are improving, it remains exceptionally challenging for the unemployed to find work. There are nearly five job seekers for every opening available and, as a result, in March, the share of the unemployed who are long-term unemployed — out of work and searching for a new job for at least six months — ticked back up 45.5 percent, just a tenth of a percent below the series high Click here for a larger image:

The problem is no longer primarily lay-offs, but a lack of robust hiring. The BLS Job Openings and Labor Turnover Survey shows that the rate of lay-offs and discharges has down, but, over the past year, the rate of hiring has not improved. Combined with sharply lower voluntary quit rates compared to before the Great Recession, for job seekers, it looks like the labor market is calcifying.

This of course means that unemployment insurance benefits remain critical for families, as well as the economy overall. Yet, states are cutting unemployment benefits. This week, Michigan Gov. Rick Snyder (R) signed into law a bill that, beginning in 2012, will reduce Michigan’s unemployment benefits to 20 weeks, from 26 weeks; 26 weeks is the standard in every other state. Florida is poised to follow suit, as a similar bill has passed in the Florida House. Bills are also pending in Arkansas and Indiana. Missouri has blocked federal aid to the unemployed, which will lead to elimination of benefits for more than 10,000 workers next week.


This is a reckless course of action. The unemployment insurance system acts “counter-cyclically,” pumping money into the economy when unemployment is high by paying benefits that replace lost wages to those involuntarily unemployed while they search for work. State programs matter in terms of how effective unemployment insurance is in boosting economic growth. Wayne Vroman of the Urban Institute examined the effect of the wide differences in unemployment benefit recipiency across states and found that states that covered a larger share of their workers had a stronger macroeconomic stabilizing effect from the program.

The real problem is that states are in crisis. Most states didn’t adequately fund their unemployment insurance systems in good times and now that unemployment is high, they have had to borrow from the feds to pay out much-needed benefits. These loans, however, are now coming due. The Center for American Progress has laid out a comprehensive plan to avoid this race to the bottom. Without a real fix, the race to the bottom will continue.