The 11.7 million Americans searching for work got discouraging news Friday morning when the Labor Department said employers created only 88,000 jobs in March. The weak job growth comes at the same time benefits for the long-term unemployed are shrinking.
The smaller-than-expected increase in payrolls was a big disappointment, coming after a long stretch of much better results. Over the past year, employment growth has averaged 169,000 a month.
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 upon her unemployment insurance checks since losing her job in January 2012.
“The economy is still so bad in our area,” she said. Despite her constant search for employment, she keeps being told she is “overqualified” for the restaurant work available. “It’s very frustrating,” she said in a phone interview.
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 that 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 1980s recession.
“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 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.