News Column

Extended Jobless Benefits Set to Expire Dec. 29

Oct. 29, 2012

Richard Craver

The local economy, already bruised by a persistently high jobless rate, could take another hit as the new year begins, regardless of who is elected president.

That's because all federal extended unemployment benefits will expire Dec. 29 unless Congress acts to extend them again.

If the expiration occurs, North Carolinians would receive just up to 26 weeks of regular state benefits if they qualify for unemployment benefits, rather than what had been up to 99 weeks of state and federal benefits.

Which means anyone whose job was terminated or ended after June 30 will not get any more federal unemployment benefits.

Bobbi Wessling, manager of the Winston-Salem office of the N.C. Division of Employment Security, said her office has been informing jobless-benefit recipients of the pending expiration.

"We're continuously reminding them on the phone and when they come to see us," Wessling said. "They are concerned, of course, because for many of them the benefits are their only source of income."

North Carolina was one of 22 states whose unemployed recipients could receive up to the 99 weeks, in part because its unemployment rate stayed above 8 percent for several years.

Extending the federal jobless benefits will be crucial since more than half of unemployed North Carolinians have been out of work for more than 26 weeks, said Alexandra Sirota, director of the Budget and Tax Center, a project of the N.C. Justice Center.

"Losing that income will blow a hole through their households, with a ripple effect to be felt throughout local communities," Sirota said.

Ericka Perryman, press secretary for U.S. Rep. Virginia Foxx, R-5th, said extending the federal unemployment benefits will be "one of a number of issues that will be considered, and hopefully resolved, during a very busy lame-duck session of Congress."

U.S. Sens. Richard Burr, R-N.C., and Kay Hagan, D-N.C., could not be reached for comment on whether they support another round of extended federal benefits. Hagan spokeswoman Hannah Smith said she is not aware of any current effort.

Hagan said in an Oct. 19 statement about the September state jobless rate that "we need to stop the partisan bickering in Washington and focus on action that gets North Carolinians back to work."

"They cannot wait for action that moves our economy forward, and neither can the businesses that don't have the certainty they need to hire more people."

Larry Parker, acting public information director for the N.C. Division of Employment Security, said he not been made aware of any attempt to extend the benefits in Congress.

"Many Congressional Democrats are anxious to deal with this during the lame duck session as part of any deal regarding the fiscal 2013 budget," said Ross Eisenbrey, vice president of the left-leaning Economic Policy Institute.

"Many of their states are still in deep jobs deficits and they don't want to see millions of people cut off from the only income source they have. It's telling that President Obama is not proposing to extend the payroll tax cut but still supports (the federal unemployment benefits)."

The outcome of the presidential election could hold the keys to whether extended benefits are discussed, much less approved, said John Hood, president of the John Locke Foundation, a libertarian policy-research group in Raleigh.

"If President Obama wins, particularly if the vote is close, I think the administration may be inclined to seek some compromise with the outgoing Congress as a sign of things to come," Hood said.

"On the other hand, if Romney wins, I suspect that the Obama administration will focus on a few final priorities. I'm not sure if action on unemployment insurance will be one of those items."

Subhead

When Congress agreed to extend the federal benefits in February, more than 150,000 North Carolinians were estimated to be affected. North Carolina's jobless benefits max out at $521 a week and average $280 a week.

Parker said the division would not have a firm number of North Carolinians facing the expiration until early December.

"There are people every week whose extended benefits are expiring and there are people who are qualifying now for whatever weeks that are left," Parker said.

According to the National Employment Law Project, more than 2 million Americans will have their federal extended unemployment benefits expire during the holiday season.

Nationally, the U.S. Bureau of Labor Statistics reported there were 4.8 million long-term unemployed Americans, defined as being without a job for at least 27 weeks.

Although the figure is down from 6.2 million in September 2011, it still means about 40 percent of unemployed Americans are in the long-term category.

"So while extended unemployment benefits aren't as necessary as they were a year and two years ago, there are still a lot of people who could use those benefits," said Andrew Brod, a senior research fellow for UNC Greensboro's Center for Business and Economic Research.

"Among various kinds of government spending or tax cuts, unemployment benefits provide one of the biggest bangs for the buck. The people who receive unemployment benefits tend to turn around and spend them.

"And that's what gets a depressed economy like ours moving again."

Brod said his sense is that "some of the more sensible policies we've had in recent years are getting lost in the fiscal-cliff shuffle."

"Federal extended unemployment benefits may be one. The temporary payroll tax cut is definitely one. Both of them affect lower-income folks, and that's where you get the biggest bang for the buck.

"But the payroll tax is a rather quiet, almost behind-the-scenes initiative," Brod said. "Its extension doesn't seem to have an advocate in D.C. right now, which is unfortunate given its success."

Subhead

The 20 weeks of extended state benefits were paid after the recipients exhausted the 53 weeks of extended federal benefits that were dispersed through four tiers.

In September, the four tiers were reduced in length. The first two tiers now provide 14 weeks each, the third tier nine weeks and the four tier 10 weeks.

The state's extended benefits -- provided through borrowing from the U.S. Labor Department -- expired in May. The state owed $2.51 billion to the department as of Wednesday.

Since the financial and housing crisis began in late 2007, extended federal benefits have become a major political issue, including Republicans proposing drug testing and high school equivalency diplomas to qualify.

Each time, the program was saved from expiration by last-minute compromises in Congress.

Michael Walden, an economic professor at N.C. State University, said long-term unemployment will remain a big issue for years to come.

"It will likely be a political issue as to whether the benefits are extended," Walden said. "My guess at this point is no."

People who exhaust their state and federal benefits find themselves in a frustrating Catch-22. Essentially, their unemployment payments are over unless they can get another job, and get laid off again, at which time they will be eligible for new benefits.

Many employers, though, remain reluctant to hire, particularly full time.

Subhead

The expiration of the extended federal benefits will only exasperate an already festering economic wound in North Carolina, said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy.

"The bottom line in North Carolina is the state's labor market is not generating enough jobs for all those who want and need work," Quinterno said.

"As a result, those who have found themselves unemployed are facing prolonged spells of unemployment. Little suggests that the state's job market is about to grow robustly between now and December, meaning that the basic landscape facing the unemployed likely will remain unchanged."

Quinterno said the economic impact goes beyond the affected households.

"The expiration of benefits will remove income from many communities, especially in those with high levels of unemployment, and further reduce economic demand and activity in local economies throughout the state," Quinterno said.

Mark Vitner, a senior economist with Wells Fargo Securities, said the larger metro areas can handle the loss of the extended federal benefits better than suburban and rural communities.

"I think places like Thomasville, Gastonia and Hickory and other areas where unemployment has remained high for a long time will have a bit more trouble," Vitner said.



Source: (c)2012 Winston-Salem Journal (Winston Salem, N.C.). Distributed by MCT Information Services.


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