It seems as if every monthly employment report is a mixture of good and bad news. Friday was no exception. Job growth picked up steam last month, with the economy generating 290,000 new jobs in sectors such as manufacturing, federal census taking, business services and healthcare, according to the Bureau of Labor Statistics.
But raised hopes of finding a job encouraged even more workers who had given up hope to renew their search, and as a result, the unemployment rate inched up two-tenths of a point to 9.9 percent. Indeed, prospects are better for those 195,000 re-entrants to the workforce – but still very bad: there are 5.5 workers unemployed for every job opening, down from a peak of 6.25, but still nearly double the worst point of the 2001 downturn.
And Economic Policy Institute president Larry Mishel calculates that there are another 1.9 million people still in the wings waiting to enter the job search just to get back to the level before the recession. Ironically, workers with less than a college education – who as always were hit hardest and first – were gaining some jobs, while better educated workers were still losing jobs.
The economy — and therefore jobs — just hasn’t grown fast enough, despite the beneficial effects of the stimulus.
But as that tapers off later this year and as state and local governments slash jobs in their new fiscal year, the unemployment rate is likely to remain high, and the percentage of the unemployed who have been out of work six months or more – already at a record high of 45.9 percent – will likely continue to grow.
That makes the news from Thursday’s hearings before the House Ways and Means Committee’s Subcommittee on Income Security and Family Support even more grim. The nation’s unemployment insurance safety net, already full of holes and inadequate, faces a financial crisis that could lead to drastic cutbacks at a time when workers need help and the economy needs the powerful stimulus of unemployment insurance.
Largely state-run, and financed by taxes on employers, but also partly a federal responsibility, the nation’s unemployment systems, for the most part, headed into the recession without adequate funds for even a mild recession, according to Andrew Stettner, deputy director of National Employment Law Project. Many states – as well as the federal government – kept the taxable portion of wages unchanged for years, even decades, as nominal pay increased and even cut tax rates.
Hard hit by high joblessness, the unemployment insurance (UI) trust funds in 34 states were depleted, and state government borrowed $41 billion up till now (with the Labor Department predicting that 40 states will borrow $90 billion by 2013). Last year’s stimulus package waived interest payments through the end of the year, as it also pushed states to improve their UI protections for workers. In other legislation, despite Republican delays and opposition, Congress extended the duration of UI and COBRA (a provision to continue an employer-provided health insurance plan after a layoff), and a longer extension of a temporary fix is near reconciliation between the two houses.
But when the waiver on interest payments on the federal loan to the states expires, many states are likely to cut eligibility even further (and now fewer than half the unemployed) and reduce benefits that are often paltry. That’s what most states did after the deep Reagan recession in th 1980s.
States are reluctant to tax businesses further in an early, fragile recovery, especially on top of taxes many have imposed to deal with their fiscal crises, and they can’t easily turn to depleted general funds. But if they cut unemployment benefits, they hurt vulnerable workers and pull away an essential stimulus.
Stettner and Center on Budget and Policy Priorities experts Iris Lav and Michael Leachman argue that Congress should extend the waiver on state repayments of interest but with conditions: (1) states would have to at least maintain their level of effort to help the unemployed, and (2) reform their systems so they will be more robust, in particular building up a trust fund in good times to carry them through even very bad recessions.
At a time when more people need more help and for longer periods, it’s the least we should be doing for them – and for everyone else, who will benefit from a growing economy.
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David Moberg, a former senior editor of In These Times, was on staff with the magazine from when it began publishing in 1976 until his passing in July 2022. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy.
