SNAP Enrollment Remains High Because the Job Market Remains Weak

PDF of this report (7pp.)

By Chad Stone, Jared Bernstein, Arloc Sherman and Dottie Rosenbaum

Revised July 30, 2013

The Supplemental Nutrition Assistance Program (SNAP, formerly known as the food stamp program) historically has been the most responsive federal program after unemployment insurance in assisting families and communities during economic downturns.  The recent downturn was no exception.  While SNAP enrollment growth has slowed substantially in the last year, national enrollment is at an all-time high (see Figure 1).  Some critics have claimed that the fact that SNAP enrollment has not declined in tandem with the recent decline in the unemployment rate indicates most of SNAP’s enrollment growth of recent years is not related to the economy.  The reality, however, is that SNAP enrollment and costs are high because the job market remains weak.

  • The recent reductions in the unemployment rate overstate the improvements in the labor market since the economy hit bottom, as Federal Reserve Chairman Ben Bernanke recently observed.  Most tellingly, the proportion of the adult population with a job (the employment rate) has barely improved since the depth of the recession.
  • The number of unemployed workers who aren’t receiving any unemployment insurance (UI) benefits — the group of the unemployed most likely to qualify for SNAP because they have neither wages nor UI benefits — has continued to grow and is higher now than at the bottom of the recession.  Even as the overall number of unemployed workers has declined, the number of unemployed workers receiving no UI benefits has increased.
  • The historical record shows that declines in poverty and SNAP enrollment typically lag behind declines in the unemployment rate following recessions.  Two new economic studies find that the relationship between SNAP participation and unemployment in the recent recession and its aftermath is consistent with the pattern of what occurred during and after previous economic downturns, and that the key difference is that this time, the jobs slump is far worse. 

If the job market improves and fewer families thus need food assistance, SNAP enrollment and costs should come down.  In fact, the Congressional Budget Office (CBO) projects that as the labor market recovers, SNAP costs will decline markedly.  CBO projects that by 2019, SNAP costs will fall all of the way back to their mid-1990s level, measured as a share of gross domestic product (GDP) (see Figure 2).

SNAP Responded to the Recession and Will Shrink as the Economy Improves

SNAP spending rose considerably when the recession hit.  That’s precisely what SNAP is designed to do:  quickly help more low-income families during economic downturns as poverty rises, unemployment mounts, and more people need assistance.  As CBO has stated, “the primary reason for the increase in the number of participants was the deep recession from December 2007 to June 2009 and the subsequent slow recovery.”[1]

The number of SNAP recipients increased in every state as a result of the recession.  Some of the states that were hit hardest by the recession saw the largest caseload increases.  For example Nevada, Florida, Idaho, and Utah, the four states with the greatest growth in the number of unemployed workers between 2007 and 2011, also had the greatest growth in the number of SNAP recipients.

As the economy has started to recover, SNAP caseload and spending growth have slowed substantially.  SNAP spending in the first half of calendar year 2013 was only 1.5 percent higher than the same period in 2012.  In coming years, caseloads and spending are expected to begin declining as households’ economic circumstances improve, and as the large temporary increase in SNAP benefits enacted in the 2009 Recovery Act ends in November 2013.

Labor Market Conditions Remain Weak Despite Drop in Unemployment Rate

In the economic recovery from the Great Recession, the unemployment rate has fallen from a peak of 10.0 percent in October 2009 to 7.6 percent in June 2013.  That is a significant improvement.  But as Federal Reserve Chairman Ben Bernanke said recently:  

[The current unemployment rate] overstates the health of our labor markets, given participation rates and many other indicators of underemployment and long-term unemployment.[2]

Bernanke’s mention of “participation rates” refers to the fact that the official unemployment rate does not include the large number of people who want a job — and in many cases would likely have found one in a stronger labor market — but with jobs so hard to find haven’t looked enough recently to count as officially unemployed.  (This group is referred to as people who are “marginally attached to the labor force.”)[3]  The labor-force participation rate — the share of people aged 16 and over who are either working or officially unemployed — fell in the Great Recession and then continued to decline in the sluggish recovery.  It is now at levels not seen since 1981.

As a result of the combination of a high unemployment rate and a low labor-force participation rate, the share of people aged 16 and over who have a job — what is often called the employment rate (or, more technically, the employment-population ratio) — plunged in the recession to levels not seen since the mid-1980s and has remained there.  While the percentage of workers in the labor force who are unemployed has fallen since late 2009, producing a decline in the official unemployment rate, this masks the cold reality that the percentage of the adult population with a job is still stuck at levels it fell to when the economy hit bottom (see Figure 3).[4]

Besides its failure to reflect the decline in labor-force participation, the official unemployment rate does not reflect underemployment.  Many people who would like to work full time can only find part-time work.  The Labor Department estimates that in June 2013, 22 million Americans were either unemployed or underemployed, when you take into account those who want to work full time but can only find part-time work (a category referred to as people who work “part-time for economic reasons”).  Of these 22 million individuals (who constitute 14.3 percent of those in or marginally attached to the labor force), barely over half — 11.8 million — were officially unemployed.

Both the duration of unemployment and the prevalence of long-term unemployment —defined as being unemployed for 27 weeks or longer — have been sharply higher in the current economic slump than in any previous downturn, with data going back to the late 1940s.  The percentage of unemployed workers who are long-term unemployed soared above 40 percent in the current jobs slump, far above its previous peak of 26 percent following the 1981-82 recession — and it remains stuck far above the highest level it hit in any prior downturn on record (see Figure 4).  With the deep, prolonged recent recession and ensuing weak recovery, SNAP has become increasingly important to the long-term unemployed. It is one of the few resources for people who have exhausted their unemployment benefits and still been unable to find a job. 

A final factor likely contributing to the ongoing demand for SNAP benefits among unemployed workers is the growing number of such workers who receive no UI benefits.  While the number of unemployed workers has fallen since 2010, the number of jobless workers who receive no state or federal UI benefits has risen and is higher now than at the depths of the recession.  This trend appears to be driven by increases in the number of people who have lost their jobs but aren’t receiving UI, rather than increases in the number of people who aren’t eligible for UI in the first place because they have quit their old job to look for a different one or are new entrants or re-entrants to the labor force.

In 2009, when the economy hit bottom and the unemployment rate peaked, 14.3 million workers were officially unemployed and 9.2 million of them received UI benefits — leaving 5.1 million jobless workers with no UI benefits.  In the first half of 2013, there were fewer officially unemployed workers — 11.9 million.  But there were more unemployed workers not receiving UI benefits — 6.7 million.  In other words, the number of unemployed workers who are in the worst shape because they have neither wages nor unemployment benefits is greater now than at any previous point in many years.

The increase in the number of unemployed workers not receiving UI benefits is important in understanding recent trends in SNAP participation (see Figure 5).  SNAP benefits are particularly important for those who have lost their jobs and have neither wages nor UI benefits and consequently are more likely to qualify for SNAP than workers receiving wages or UI.

A smaller share of unemployed workers now receive UI for several reasons.  One is the length and depth of the protracted jobs slump, which has left many workers unable to find work before their UI benefits run out.  In addition, a number of states have cut the number of weeks of regular, state-funded UI benefits in recent years; these changes also shorten the number of weeks of federal UI benefits a person can subsequently receive. 

In addition, the duration of federal UI benefits (which go to long-term unemployed workers) has fallen.  This reflects several factors.  One is the decline in the official unemployment rate in many states, which itself leads to automatic reductions in the number of weeks of federal UI benefits in the form of Emergency Unemployment Compensation available in those states.  Another factor is federal changes implemented in 2012 in the number of weeks of federal UI benefits provided irrespective of improvements in economic conditions.  A third factor is the disappearance from every state except Alaska of another source of long-term UI benefits, the federal Extended Benefits program (which is designed to “trigger on” automatically when a state’s unemployment rate is rising rapidly, but under the same formula, ceases to remain available once unemployment stops rising even if the state continues to experience a long period of severely elevated unemployment).[5]

Historically, Declines in SNAP Have Lagged Behind Declines in Unemployment

Critics of SNAP who argue that participation and program costs should fall in line with the unemployment rate also have not looked carefully at the historical record.  Declines in poverty and hardship tend to lag behind improvements in the economy.

As CBO has observed:

Even as the unemployment rate began to decline from its 1992, 2003, and 2010 peaks, decreases in [SNAP] participation typically lagged improvement in the economy by several years.  For example, the number of SNAP participants rose steadily from about 20 million in the fall of 1989 to more than 27 million in April 1994 — nearly two years after the unemployment rate began to fall and a full three years after the official end of the recession in March 1991.[6]

Two recent studies conclude that the rise in SNAP rolls in the Great Recession and its aftermath do not exceed what would be predicted based on the historical relationships between SNAP participation and the economy. 

In a new piece of research, economists Hilary Hoynes and Marianne Bitler examine the relationship between poverty and fluctuations in economic activity since 1980 and the historical responsiveness of SNAP, UI, and other safety net programs over the business cycle.[7]   If SNAP had increased more in proportion to the unemployment rate over the past few years than it has historically, that would provide support to critics who claim that SNAP should have come down as the unemployment rate has declined.  But that is not what the research shows.  Hoynes and Bitler found that “[T]he safety net programs receiving the most attention through the Great Recession (Food Stamps and UI) exhibit adjustments very consistent with their behavior during previous historical cycles.”

Similarly, in another new study, economists Peter Ganong and Jeffrey Liebman examine changes in SNAP participation from 1991 to 2011.  They find that changes in local employment conditions explain as much as 96 percent of the increase in SNAP enrollment from 2007 to 2011.[8]   In discussing these results, they observe that “Some commentators …have raised concerns that SNAP receipt remained high even after the unemployment rate peaked in June 2009” but estimates show this is consistent with past recessions.

One reason that SNAP enrollment may remain high for several years after a recession ends and the unemployment rate begins to decline is that people who find jobs with low wages and limited hours often will still be eligible for SNAP.  A second reason may be that the least-skilled workers are slower to be hired back.  Less-skilled workers are liable to be among the “first fired” in a downturn and the “last hired” in a recovery.  A report from the U.S. Department of Agriculture’s Economic Research Service notes that the research indicates that:

One explanation for a lagged response of SNAP participation to a reduction in the unemployment rate during the early stage of an economic recovery is that labor market outcomes (such as unemployment) for less-skilled workers vary more over the business cycle than do those of more-skilled workers.  The improvement of economic conditions during the early stage of recovery, when the unemployment rate finally starts to fall, takes longer to be felt by low-income workers in low-skilled jobs, who are more likely to participate in SNAP.[9]

Conclusion

Once the true state of the labor market and the historical relationship between changes in SNAP and the economy are taken into account, there is nothing surprising about the fact that SNAP participation and program costs have not come down in tandem with the unemployment rate.  The labor market still needs to improve substantially from the severe blows of the Great Recession, but when it does, SNAP enrollment and costs should decline — as they have in previous economic recoveries and as CBO projects that they will in the years ahead.

End notes:

[1] Congressional Budget Office, “The Supplemental Nutrition Assistance Program,” April 2012, http://www.cbo.gov/sites/default/files/cbofiles/attachments/04-19-SNAP.pdf.

[2] “Bernanke Talks: A Conversation at the NBER,” Real Time Economics, The Wall Street Journal, July 11, 2013, http://blogs.wsj.com/economics/2013/07/11/bernanke-talks-a-conversation-at-the-nber/.

[3] To be counted as officially unemployed, a respondent to the Census Bureau’s monthly Current Population Survey — which is used to estimate the unemployment rate — must have looked for a job in the four weeks prior to the survey.  A person who wants and is available for work and has looked in the past year but not in the most recent four weeks is considered “marginally attached” to the labor force but not officially unemployed.

[4] “Chart Book: The Legacy of the Great Recession,” Center on Budget and Policy Priorities, updated July 9, 2013, http://www.cbpp.org/cms/index.cfm?fa=view&id=3252.

[5] Center on Budget and Policy Priorities, “Policy Basics: How Many Weeks of Unemployment Compensation Are Available?” updated July 23, 2013, http://www.cbpp.org/cms/?fa=view&id=3164.

[6] CBO op. cit. P 3.

[7] Marianne Bitler and Hilary Hoynes, “The More Things Change, the More They Stay the Same:  The Safety Net, Living Arrangements, and Poverty in the Great Recession,” draft, May 2013. http://www.econ.ucdavis.edu/faculty/hoynes/working_papers/Bitler-Hoynes-GR-fin.pdf.  This study examines SNAP participation through 2011.

[8] Peter Ganong and Jeffrey B. Liebman, “Explaining Trends in SNAP Enrollment,” draft, June 2013.  http://scholar.harvard.edu/ganong/publications/explaining-trends-snap-enrollment/.  Ganong and Liebman conclude that changes in employment conditions account for a minimum of 69 percent and as much as 96 percent of the increase in SNAP participation over this period.

[9] Kenneth Hanson and Victor Oliveira, “How Economic Conditions Affect Participation in USDA Nutrition Assistance Programs,”EIB-100, U.S. Department of Agriculture, Economic Research Service, September 2012, http://www.ers.usda.gov/media/914042/eib100.pdf.

 

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