April 7, 2003

 LATEST UNEMPLOYMENT INSURANCE DATA AND MARCH EMPLOYMENT REPORT
BOTH INDICATE A WORSENING LABOR MARKET
Indicators Suggest Temporary Federal Benefits Program Should Be Continued
By Jessica Goldberg and Isaac Shapiro

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New data from the Labor Department on the number of workers who are running out of unemployment benefits show that the plight of the long-term unemployed is both serious and deteriorating.

• The proportion of workers who exhausted their regular, state unemployment insurance benefits before finding a job — the “exhaustion rate” that examines how difficult it has been for unemployment insurance recipients to find new jobs — equaled 50 percent in February.  This is the highest level for any February on record.

• Nearly one-third of a million workers exhausted their state unemployment benefits in February.  The number of “exhaustees” has now increased for 24 straight months when compared to the same months in the previous year.

• Last year Congress created a temporary federal program to provide additional federal benefits to those who have exhausted their state unemployment benefits.  Since then, 2.6 million workers have run out of those federal UI benefits.  That is more than twice the number of exhaustees than in the first year of a similar program Congress created in the last recession.  The current temporary program generally provides fewer weeks of benefits than the federal program in the early 1990s.

Further, the general labor market data released on April 4 as part of the government’s monthly employment report contain grim news about job creation.  More than 100,000 jobs were lost in March, with the overall number of jobs in the economy dipping to a 40-month low.  There are now fewer jobs in the labor market than at any other point in the current downturn.  In combination, the unemployment insurance and job loss indicators suggest that the temporary federal benefits program should be strengthened and extended beyond May 31, when under current law the door closes for any additional workers to begin receiving federal benefits.

 

Exhaustions of Regular, State-Funded Unemployment Benefits

About 327,000 workers exhausted their state-funded unemployment insurance (UI) benefits in February, the most recent month for which data are available.  Since state unemployment benefits typically last for six months, workers who exhausted their benefits in February 2003 generally began receiving unemployment insurance in August 2002.

• Almost twice as many workers exhausted their state UI benefits in February 2003 as in February 2001, the month immediately before the recession began.  Exhaustions in February 2003 even exceeded the already-high level for February 2002, which reflected the effects of the recession.  (Since exhaustion data are not adjusted to control for seasonal variations in unemployment, we evaluate trends in these data by comparing the same month in different years.)

• February 2003 marked the 24th consecutive month in which exhaustions increased relative to the same month in the prior year.  This shows that even workers with significant labor force experience — that is, those who have worked long enough and earned enough to qualify for UI benefits — are having trouble finding jobs.

• Not only is the number of workers exhausting their state UI benefits increasing, so too is the percentage of recipients who exhaust their benefits.  The “exhaustion rate” in February 2003 was 50 percent, a record for a February.[1]  Moreover, for the 12-month period ending in February 2003, the exhaustion rate was 43 percent.  As the graph below shows, that is the highest 12-month average exhaustion rate ever recorded, with data available back to 1973 and covering three other recessionary periods.

 

 

Exhaustions of Federally Funded Unemployment Benefits

Since it was created in March 2002 the Temporary Extended Unemployment Compensation (TEUC) program has provided vital assistance to most workers who have exhausted their state UI benefits over the past year.  In contrast, workers who are still unemployed when their federal TEUC benefits run out are left with neither a paycheck nor any unemployment assistance.  (At the same time, it bears noting that neither regular nor federal unemployment benefits provide the same income security as a job.  Unemployment benefits typically replace only 35 to 50 percent of lost wages, so receipt of a UI check does not guarantee that a family will be able to meet even basic needs such as food and shelter.)

From March 2002 through February 2003, nearly 2.6 million workers ran out of TEUC benefits without being able to find a job.  That is more than twice the number of workers who exhausted their federal UI benefits during the first year of the last recession, in the early 1990s; the difference largely reflects the fact that the TEUC program generally provides workers with fewer weeks of benefits than the earlier program and thus less time to find a job before those benefits expire.[2]  Of those 2.6 million workers, we estimate that more than one million are still without jobs.  (See Table 1 for state-by-state estimates.)

 

The March Unemployment Situation

According to Department of Labor data released on April 4, some 108,000 jobs were lost in March.  Those losses follow sharp declines in February, and bring the total number of jobs lost in the two years since the recession began to nearly 2.1 million.

The private sector lost 68,000 jobs in March, bringing the total number of private sector jobs to about 109 million.  While some government jobs have actually been created since the recession began, private sector job losses have been particularly steep.  Some 2.6 million private sector jobs have vanished between March 2001 and March 2003.  The number of private sector jobs in the economy is currently the lowest since August 1999.

 

Conclusion

After May 31, no new workers will be assisted by the TEUC program, though workers already receiving benefits as of that date generally will receive all the weeks of aid for which they originally qualified.  The 40-month low in the number of jobs available and the continued growth in the number of workers exhausting their state UI benefits suggest the TEUC program needs to be extended.  Indeed, the large number of workers exhausting their TEUC benefits suggests the program should also be strengthened to provide additional weeks of benefits.

These conclusions are very likely to hold even if the labor market begins to turn stronger between now and the end of May.  In all probability, a month or two of positive data will not signal an improvement that is sufficiently dramatic — or sustained — to make the TEUC program unnecessary.  It is worth noting that Congress repeatedly extended the temporary federal unemployment benefits program it created in the early 1990s recession; that program did not end until after the number of people exhausting their regular benefits had declined for 19 consecutive months (again measured on a month-over-month basis).

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Table 1
Exhaustions of TEUC Benefits During the First Year of the Program

	Total number of workers who have exhausted TEUC benefits	Estimated number of workers who have exhausted TEUC benefits and are still unemployed at the end of February
Alabama	28,100	13,600
Alaska	8,800	4,400
Arizona	24,600	10,400
Arkansas	19,100	9,500
California	303,200	118,600
Colorado	37,000	16,600
Connecticut	34,200	16,200
Delaware	5,500	2,000
District of Columbia	8,300	2,600
Florida	138,100	55,900
Georgia	93,300	22,500
Hawaii	7,000	3,100
Idaho	8,500	4,100
Illinois	140,400	53,600
Indiana	47,500	21,100
Iowa	19,500	9,200
Kansas	15,900	8,300
Kentucky	32,400	16,300
Louisiana	22,600	11,700
Maine	7,000	3,100
Maryland	30,400	11,100
Massachusetts	89,900	35,000
Michigan	114,400	47,600
Minnesota	41,300	17,000
Mississippi	22,700	8,000
Missouri	42,100	15,600
Montana	5,100	3,300
Nebraska	8,700	3,600
Nevada	18,900	7,600
New Hampshire	3,700	1,500
New Jersey	123,500	50,500
New Mexico	7,500	2,600
New York	273,600	88,600
North Carolina	78,600	42,200
North Dakota	2,500	1,500
Ohio	88,700	41,900
Oklahoma	19,400	7,800
Oregon	25,000	16,000
Pennsylvania	122,100	39,300
Rhode Island	10,800	4,900
South Carolina	42,000	19,600
South Dakota	900	500
Tennessee	64,700	25,300
Texas	175,200	58,200
Utah	16,500	7,900
Vermont	2,900	1,500
Virginia	39,500	15,900
Washington	46,800	39,000
West Virginia	7,700	3,600
Wisconsin	46,300	22,700
Wyoming	3,100	1,300
Total	2,575,300	1,043,900
Note:  Data from the Department of Labor.  Number of workers still unemployed as of the end of February are Center on Budget and Priorities estimates based on Department of Labor data and estimated rates of reemployment.

 

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End Notes:

[1] Following the approach used by the Department of Labor, the exhaustion rate is the ratio of the number of individuals exhausting their regular benefits in a month to the number of individuals who first began receiving benefits six months prior.

[2] For a more complete discussion of this issue, as well as other TEUC issues, see Jessica Goldberg and Isaac Shapiro, Looking Back and Looking Forward:  An Assessment of the Temporary Federal Unemployment Benefits Program and the Needs of the Long-term Unemployed, Center on Budget and Policy Priorities, March 7, 2003.