Extending unemployment benefits stimulates economy and helps workers

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Snapshot for January 30, 2008.

Extending unemployment benefits stimulates economy and helps workers

by Michael Ettlinger and Liana Fox

If the economic stimulus package that Congress eventually passes fails to extend the eligibility period of unemployment compensation, how many people will be left out in the cold?

Nationally, in 2007, 1.2 million people were unsuccessfully seeking jobs for over six months. That makes for a long-term unemployment rate of 0.8% (the percentage of the labor force that has been in the job market for over 26 weeks). Michigan had the highest long-term unemployment rate at 1.7% (with the long-term unemployed numbering over 85,000). Other states that stand out are California (over 160,000) and New York (over 97,000). Hawaii and South Dakota tied for the lowest long-term unemployment rate, at 0.4% (see Map).

No matter where one lives, however, these numbers are undoubtedly on the rise with a weakening labor market. Long-term unemployment puts a great strain on both families and the economy—as savings are depleted and spending constrained. That is why extending unemployment benefits for this group is so important. It both relieves the worst suffering experienced in an economic downturn and provides a strong benefit to the economy as the long-term unemployed quickly spend their benefits on necessities.