Economic Snapshot | Jobs and Unemployment

It’s too early to cut back on unemployment benefits

Congress is debating whether to renew legislation that extended unemployment insurance benefits for the long-term unemployed for up to 99 weeks (providing 73 weeks of federal benefits beyond the regular 26 weeks of state-financed benefits in most states). A good benchmark for testing whether this is a good idea is to determine if the long-term unemployment situation has improved enough to warrant discontinuing extended benefits or shortening the length of time unemployment benefits can be received.

The figure shows the share of unemployed workers who have been out of work for more than six months, the maximum length of regular benefits in most states. There has been little discernible improvement. The share of the unemployed who have been out of work for more than six months shot up from a 17.5 percent average in 2007 to 43.7 percent in March 2010; it has since hovered around that point, peaking at 45.5 percent in March 2011. It currently sits at 42.5 percent—25 percentage points above the pre-recession level.

The fact that there has been so little improvement in job-finding prospects for unemployed workers shows that it is much too early to begin cutting back on how long unemployed workers can receive benefits. Congress should reject suggestions to cut back on unemployment benefits; instead, it should renew through the end of 2012 the program of extended benefits as it currently stands.

See related work on Unemployment insurance

See more work by Heidi Shierholz