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Economy in Brief

U.S. Pays $8 Billion In Unemployment Benefits
by Tom Moeller July 9, 2009

The current recession started over eighteen months ago and roughly eight billion dollars are being paid each month in unemployment benefits under state programs. For the jobless who have exhausted their unemployment benefits, recent discussion in Washington of extending the duration of benefits may come too late. For those receiving benefits, the news is welcome in this tough job environment. Data in Haver's USECON database focuses on the magnitude of the labor market difficulties, not only by dollars paid and the duration of unemployment but by which industries and states have been most affected.

The average duration of unemployment recently has been running 15.7 weeks. That is up by one full week from the beginning of the year and, given the severity of this recession, it likely will rise further. During the severe recessions of 1973-75 and 1981-82, the peaks in average duration were above 17 weeks. Notable this cycle has been the jump in the benefit exhaustion rate to a record 49.2%. (The exhaustion rate is the percent of claimants who collect all of their unemployment.) Past cycle highs were nearer to 40%. As this recession has now lasted so long, the higher rate is no surprise. The states with the higher benefit exhaustion rates include New Jersey (57.3%), California (55.5%), Massachusetts (48.8%) and New York (46.5%). (These figures are available in Haver's REGIONAL database.)

Also under current discussion is raising the level of weekly dollars paid in insurance. The current average of $315.71 is up 6.2% from last year and up from an average $212.13 ten years ago. Adjusted for inflation using the CPI, benefits have risen 18% over those ten years helped by the recent decline in oil prices.

The industry breakout of continued unemployment claims indicates that roughly one-third of all continuing unemployment insurance benefits are being collected by workers in the manufacturing (20.3%) and construction (13.6%) industries. The factory sector's share of all claims being paid is up to 20% from 13% early last year. The administration & support sectors follow with 10.0% of workers collecting, but that rate has been stable since 2005. The retail trade sector follows with a steady 8.0% collecting while 5.4% of workers in the professional/scientific and tech services area collect. Surprisingly, perhaps, workers in the health care & social services industry account for 4.7% of those collecting, but that is down from an 8.0% 2007 peak. Finally, 3.0% of workers in the finance & insurance industries collect but that is down from a 4.8% share late in 2007.

The elasticity of the unemployment rate with respect to benefits from the Federal Reserve Bank of Philadelphia can be found here.

Unemployment Insurance Benefits May April May '08 2008 2007 2006 
Average Duration (Weeks) 15.68 15.21 15.18 15.19 15.14 15.38
Exhaustion Rate (%) 49.23 47.06 36.80 37.84 35.22 35.42
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