Tuesday, August 4, 2009

NYT: By Year's End, Benefit Lifeline to End for 1.5 Million

We've talked about this subject in the past, and in fact predicted long term unemployment rolls will begin falling in America. (they have in recent weeks) We also said the market will misread it as people suddenly finding a bevy of jobs. (it did) And we pointed out where these people will be going as the economy sprouts with green shoots [Jun 22: WSJ - Numbers on Welfare See Sharp Increase]

pssst - as you see long term unemployment claims fall in the months ahead, after you digest all the green shoots from CNBC just remember this story and how many (not all) of those people simply have extinguished their benefits. A few million are now reaching that stage where they will run out of unemployment even after federal extensions. So not only do they become "not unemployed", they stay on the public dole but in a different compartment. See the unemployed person? Not under shell 1... look under shell 2... where conveniently he is no longer counted as unemployed. Prosperity!

If it weren't so predictable it would almost be funny. This recession has been so deep, and so many are now unemployed for extremely long periods of time that despite multiple state and now federal extensions about 1.5 years of unemployment benefits has not been enough for many fellow citizens. If we wanted to - we could quantify how many people the past 3,4 months finally just ran out of time. It's really not so complicated - however it is not politically convenient to showcase. Say for example in State ABC the combination of state and federal extensions got someone to 79 weeks of unemployment insurance... and Joe ex-Accountant stopped claiming benefits in week 79, you have a pretty clear case of someone who just ran out of time and did not find a job. If instead he dropped off the unemployed rolls at week "anything less than week 79" you have a pretty good chance that he found work. It's not that complicated... but again, do you really want to tell the truth to the American people? It might be a yellow shoot.

However, those people are in the past ... and their sacrifice laid the way for company after company to "beat expectations" and allow speculators to partake in good times once more in the great casino in NYC. Unfortunately, another wave is following as the NYTimes reports. Now let me say, while many argue keeping people on these rolls stops them from trying to find a new job, I'd argue that if we would roll back, eliminate, and "never done in the first place" all these other bailouts, this is one program I'd actually be ok with extending. Why? Because our economy has created very few real jobs (despite government myths in their reporting) for people to actually try to find. So having them search for something that is not there is quite fruitless.

And these benefits will get extended - each and every Congress person has to be feeling the heat as our dynamic bubble filled economy has yet to of been back blown into shape, and put back on the wall Humpty Dumpty style. Look for it as part of Stimulus 4.0, and/or as a stand alone extension. It can be done very expediently when the time comes - we just "approved" $2 Billion in the House for Cash for Clunkers 2.0 in a mere hours; don't ever say Congress can't get anything done. But please - just continue to chuckle inwardly as CNBC pronounces the green shoots as "long term jobless" rolls have weeks where they drop and remember the real reason why.

One more footnote before we move onto the NYTimes piece; just remember unemployment benefits do NOT extend to self employed. So while the Bureau of Labor Statistics has continued to misinform America of the true unemployment situation via "adjustments" - and claiming almost EACH month of the Great Recession 100-200K "small business jobs" are being created, it's simply another smoke screen. And as these self employed close shop - they truly do not have anything to lean on but themselves. Our economy has changed (much higher reliance on small business and "work for yourself" workforce versus 50 years) but the social safety net is based on 1964 America.
  • Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.
  • In ordinary times, employers pay into a state insurance fund, and workers who lose jobs draw benefits for up to 26 weeks. During recessions, Congress has often paid for extended coverage for an extra 13 or even 20 weeks.
  • In 2008, as the recession deepened, Congress provided 33 extra weeks of benefits. Earlier this year, President Obama’s stimulus plan offered an additional 20 weeks in states where unemployment surpassed 8 percent.
  • Because of emergency extensions already enacted by Congress, laid-off workers in nearly half the states can collect benefits for up to 79 weeks, the longest period since the unemployment insurance program was created in the 1930s. But unemployment in this recession has proved to be especially tenacious, and a wave of job-seekers is using up even this prolonged aid.
  • Tens of thousands of workers have already used up their benefits, and the numbers are expected to soar in the months to come, reaching half a million by the end of September and 1.5 million by the end of the year, according to new projections by the National Employment Law Project, a private research group.
  • Unemployment insurance is now a lifeline for nine million Americans, with payments averaging just over $300 per week, varying by state and work history. While many recipients find new jobs before exhausting their benefits, large numbers in the current recession have been unable to find work for a year or more.
... and so begins the next round
  • Calls are rising for Congress to pass yet another extension this fall, possibly adding 13 more weeks of coverage in states with especially high unemployment. As of June, the national unemployment rate was 9.5 percent, reaching 15.2 percent in Michigan.
No need to pile on Michigan like that & single us out; if the government says its 15.2% we know its somewhere in the low 20% range. That's Depression like - nice!

[click to enlarge]

  • Representative Jim McDermott, Democrat of Washington and chairman of the House Subcommittee on Income Security and Family Support, said he would introduce a bill in September to provide yet another 13 weeks of coverage in states with unemployment rates of 9 percent or higher. “Legislators will line up quickly when they start getting calls from desperate constituents,” he said in a telephone interview.
  • The cost would be $40 billion to $70 billion... (just put it on the tab, we can do 25 more Cash for Clunkers programs with that money but ok, ok - I guess supporting people so they don't turn into 3rd world citizens is more important that getting a new car into every 20th driveway in America)
While Fox News already has their talking points out about how keeping people desperate makes them look harder for work, there comes a fine line between then desperate for work and social unrest interconnect. According to the stat below, 5 out of 6 people apparently would agree (although of course some people are milking the system, as always)
  • Traditionally, many economists have been leery of prolonged unemployment benefits because they can reduce the incentive to seek work. But that should not be a concern now because jobs remain so scarce, said Lawrence Katz, a labor economist at Harvard.
  • For every job that becomes available, about six people are looking, Dr. Katz said. “Unemployment insurance gives income to families who are really suffering and can’t find work even if they are hustling to look,” he said.
  • ... when people exhaust unemployment and health insurance, many end up applying for disability benefits, which become a large, unending drain on the Treasury.
So as I said above, we can lie about the reality on the ground all we want in government reports. The people are still out there and the taxpayer is still going to support them; it's just a matter of which shell we want to hide them under.

Some of the cursory desperate stories - granted the first lady says she is upset she can't buy a laptop for her kid. I don't know what it takes for people to realize this is a new normal and you have to adjust accordingly.
  • For many desperate job seekers, any extension will seem a blessing. Pamela C. Lampley of Dillon, S.C., said she sat outside the post office last month and cried because “it was the first Wednesday in quite some time that I’ve gone to the mailbox and left without an unemployment check.” The jobless rate in her state is 12.1 percent.
  • In Ohio, where unemployment is 11.1 percent, Cathy Nixon, 39, a mother of four teenagers from Lorain, has been out of work for much of the time since June 2007, and her benefits — $313 a week — run out in September. Ms. Nixon is already fighting foreclosure and said she feared that when the benefits end, “we’ll be homeless.”
  • Raymond Crouse of Columbus operated heavy construction machinery but has found no work since 2007. Mr. Crouse is 72 and receives Social Security but said that was not enough to live on. The $190 a month he has received in unemployment benefits enabled him and his wife to hang on to the house they bought 15 years ago, he said. But with the benefits ending next month, he fears that they will not keep up.
  • Ms. Lampley, whose benefits have ended, described the tough job market. She used to make nearly $15 an hour and has unsuccessfully sought office and clerical work at $8 an hour. And Ms. Nixon said that she had interviewed endlessly for jobs in real estate and office work and that even her teenagers could not find fast-food jobs because laid-off adults were filling them. (I highly recommend federal government work - the job security is priceless, the benefits are top notch, no wage competition from the Chinese, and the taxpayer is happy to foot the bill)
I do not believe a 13 week extension will be sufficient - we need at least 39 weeks before the government can blow up a massive new bubble to create waves of employment in America. Oops, sorry - I mean 39 more weeks before prosperity can return in our dynamic economy as a flood of private sector jobs flourish. This is going to be a tough one Bernanke - you need to create a bubble large enough to employ millions, which at the same time will cause inflation, which will strike incredibly hard at those in vulnerable positions who have the least amount of margin for such a situation - especially in food and energy. Green shoots does not put food on the table; thankfully food stamps do... [Jun 8, 2009: 1 in 9 Americans on Food Stamps]

So we'll continue to focus on the glee that is Wall Street as jobs are simply a cost center and the less of them the better (higher profits)... or if you insist on still employing humans, for gosh sakes move the work to a country who pays 1/20th the wage. But we'll also keep our eyes on Main Street U.S.A., where private sector job creation is still considered a small necessity.

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