Government Extends Unemployment Benefits

By Bill Leonard Nov 21, 2008

Congress has finished work on, and President Bush has signed, legislation (H.R. 6867) that will extend unemployment insurance benefits for seven weeks, and for 13 weeks in states where the jobless rate is above 6 percent.

The president signed the billon the morning of Nov. 21, 2008, less than a day after news of a rapidly deteriorating unemployment picture and subsequent final action by Congress. The president had indicated that he would accept an unemployment extension if it remained separate from a larger and more costly economic stimulus package.

The U.S. Bureau of Labor Statistics (BLS) had released a report on Nov. 20 showing that the number of people filing for initial unemployment claims had climbed sharply from the previous week and had hit a 16-year high.

“The numbers cry out for an extension of unemployment insurance now,” said Sen. Charles Schumer, D-N.Y., just moments before the Senate approved the bill. The House had approved the extension measure in early October 2008.

Data from the BLS show that more than 1.2 million jobs have been lost in 2008 and that the U.S. unemployment rate has hit a 14-year high of 6.5 percent. Many economists believe that indicators point to a further weakening of the U.S. job market in early 2009, a trend also suggested by the Society for Human Resource Management’s Leading Indicators of National Employment (LINE) reports.

While the federal government will fund the benefits extension, the higher unemployment rate has put pressure on state unemployment insurance funds. Insurance funds for unemployment benefits had dropped in 32 states as of Sept. 30, 2008, compared to fund levels from a year earlier, government statistics show.

If the job market weakens further and the insurance funds continue to shrink, many states might be forced to reduce unemployment benefits or raise taxes to keep their insurance pools solvent, sources say. At least 11 states are now considering proposals to raise their unemployment tax, and several states have laws in place that will raise taxes automatically when the insurance funds drop below a certain level.

For example, Michigan, with an unemployment rate of 9.3 percent, on Jan. 1, 2009 will increase the jobless fund tax on employers for the first time in 23 years. Michigan businesses, which now pay an average of $441 a year per worker, will pay an additional $67.50.

Also at the start of 2009, Wisconsin will raise its unemployment tax for the first time in 20 years, with employers paying an average of $41 more per worker. And Ohio is considering a proposal to put a three-year freeze on unemployment benefit increases.

While Congress moved quickly to approve the unemployment extension, no decision was made on providing an aid package to the ailing U.S. auto industry. The CEOs of GM, Ford and Chrysler, along with the head of the United Autoworkers Union, went to Capitol Hill to ask for $25 billion in federal loans to help prop up the struggling automakers.

The group testified that if Congress did not act, more than a million jobs in the auto industry could be lost. Congressional leaders delayed a final vote on the loan package and told the automaker executives that they would have to submit a recovery plan before Congress would consider approving any new aid.

Democratic leaders stated that Congress would likely reconvene in early December to consider the automakers’ request.

Bill Leonard is senior writer for HR News.


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