By Vicki Needham - 07/02/12 09:00 AM EDT
Millions of long-term unemployed Americans will face the loss of their jobless benefits at year's end without congressional action.
As federal programs wind down this year, pressure will increase on lawmakers to consider an extension while the unemployment rate hovers around 8 percent.
"I think Nov. 6 will determine the outcome more than anything else," Rep. Sandy Levin (D-Mich.), ranking member on the Ways and Means Committee, told The Hill.
"We've had a struggle with the Republicans. They continue to think that it's a disincentive," he said of jobless benefits. "So we're going to continue the battle; whether we win it or not will depend more on Nov. 6."
Political fatigue over the issue is already high, spinning from the compromise crafted in February that requires the drawdown of federal programs this year — from a maximum of 99 weeks to 73 weeks — and places additional requirements for unemployed workers to qualify for job placement programs.
There is no funding for federal benefits beyond Dec. 29, and advocates of extending the program face a high level of difficulty as Congress hurtles toward the so-called fiscal cliff, a volatile mix of spending cuts and tax increases set to hit next year.
The cost of an extension could certainly hamper its chances of moving forward.
That doesn't bode well for 2.7 million jobless workers who will lose their benefits at the end of December, said George Wentworth, senior attorney with the National Employment Law Project (NELP).
Wentworth said NELP intends to help spearhead the campaign to assess what is needed for jobless workers heading into 2013.
"The evidence is pretty compelling that as the economy is recovering the labor market is not coming back fast enough," he said.
What this means is that workers who lose their jobs beginning in July would likely be the first group that won't be able to dip into federal benefits and would receive a maximum of 26 weeks of state benefits.
Furthermore, with voters already concerned about the economy and jobs, expiring federal benefits, which have always been available when the unemployment rate was above 7 percent, could hinder President Obama's bid for a second term.
The highest unemployment rate when federal benefits were cut by Congress was 7.2 percent, in 1985.
The cutbacks will begin to hit the unemployed amid an already slowing job market.
The problem for Obama is the persistently high unemployment rate, although the economy is creating and not losing jobs. If job creation picks up in the fall, that would provide a boost to the broader economy, including consumer spending, and for Obama's second-term hopes.
The Federal Reserve, though, said recently that the unemployment rate will stay stuck above 8 percent for the rest of the year, and that it will remain above 7 percent through 2014.
The Labor Department is set to release June employment figures on Friday. May’s report was worse than expected, with job growth of 69,000, while April’s numbers were revised downward from 115,000 to 77,000. Average growth over the last three months was 96,000, with a 165,000 average, so far, for the year.
After a robust pace of hiring over the winter, employers pulled back this spring. Economists called it "payback" for the higher levels of hiring during unseasonably warm winter months.
Unemployment increased from 8.1 percent to 8.2 because 642,000 workers entered the labor force. The number of unemployed increased by 220,000.
"The hole is so deep even in our third year of recovery that it takes years to get back to a place that … looks closer to normal rate," Wentworth said.
Jobless benefits are already being scaled back and NELP has argued that the cuts are coming faster than the economy is improving, which means more workers will have to survive without any jobless assistance and families will have less money to put back into the economy.
In June, 24 states lost eligibility for the Emergency Unemployment Compensation (EUC) because of stricter unemployment rate triggers.
In addition to the loss of EUC benefits, by the end of August, the federal Extended Benefits (EB) program will be done in 35 states because of falling unemployment rates, effectively ending the program and benefit payments for more than 500,000 unemployed workers.
Once September rolls around, the maximum number of benefit weeks available will fall to 73.
Further complicating the issue is the high percentage of long-term unemployed. Historically, the highest percentage of long-term unemployed workers was 26 percent in the 1980s, but those numbers hit a peak of 46 percent during the most recent downturn, and have dropped to 43 percent, according to the latest Labor Department figures.
Out of the 12.7 million unemployed, 5.4 million have been out of work for at least six months, with about 33 percent of those without work for a year or longer, with an average duration at 40 weeks, Wentworth said.
Before the recession began in December 2007, only 17.5 percent of the unemployed were out of work for six months or longer.