Americans fear consequences of unemployment benefits expiring

More than 1 million will lose benefits; Obama administration urges Congress to extend them after holiday break

Richard Mattos, 59, looks for jobs at a state-run employment center in Salem, Ore., on Thursday. Mattos is one of more than 1 million Americans who will lose federal unemployment benefits on Saturday.
Jonathan J. Cooper/AP

More than 1 million Americans lost extended federal unemployment benefits this weekend, prompting the Obama administration to urge U.S. lawmakers to restore the benefits as soon as they return from their holiday break, and causing people who rely on the benefits across the country to worry about their next steps.

"It's very stressful," David Davis, an unemployed Virginia resident told The New York Times. "At least I've had the ability to maneuver my finances so I don't wind up homeless. That's one goal, to avoid living on the street or in my car."

House Democratic leader Nancy Pelosi lambasted the move in a statement Saturday, saying many families would start the new year with uncertainty, insecurity and instability.

"Neglecting to extend this vital lifeline to millions of workers is simply immoral – an abdication of our obligation to do what we can to support those who worked hard, played by the rules, and lost their jobs through no fault of their own," she stated.  

"Never before have we abruptly cut off emergency unemployment insurance when we faced this level of long-term unemployment and it would be a blow to these families and our economy," Gene Sperling, director of the National Economic Council, said in a release.

He added that the president and democratic congressional leadership were pressing to return to the issue once Congress reconvenes.

U.S. lawmakers do not return from the Christmas and New Year break until Jan. 3. An estimated 1.3 million people will be cut off when the federally funded unemployment payments end Saturday.

For families dependent on cash assistance, the end of the federal government's "emergency unemployment compensation" will mean enrollees lose their average monthly stipend of $1,166.

Some states will be especially hard-hit. More than 90,000 people in New Jersey will lose their benefits, proportionally more than any other state.

For 49-year-old Adaline Irizarry, who lost her job as a secretary, the end of benefits means the end of the majority of her income.

"That's my source of income right now," Irizarry told The Star-Ledger. "If I don't get an extension, I'm screwed. I think a lot of people are in that situation."

Advocates of extended benefits say communities hardest hit by the recession will feel the sudden loss of cash in circulation the most.

They cite a set of their own troublesome figures: three jobseekers still competing for each opening; some 4 million people in the ranks of long-term unemployed; unemployment lasting on average 37 weeks, two months longer than most states provide insurance.

Started under President George W. Bush, the unemployment benefits were designed as a cushion for the millions of U.S. citizens who lost their jobs in a recession and failed to find new ones while receiving state jobless benefits, which in most states expire after six months.

Another 1.9 million people across the country are expected to exhaust their state benefits before the end of June.

Jobless rates could drop, but analysts say the economy may suffer with less money for consumers to spend on everything from clothes to cars. Having let the "emergency" program expire as part of a budget deal, it's unclear if Congress has the appetite to start it anew.

But Obama has no quick fix. He hailed this month's two-year budget agreement as a breakthrough of bipartisan cooperation while his administration works with Democratic allies in the House and Senate to revive the extension of jobless benefits for those unemployed more than six months.

The Obama administration says those payments have kept 11.4 million people out of poverty and benefited almost 17 million children. The cost of the program since 2008 has totaled $225 billion.

The effect of jobless benefits on the unemployment rates has been fiercely debated for decades. To qualify, people have to be seeking work. Tea partiers such as Sen. Rand Paul of Kentucky argue that the payments aggravate rather than relieve unemployment.

The benefits allow some jobseekers to hold out for higher wages. Without the benefits, they might accept lower-paying jobs, reducing the unemployment rate. Others may be looking for work only to keep the benefits flowing and will drop out of the job market entirely once the checks stop. In theory, that also would push the unemployment rate lower.

The flip side is that the benefits — in addition to alleviating suffering — get spent on consumer goods, stimulating the economy and creating jobs. Pelosi said that each dollar spent on unemployment benefits yields $1.52 in economic growth, and that an extension of the benefits could produce as many as 300,000 jobs.

But as of now, without Congressional action, the unemployed will have little choice but to keep on looking.

"Unemployment has saved us," Robin Schirle, an out-of-work administrative assistant told the San Jose Mercury News. "I was hoping it would last another three months to help me find a job...I need to get back to work because it's been rough."

Al Jazeera and wire services

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