Unless Congress Acts Soon, the Economy Will Get a Lump of Coal for the Holidays

Hundreds of thousands of jobless Californians who are struggling to find work in the weakest job market in decades face the prospect of struggling to make ends meet without Unemployment Insurance (UI) benefits just before the holidays. Federally supported emergency UI benefits will expire just five days after Thanksgiving, unless Congress acts soon. A new CBP analysis released today argues that Congress should continue emergency UI until the economy shows strong signs of recovery.

Why should Congress maintain federally supported UI benefits? Because they have played a vital role in combatting the recession and rebuilding the economy. Here’s the evidence:

  • Providing UI to jobless workers is one of the most effective ways to boost the economy. Every federal dollar used to provide UI boosts economic activity in California by $1.56 – a significant bang for the buck. According to Mark Zandi, chief economist at Moody’s Analytics, “No form of the fiscal stimulus has proved more effective during the past two years than emergency UI benefits.”
  • UI helps stabilize the economy and saves jobs. By enabling jobless workers to pay the bills and put food on the table while they search for work, UI benefits inject much-needed dollars into local businesses which helps promote job retention and creation. In fact, UI benefits kept an average of 1.6 million US workers on the job during each quarter of the Great Recession. To see how this works, watch this video from the Center for American Progress.
[youtube http://www.youtube.com/watch?v=wyYqrjQgvxk]

With a slowing recovery in the job market and increasingly pessimistic economic projections, it’s too soon to allow this significant source of economic activity to end. Failing to renew federally supported UI would deliver a sharp blow to the economy. Jobless workers and their families would be forced to cut back on their spending, which means businesses would see fewer customers and have weaker sales. By one estimate, we could see $80 billion of purchasing power drained out of the national economy over the next year, and that could cost us 1 million or more jobs. Additional job loss could further weaken the struggling economy.

The evidence is clear: We can’t afford not to renew emergency UI.

— Alissa Anderson