Recession outlasts extended benefits

CHRISTOPHER S. RUGABER
AP Economics Writer

Washington – In the coming weeks and months, hundreds of thousands of jobless Americans will exhaust their unemployment benefits, just when it’s never been harder to find a job.

Congress extended unemployment aid twice last year, allowing people to draw a total of up to 59 weeks of benefits. Now, as the recession drags on, a rolling wave of people who were laid off early last year will lose them.

Precise figures are difficult to determine, but Wayne Vroman, an economist at the Urban Institute, estimates that up to 700,000 people could exhaust their extended benefits by the second half of this year.

Some will find new jobs, but prospects will be grim: Layoffs are projected to go on, and many economists expect the jobless rate, already at 8.5 percent, to hit 10 percent by year’s end.

“It’s going to be a monstrous problem,” Vroman said.

U.S. employers shed 663,000 jobs in March, and the jobless rate now stands at its highest in a quarter-century. Since the recession began in December 2007, a net total of 5.1 million jobs have disappeared.

Those who know that their unemployment aid is about to run out are counting the days, taking on odd jobs, moving in with relatives and fretting about the future.

“My biggest fear is we’ll lose the house,” said Hernan Alvarez, 54, an Orlando, Fla., construction worker who lost his job in July and whose benefits will end in four weeks. “The only thing I can do is keep looking for work and hope tomorrow will be better than today.”

That so many people have remained on jobless aid for more than a year underscores the depth and duration of the recession, which began in December 2007. If the downturn extends into May, it will be the longest recession since the Great Depression.

The jobs crisis it has created has proved worse than most economists forecast – not to mention what lawmakers expected when they extended jobless benefits last year.

In March, nearly a quarter of the unemployed had been without work for six months or more, the highest proportion since the 1981-82 recession.

And the problem will probably get worse. Employers typically remain reluctant to hire even months after a recession has officially ended. In the 1990-91 and 2001 recessions, the jobless rate peaked more than a year after the recovery began.

“What comes next, I’m afraid, will be the mother of all jobless recoveries,” said Bernard Baumohl, chief global economist at the Economic Outlook Group. “While we may emerge from recession from a statistical standpoint later this year, most Americans will be hard-pressed to tell the difference between a recession and a recovery the next 12 months.”

States typically provide 26 weeks of unemployment benefits, an average of about $350 a week. Last year, Congress tacked on 20 extra weeks of benefits, and later it added 13 additional weeks for people in states hardest-hit by unemployment.

Experts said food stamps and other social programs provide a partial backstop for many recipients who exhaust benefits. Some will also take low-paying “tideover” jobs” if they can find them, said Rebecca Blank, an economist at the Brookings Institution.

Unemployment has risen so high that in some states a third leg of benefits is kicking in – a new lifeline for many who would otherwise run out. Under federal law, states found to have particularly high unemployment under complex formulas must provide 13 to 20 more weeks of benefits.

It has already taken effect in 18 states, twice as many as activated it in either of the last two recessions.

The National Employment Law Project, an advocacy group for low-wage workers, wants more states to change their laws to make it easier for extended benefits to kick in.

The federal stimulus package provides federal money for the extension, which otherwise would be split between the states and federal government. California’s Legislature took such a step last week, and Gov. Arnold Schwarzenegger is expected to sign the legislation.

That comes as a relief to Beth Lambert, 58, of San Diego, who has been out of work since January 2008 after losing her job as an administrator at a construction company.

“I can breathe for a few more weeks and just keep trying,” she said.

AP Writers Ramit Plushnick-Masti and Stevenson Jacobs contributed to this story.