Congress' Next Big Issue: How to Handle Jobless '99ers'
CNBC.com Senior Writer
Before the new Congress takes over in January, lame-duck legislators will have a big issue on their plate: What to do with those whose emergency unemployment benefits run out at the end of the November.
Congress ran into the same problem during the summer, and it resulted in hundreds of thousands without jobs to go weeks not receiving benefits. Those affected have come to be known as "99ers," meaning they have exhausted the government's extensions of up to 99 weeks of compensation.
Their numbers rose to record levels in September as a total percentage of the unemployed. More than one in 10 jobless Americans—1.47 million, or 10.4 percent of the total—have been out of work for more than 99 weeks, with a few million more on the fourth and final tier of benefits.
They are among the individuals most impacted by the economic slowdown, and without help as many as five million more could be joining their ranks soon. Though perhaps not enough to cause a double-dip recession in itself, the trend of long-term unemployment remains a burden the economy cannot shake.
"It's going to be another factor that isn't helpful rather than a factor that sends the economy back into recession," Paul Dales, US economist at Capital Economics in Toronto, says of the impact the 99ers will have on total growth. "It will further undermine the already fragile economic recovery."
Still, the continued flow of long-term jobless through the government's long arm of assistance is a vexing problem for politicians and policy makers.
The government will provide the latest snapshot of the labor situation Friday when it releases the monthly nonfarm jobs report. Nonfarm payrolls are expected to increase by 60,000 and the unemployment rate is likely to hold steady at 9.6 percent.
But the parade of workers onto the fourth tier of the unemployment benefits system will cause congressional consternation as lawmakers debate a variety of proposed help.
While the immediate question will be whether to extend the funding for those on their final weeks of receiving benefits, there also are two bills pending to go even beyond that point and create a fifth tier of benefits. The current system extends the traditional 26 weeks of coverage to 60 and then 99 weeks depending on individual state unemployment levels
The Emergency Unemployment Compensation Act would add another 20 weeks of benefits for those in states with a jobless rate higher than 10 percent. The competing Americans Want to Work Actalso proposes another 20 weeks, but lowers the bar for qualified states to 7.5 percent unemployment.
Should the Republicans take over after Tuesday's elections—the new majority won't actually be seated until January—that could squelch momentum for either bill to get passed.
"As a result of what happens today positions will just get locked up even tighter," says Ken Goldstein, economist at the Conference Board in New York. "It's very unlikely that we'll see any action. That certainly means that some of these programs are just going to run out."
Democrats and Republicans faced down over the issue this summer, when the GOP refused to extend benefits to those in the final tier until money was designated to pay for it, following Congress' adherence to pay-as-you-go regulations.
While the two sides ultimately reached an agreement, an accord could be harder to find in a new political climate where deficit reduction takes priority.
Should the long-term unemployed not get an extension and become 99ers, that would knock off about 0.6 percent in gross domestic product over the next two quarters, says Zach Pandl, economist at Nomura Securities in New York.
"There's definitely an effect of some kind," Pandl says. "Lower consumption, lower wages, lower labor-force participation rates—the process is gradual."
Indeed, despite the government's extraordinary intervention, the trend is toward longer, not shorter, levels of unemployment.
While the government no longer is paying the 1.4 million who have take on 99er status and moved off the compensation rolls, it has to contend with another 6.1 million who have been out of work for more than 27 weeks.
That number constitutes 41.7 percent of the entire jobless group, meaning headaches for the current Congress and the new guard that will take over in January. Holding steady against more benefits might sound good fiscally, but it will have political and personal ramifications.
"The experience this summer demonstrates that the effect on benefit recipients is large and immediate," Pandl says. "Whatever they do, hopefully we will not have this temporary expiration like we did last time and it will be a smooth transition to extending the program, or widening it out."