U.S. Department of the Treasury Secretary Timothy Geithner estimated that the U.S. unemployment rate may not peak till the second half of 2010.
And the White House National Economic Council Director Lawrence Summers described the job market as serious.
The chart below shows job losses compared to the most recent recessions. The data shows actual numbers of jobs lost–but not expressed as a percentage of the labor force.
Currently, over six million people are receiving unemployment insurance benefits. According to the U.S. Department of Labor:
The Department of Labor’s Unemployment Insurance (UI) programs provide unemployment benefits to eligible workers who become unemployed through no fault of their own, and meet certain other eligibility requirements.
You must meet the State requirements for wages earned or time worked during an established period of time referred to as a “base period”. (In most States, this is usually the first four out of the last five completed calendar quarters prior to the time that your claim is filed.)
Each state determines whether or not someone qualifies for unemployment benefits, the amount of the benefits and the length of time benefits are received. Go to this link to find the specifics for your state.
Benefits are based on a percentage of your earnings over a recent 52-week period – up to a State maximum amount.
The funding for unemployment insurance benefits comes from Federal and state taxes paid by employers–specifically for this program. The Federal Unemployment Tax Act (FUTA), authorizes the Internal Revenue Service to collect a federal employer tax. This money is used to fund state workforce agencies. In addition, the states collect a state unemployment tax from employers. Of course, the rules for the state tax can vary by state.
Unemployment benefits are intended to be temporary in nature although the government is contemplating extending the time covered–due to the high unemployment.
Benefits are taxed and must be reported on your Federal income tax return. The tax can be withheld by the state agency.
According to the U.S. Department of Labor, unemployment insurance programs date back to the Great Depression:
It was created in 1935 in response to the Great Depression, when millions of people lost jobs. They couldn’t buy goods and services, which contributed to more layoffs.
Now, as then, the program helps cushion the impact of economic downturns and brings economic stability to communities, states, and the nation by providing temporary income support for laid off workers.
The National Employment Law Project, a pro-labor advocacy group recently reported:
“Over half a million Americans will face life without a paycheck or an unemployment check by the end of September. By the end of the year, that figure will triple. It is clear we are coming up on a tidal wave of need for more extensions and help from the federal government,” said Andrew Stettner, Deputy Director of the National Employment Law Project.
“Never in the history of the unemployment insurance program have more workers been unemployed for such prolonged periods of time.”
Lesson: Unemployment typically starts dropping several months after the stock market and the economy have bottomed. The economy, based on government statistics, appears to have hit a bottom in March of this year. Now five months later, unemployment is still rising. Companies are slow to hire because of 1) the fear of higher taxes and higher health-care costs, 2) the lack of credit available to expand, and 3) the concern about a double dip recession (a “W” shaped recovery)–with a second downturn starting in the second half of 2010 and into 2011. The chart below illustrates the last “W” shaped recovery–the Great Depression.
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