The Week Ahead: Unemployment benefits fizzle out

December 28, 2013 

Thanks to inaction by Congress, an experiment in economic and employment policymaking begins in the new week. More than 1 million people will go without federal unemployment benefits as Congress adjourned for the holidays without extending the payments. Thus ending a string of 11 extensions or expansions of the federal payments since the Great Recession.

Instead, 1.3 million people will not receive unemployment checks this week. Previous expirations had been met with political indignation but enough support was mustered on Capitol Hill to find the money. Not this time, at least not yet. Pressure will build on Republicans in Congress to relent and agree to a 12th extension early next year.

Yet, two key gauges of economic policy may provide political cover. First, the stock market is closing the year with remarkable gains. The Standard and Poor's 500-stock index is up almost 30 percent and continued to hit new highs even as it was clear that federal unemployment payments would not be extended. Second, thanks to methodology, this first week of no emergency federal unemployment payments could result in a lower unemployment rate.

Here's why: To collect unemployment insurance, one has to be actively looking for work. That's the same requirement to be counted as the officially unemployed. If there's no unemployment check, there's no reason to actively look for work and thus, the theory goes, the unemployed no longer fit the qualifications to be counted for the unemployment rate.

But this does not result in actual lower unemployment. A technicality of data collection is not responsible justification for today's economic policy.

Tom Hudson, financial journalist, hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news.

He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter HudsonsView.

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