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Monday, May 14, 2012 4:31 PM

200,000 Lose Unemployment Benefits This Week, Nearly Half From California

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The grim situation in California is about to get grimmer as Unemployment Benefits Go Bye-Bye

More than 200,000 long-term jobless Americans will lose their unemployment checks this week, when eight states roll off the federal extended benefits program.

Nearly half of them live in California, and the rest reside in Florida, Illinois, North Carolina, Colorado, Connecticut, Pennsylvania and Texas.

The federal extended benefits program has provided the jobless with up to 20 weeks of unemployment checks after they've run through their state and their federal emergency benefits, which together last up to 79 weeks.

But the extended benefits program is expiring throughout the country as the economy improves. To be eligible for these benefits, a state must show that its unemployment rate is at least 10% higher than it was in at least one of the past three years.

Already, 25 states have rolled off the extended benefits program, with 15 of them exiting last month alone. But more unemployed folks will be affected by this week's cessation than April's, when about 135,000 people saw their payments end.

The jobless have been able to collect up to 99 weeks of benefits for much of the Great Recession and its aftermath. But after multiple extensions, Congress in February passed a law that starts phasing out this unprecedented lifeline.

Starting later this year, the maximum number of weeks the jobless can collect unemployment benefits will be reduced to as little as 40 weeks in states with jobless rates below 6% and to as many as 73 weeks where unemployment tops 9%.
Long Term Unemployed

The chart shows a drop of about 1.5 million off the long-term unemployment rolls. Yet, about 5.1 million are still long-term unemployed.

Moreover the numbers are probably much worse than they look as some of that drop is a result of fraudulent disability claims. For details please see TrimTabs on Debt and Disability Claims: How Much Debt Does it Take to Generate $1 in GDP? Disability Fraud vs. Expiring Unemployment Benefits Revisited.

Given a total of 335,000 have lost or about to lose unemployment benefits, I expect to see another jump in fraudulent disability claims. Those of retirement age might also select "forced retirement" in order to collect social security benefits.

As noted above, California bears the brunt of this wave of benefit expulsions, and that will exacerbate the state's fiscal problems. For details, please see California Deficit Soars to $16 billion; Governor Brown Threatens Public Education Unless He Gets "Temporary" Tax hikes; How Brown Ruined California in His First Term; Four Point Solution.

Mike "Mish" Shedlock
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