As 1.3 Million Americans Are About To Lose Their Jobless Benefits This Week, The Unemployment Rate Will Surge To 10.5%

Tyler Durden's picture

As we reported on Friday, a critical bill that was unable to pass this past week was the extension of unemployment benefits to millions of Americans currently collecting a $1,200 average monthly stipend from the US government for sitting on their couch and not paying their mortgage. As a result of this huge hit to endless governmental spending of future unearned money, the WSJ reports that "a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week." Furthermore, the cumulative number of people whose extended benefits are set to run out absent this extension, will reach 2 million in two weeks, and continue rising: as a reminder the DOL reported over 5.2 million Americans currently on Extended Benefits and EUC (Tier 1-4). The net result is yet another hit to the US ledger, as soon 2 million Americans will no longer recycle $1,200 per month into the economy. In other words, beginning in July, there will be $2.4 billion less spent each month by America's jobless on such necessities as LCD TVs (that critical 4th one for the shoe closet), iPads and cool looking iPhones that have cool gizmos but refuse to hold a conversation the second the phone is touched the "wrong" way. As the number of jobless whose benefits expire grows, the full impact of lost money will progressively increase, and absent some last minute compromise, the monthly loss will promptly hit $5 billion per month. Annualized this is a hit of $60 billion to "consumption", and represents roughly 120 million iPads not purchased, and about half a percentage point of GDP (ignoring various downstream multiplier effects). Worst of all, as these people surge back into the labor force, the unemployment rate is about to spike by nearly 1%, up to 10.5%.

From the WSJ:

On Thursday, Senate Democrats failed to secure the 60 votes needed to break off a GOP-led filibuster. Sen. Ben Nelson (D., Neb.) voted with Republicans in a 57-41 roll call. Senate Majority Leader Harry Reid (D., Nev.) said this third vote on the matter would be the last, allowing the Senate to move on to modest legislation cutting taxes for small businesses.

The collapse of the wide-ranging legislation means that a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week. It will also leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid costs.

Up in the air are other provisions that were to be included in the legislation, including some $50 billion in new taxes designed to help offset its cost. They included an increase in levies paid by private investment groups, including hedge-fund firms and real-estate partnerships, a provision long sought by some Democrats that will likely return another day.

Under a program initially enacted last year—which expired June 2—jobless workers could receive up to 99 weeks of aid, including 26 weeks of basic assistance provided by states plus longer-term federal payments. The Labor Department estimates that the long-term unemployed, meaning those out of a job for at least six months, make up 46% of all jobless workers in the U.S.

And like every other stimulus program, there are those who focus on possible cons from the program end...

There are economic risks in ending benefits. Workers receiving them tend to funnel money back into the economy immediately, helping prop up demand and jobs.

In addition, said Harvard economist Lawrence Katz, if workers are unable to find work and no longer eligible for unemployment benefits, some will turn to other government programs, such as disability and Social Security. "If you're really concerned about the long-term deficit, you should be really concerned about the long-term unemployed," Mr. Katz said.

and pros...

Other economists argue that extended benefits have played a part in keeping people out of the labor force. "There's a very large body of research that says that more generous benefits and benefits that last longer…encourage people to stay out of work longer," said Bruce Meyer, an economist and public policy professor at the University of Chicago.

James Sherk, a labor economics analyst at the conservative Heritage Foundation think tank, said that while it could be argued that the benefits made available last year were too extensive, cutting off workers who expected to receive the full 99 weeks of benefits isn't ideal either. "You don't sort of pull the rug out from someone halfway through," he said.

In our view, what will happen is that the 1.3 million who had gotten used to receiving benefits (and for whom we certainly feel sorry, as once again expectations and reality under the current administration diverge in a dramatic fashion) and had no desire to look for work, will immediately flood back into the labor force to find some job, any job, that pays even remotely as well as what the government did. What this means is that the total labor force (which incidentally dropped by 322,000 From April to May) of 154.393 million, is about to grow by at least 1.3 million, and as much as 2 million, in July. And since census employment peaked, and the number of employed will stay flat (at best) at 139.420 million, the expansion in the total labor force, will increase the unemployment rate by almost 1% in just a month, growing from 9.7% in May to 10.5% in July. That number will be reported in late August. But by then the sequel to the Great Depression v2 movie will be playing in every theater across the land, and this number will be the least of our worries.

Appendix A: average monthly benefits check as per the Daily Treasury Statement and the DOL's weekly claims report.

Appendix B: For an extended discussion of jobless benefits, how they work, and how their expiration will adversely impact the economy, read As Extended And Emergency Unemployment Benefits Finally Begin Expiring, A Much Different Employment Picture Emerges

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QuantumCat's picture

Bring on the pain...

teaddy bearish's picture

wow we have a quantum lover here

TBT or not TBT's picture

Maybe you've been reading too many Inflation V Deflation debates.  You should try tuberculosis, BTW.

Popo's picture

It's impossible to know how much pain there is AND exactly who is feeling it.


cossack55's picture

For an exact figure, one must venture to the Oracle of Delphi's Topless Bar and Burger Joint and inquire of Billy The C.    

Everyman's picture

True and just like Schroedinger's cat if we "put them all in a box" and closed it off, do they exist?  Seems like that is exactly what the goobermint is doing, they just pretend they don't exist and everything is OK.  Even though there is so much pain in the UE ranks.


10.5%?  That is a massive increase from 9.7%.  There would be no denying it then.



goldfish1's picture

10.5%?  That is a massive increase from 9.7%.  There would be no denying it then.

My naive brethren.

Just claim that there was a fire in the statistics office and the number, best we can tell is about the same as it ever was.

Lux Fiat's picture

Don't forget the approx. 500k rolling off of the Census payrolls in the near future.  That would be a bit harder to explain, unless the economy suddenly adds 500k beach/marsh cleanup jobs - the kind where a W2 is issued.

TBT or not TBT's picture

That very impossibility to know can help us.   Our economy could quantum tunnel through the mountain of debt just because there is a probability of its existence on the other side.   Quantum uncertainty has a bright side!

PeterSchump's picture

We know for sure it is not the banksters, nor the govt.

pan-the-ist's picture

Quantum uncertainty is a limitation of observation, not an insight to the working of the Universe.  Just another myth I find myself pointing out again and again.  Though it is funny.  Hahaha. ha.

technovelist's picture

Quantum uncertainty is a limitation of observation, not an insight to the working of the Universe.  Just another myth I find myself pointing out again and again.  Though it is funny.  Hahaha. ha.

I don't believe that is correct. My understanding is that a particle really doesn't have both momentum and position at the same time. In fact, it doesn't have either until we decide to measure one of them.

7bit's picture

The particle might not even exist at all, at least not necesarily as a "particle".

pan-the-ist's picture

QM is a model to predict some behavior.  As 7bit says, particles might not exist at all... We can be confident that at some point in time QM will be replaced with a better model.

jimijon's picture

If you freeze time for an instant ... what is its momentum? You stop moving... you die. Because in essence you stopped time.

Bringin It's picture

Someone pointed out to me that - In the same way the Enlightenment grew out of a new understanding of existance, the societal transformation resulting from comprehension of the QM meme have barely begun.


Eternal Student's picture

I don't know if he's a quantum lover, but I would say that he looks like he's a Quantum Mechanic.

LeBalance's picture

I'm quite hestitant to make a determination and as a result limit my possibilities.

Bringin It's picture

And I thought I was first

until I observed

that QC arrived over 40 weeks ago.

quintago's picture

the unemployment rate is derived from the number of people collecting benefits. If they no longer collect benefits, then the unemployment rate goes down, so its all good baby, because the numbers don't lie!

jeff montanye's picture

if this is satire it is weak.  if "fact" imo it is wrong, as is the article above on this point in the opposite direction.  as posters below note, these people receiving benefits are in the labor force from a statistical standpoint.  lots of truth in a de facto statement like after benefits stop they really will be in the labor force seeking work.  but re: govt stats, i don't think so.  the economic/income effects seem important but could we get some editorial clarification on the unemployment statistics end of it?  thanks.

reading's picture

Your facts are off...the unemployment rate is derived by the number of those looking for work/in workforce

Lux Fiat's picture

Yes.  However, I wouldn't be surprised to see the folks coming off of extended unemployment assistance classified as "discouraged workers", in which case, they won't be included in the headline unemp rate. 

Local store I frequent used to have the typical "youthful", clueless, possibly GED educated, cashiers.  Of late, I'm seeing more middle-aged, well-groomed, seemingly college-educated or better folks behind the registers.  Does not give me the warm fuzzies regarding the economy.

fearsomepirate's picture

When teenagers are prohibited from accepting wages below $9 per hour, well, the grocery store is going to hire people who aren't quit the screw-ups that teenagers are.

quintago's picture

and how exactly do you measure who is looking for work? perhaps have them write in every other week that they are looking?

I need more asshats's picture

Pain... Oh who gives a shit!

I need a job! I need to be comforted, taken care of, loved, entertained, supported, fulfilled.

I need my mommy, the womb, the warmth, the insulation, the safety.

I need.

What a group of fagots. I mean what a group of Glenn Becks.

ozziindaus's picture

I believe we entered war the last time the unemployment rate hit 25%.

Government scheme to get public hawkish since bullish didn't transpire. If this doesn't work, people will go apeshitish with pitchforkishes.

WeeWilly's picture

Shee-it Ozz, we're in two wars already. How many will it take to get us out of this mess?

MarketTruth's picture

One wonders, once this all 'hits the fan' will MSM be pushing those unemployed to join the armed forces? Will there be more commercials showing how 'cool' it is to kill people via their PS2/xBox remote controlling drones? As i recall, that is exactly what happened in the early stages of this war years ago. Brings new meaning to first person shooter 'games'. Then again many Americans are a bit, how shall i say this, not qualified for duty due to their physical fitness.

Miss Expectations's picture

I was shocked by the Army ads I saw when I took my son to see Shrek Forever After - The Final Chapter.

I recall 2 years ago, I had "the conversation" with my neighbor about my worries about the coming depression/economic crash and how it will end in War.  She said she wasn't concerned because her son had dyslexia, allergies, asthma and flat feet (he's fat, too).  No worries.  Yesterday she told me she was upset that the "stimulus" didn't pass because it means her library assistant job at the local elementary school will be cut.  It was 8:30 in the morning and she had a can of diet pepsi in her hand.  She's obese, has type 1 diabetes and wears an insulin pump.   Oh, and I've never seen her husband without a can of beer in his hand.  And, she's my best neighbor.  So, unfortunately, all of this get to know your neighbors...bla bla bla isn't the least for me.  Someone could do a reality tv series about the assholes on my block.  Want to hear about the retired police officer next door whose pension is OVER $100,000?  His single daughter and granddaughter who are collecting welfare and food stamps?  The registered sex offender? 

bernorange's picture

Sounds like you haven a lot of material to write a compelling Hollywood sitcom.

tmosley's picture

Sounds like you need to move.  I live next door to a family that is more prepared than I am, and that's saying something.  Between the two of us, we have the resources to supply the rest of the neighborhood if we have to, and that's without my farming contacts.  Some of our other neighbors have significant capabilities as well, even if half of them are on welfare or disability.

almost_have_a_name's picture


Sounds like the making of a Chuck Palahniuk novel. What a rich/diversified culture !

I'm only happy to pay my taxes for their disfunction.



Vendetta's picture

How many wars? ... as many as it takes. Trade policies won't be touched as the money people try to control things with currency valuation schemes.

RockyRacoon's picture

The U. S. could do war on consignment -- sorta like those folks who sell stuff on eBay that is consigned.  We could subcontract some hellish weapons to folks like Xe and get some IPOs  going for new war companies.  Oooh, I can't wait.

jeff montanye's picture

oz, shadowstats didn't help me find out when that was.  their data went back only a decade or so.  may be my fault.  last time unemployment was over 20% in u.s. may have been '32, though it jumped up in '38 too.  war started in europe in '39, in u.s. in '41.  doesn't bode well, given the current two plus and counting.  ron paul has the right ideas on these endless wars.

Bringin It's picture

I think the idea is that at some point prior to shadowstats, the BLS numbers were reliable. 

RossInvestor's picture

The non-farm UE would need to be about 34% today to be equivalent to the UE of the 1930's.  Back then about 27% of the populace still lived on farms as compared to 2% today.

Also, note most of the USG statistical data for the 1930's was developed after the fact in the 1940's.  Record keeping during the GD 1.0 was poor or non-existant.-15

tmosley's picture

In the 1930's, the underemployed were counted as unemployed.  Make that change, and our unemployment is up to around 22%  In addition, back then, the women generally didn't work.  Since we have transitioned to a two-worker per household society, one member of a household losing thier job is likely to impoverish most families.  As such, the impact of our unemployment rate is similar to that of a 30% unemployment rate back in the 30's.  The main difference is that we have had a lot of industrial development in the meantime (not to mention the fact that Chinese policies keep the purchasing power of the dollar up), so food and other necessities are much cheaper.

Gully Foyle's picture

Is it a Depression yet?

No one seems worried about millions of people without money in the hot summer. It's like a subplot in a Spike Lee film.

ozziindaus's picture

I believe the rules are:

10% drop in GDP (from peak), 25% unemployment and I think the last indicator has something to do with the length of recession. Anyway, Michigan is already there. 


bob_dabolina's picture

I believe the rules are:

-If your neighbor is out of work than it is a recession.

-If you are out of work it is a depression.

-If you are Barney Frank than you are FAABBUULLOOUUUS!!!

Rebel's picture

If Barney Frank and Chriss Dodd are out of work, you have a Recovery.

LeBalance's picture

if BF and CD are out of work, hide the ten year olds.  With them in work its just 11 and up.