Will more jobless benefits aid economy?

By JESSE J. HOLLAND

AP Labor Writer

updated 12:57 a.m. ET Feb. 4, 2008

WASHINGTON - For a bipartisan majority of senators, providing three months or six months of extra unemployment checks to more than 1 million jobless people is a better way to dig the economy out of a recession than just printing tax rebate checks.

Some economists agree, and undoubtedly, so do the nearly 1.3 million unemployed workers who face losing an average $282 a week in benefits before June.

But there is strong opposition leading up to a Senate vote in the week ahead on whether to add an extension of jobless benefits to a $161 billion House-passed combination of tax rebates and business tax cuts.

Consider Deborah El, a 64-year-old diabetic who lives in Pittsburgh. She will exhaust her 26 weeks of regular benefits this month after being laid off from her job as a program coordinator at a nonprofit literacy agency.

El is taking care of her 26-year-old disabled daughter, Orissa, while also looking for a job and trying to find a new place to live.

"I don't know what I'm going to do. I'm really scared," she said. "I've never been like this before. I've always been employed, I've always worked. I went back to school a few years ago and got a master's degree, but it doesn't mean anything."

As the economy has slowed, more people have signed up for jobless benefits. The situation can only get worse given the report last week that employers payrolls by 17,000 in January — a job loss not seen since the tail of the last recession in 2003.

The unemployment rate also is on a generally upward trend. It jumped to 5 percent in December, the highest since right after the Sept. 11 attacks in 2001, then dipped to 4.9 percent in January.

Last week, the number of laid off workers filing applications for unemployment benefits soared by 69,000 to 375,000. It was the most new claims in one week since October 2005, when Hurricane Katrina and the other Gulf Coast storms disrupted the economy.

The National Employment Law Project estimates that 1.28 million people now collecting unemployment checks will be unable to find a job in the next six months and thus lose that help.

The plan before the 100-member Senate will need 60 votes to prevail. It would cost $14 billion and extend unemployment payments for 13 weeks nationwide to people whose 26 weeks of regular benefits have run out.

People without jobs in states where the unemployment rate has averaged 6.5 percent or more for three months could qualify for an additional 13 weeks of benefits, or 52 weeks altogether. Only Michigan would qualify for the extra 13-week extended benefits now; more states could join it if the job market continues to worsen.

"Every economist will tell you that stimulus spending will get into the economy much quicker than a tax rebate," says Sen. Charles Schumer, D-N.Y.

Mark Zandi, chief economist at Moody's Economy, estimates that every dollar spent on extending jobless benefits will generate $1.64 in new economic activity. Income tax rebates, he said, generate $1.26 of economic activity for every dollar they cost the Treasury.

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