Friday, January 3, 2014

End of Emergency Unemployment Compensation Won’t Directly Impact Oregon’s Unemployment Rate

We are receiving questions about how the end of Emergency Unemployment Compensation (EUC), the federally funded program that provides benefits to individuals who have exhausted regular state benefits, will impact the unemployment rate or alternative measures of labor underutilization such as the U-6 (see our previous post with definitions of the unemployment rate and alternative measures such as U-6).

The end of federal extended benefits should not cause any immediate, big changes in Oregon’s unemployment rate or the U-6 because those receiving EUC were already included in both measures. These rates are based on responses to the monthly Current Population Survey, and those who received EUC benefits will continue to be factored in as unemployed as long as they continue actively seeking work after their benefits expire. Whether or not someone is currently receiving, has ever received, or is even eligible to receive unemployment insurance benefits has no impact on determining if they are considered unemployed.

The expiration of benefits could indirectly impact the U-6 component measures if enough recipients change their job search behavior after their emergency compensation ends. Here are a few example scenarios of how people may respond to the expiration of their unemployment insurance benefits and where they would be counted in the various measures:
  • A person receiving extended benefits is included in the U-3 (unemployment rate), U-4, U-5, and U-6. (If they are receiving extended benefits, they are presumably unemployed, available for work, and actively seeking work – the criteria to be considered as unemployed). They will remain in these measures if they continue to look for work after their benefits expire.
  • If a person’s unemployment benefits expire, and they discontinue looking for work specifically because they believe no jobs are available for them, even though they want to work (discouraged workers), they would still be included in the U-4, U-5, and U-6 measures. If they are available to work but are not currently searching for work for reasons beside discouragement they are marginally attached workers (which includes discouraged) and are still included in the U-5 and U-6.
  • If a person’s unemployment benefits expire, and they are able to find a part-time job, but they want to work full time and are available to do so, they would be considered “part time for economic reasons” and included in the U-6.
  • If a person’s unemployment benefits expire, and they stop looking for work and no longer want a job, they would be considered not in the labor force, so they would not be included in the unemployment rate or the U-6. This scenario, which includes examples such as retirees, students, homemakers, and others, actually leads to a lower U-6.
You can find even more on unemployment and whoo gets counted where in Tracy Morrissette's article Alternative Measures of the Unemployment Rate.

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