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Unemployment Benefit Lapse Will Cut Jobs, Report Says

Photographer: T.J. Kirkpatrick/Bloomberg

U.S. President Barack Obama has urged lawmakers to pass an extension of the benefits before they recess for the holidays. Close

U.S. President Barack Obama has urged lawmakers to pass an extension of the benefits... Read More

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Photographer: T.J. Kirkpatrick/Bloomberg

U.S. President Barack Obama has urged lawmakers to pass an extension of the benefits before they recess for the holidays.

The Obama administration, bolstering a sustained push by Democrats to extend emergency unemployment benefits, said today that a lapse may cost the U.S. as many as 240,000 jobs in 2014.

An estimated 1.3 million unemployed workers would immediately lose benefits if the emergency program -- extended repeatedly since its inception in 2008 -- is allowed to expire on Dec. 28, according to the report drafted by President Barack Obama’s Council on Economic Advisers and the Labor Department. During 2014, 3.6 million more would have their benefits cut off.

“In no prior case has Congress allowed special extended benefits to expire when the unemployment rate was as high as it is today,” the report said, citing the current jobless rate of 7.3 percent.

As many as 23.9 million people have received the benefits since 2008, the report said. The administration’s analysis estimated the effect of extending the program for a full year, maintaining the current rules of the program and compared it to what would happen if the benefits were allowed to expire.

Ending the extra benefits would have the effect of reducing the income of job seekers, driving down consumption. The resulting reduced demand would cost as many as 240,000 jobs, according to the report.

Pre-Holiday Action

Obama has urged lawmakers to pass an extension of the benefits before the holidays -- something House Republicans have said they are wary of doing more than four years after the U.S. emerged from the worst recession in the post-World War II era.

The extended unemployment program at one point provided as much as 99 weeks of benefits -- 26 weeks in state benefits and up to 73 weeks in federal benefits. It has been renewed 11 times since it was put in place amid the financial crisis by then-President George W. Bush.

The length of the extra assistance has been ratcheted back through the extension renewals and now has a maximum total of 73 weeks, though most states average fewer.

Republicans have objected to spending more on government aid instead of focusing on economic growth.

“The president’s real focus ought to be creating a better environment for our economy and creating more jobs for the American people,” House Speaker John Boehner told reporters today. “Not more government programs.”

Republican ‘Look’

Boehner, an Ohio Republican, did say he would be willing to “entertain taking a look at” a White House plan to extend the benefits.

House Democrats, led by Minority Leader Nancy Pelosi, have threatened to oppose any deal made in current budget negotiations between House and Senate lawmakers if Congress doesn’t also take action on an extension of the benefits.

“We are making a very clear statement that we cannot support a budget agreement that does not include unemployment insurance,” Pelosi, of California, said at a Democratic hearing on the unemployment benefits today on Capitol Hill.

The U.S. Labor Department reported today that jobless claims slumped by 23,000 to 298,000 in the week ended Nov. 30. Gross domestic product rose in the third quarter at a 3.6 percent annual rate, up from an initial estimate of 2.8 percent and the strongest since the first quarter of 2012, the Commerce Department said today.

The non-partisan Congressional Budget Office said the cost of the extension proposed by House Democrats would be about $25 billion, according to an analysis provided to Representative Chris Van Hollen, a Maryland Democrat.

Obama, whose economic aides started calling for an extension last month, spoke on the jobless benefits issue in remarks yesterday.

“Christmas time is no time for Congress to tell more than 1 million of these Americans that they have lost their unemployment insurance, which is what will happen if Congress does not act before they leave on their holiday vacation,” Obama said in a speech on income inequality in the U.S.

To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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