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How Painful Is Unemployment? |
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Written by Polina Vlasenko
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Friday, 22 May 2009 00:00 |
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Continued unemployment insurance claims, representing the number of people currently receiving unemployment insurance payments, topped 6 million in April, the highest number since the data began to be collected in 1967. This does not mean that the employment situation is worse now than it was during other recessions in the past four decades. Over the years, both the size of the labor force and the fraction of labor force covered by unemployment insurance increased substantially.
The chart below shows that the fraction of labor force covered by unemployment insurance has increased dramatically since the early 1970s. Currently, more than 85 percent of the labor force is covered by unemployment insurance. In the severe recession of 1981-82, this fraction was only about 80 percent. In the recession of 1974-75, the fraction was only 70 percent. In other words, for an increasing number of workers, unemployment no longer means a complete loss of income.
Note: Monthly data, seasonally adjusted. Latest data, April 2009. Source: Department of Labor.
Some of the unemployed still do not receive unemployment benefits, either because their benefits have run out or they never qualified for coverage. The chart below shows the painful unemployment rate, the fraction of people in the labor force who are unemployed without receiving unemployment insurance payments. This fraction has been climbing since early 2007, but it has not reached the levels seen in the 1981-82 recession or even in the relatively mild 1991 recession. 
Note: Monthly data, seasonally adjusted. Latest data, April 2009. Source: Department of Labor. The data suggest that even though the national unemployment rate and the number of continued unemployment insurance claims have increased, the pain of unemployment is not as severe as it was in prior recessions.
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No, I'm not Phil Gramm ;)
Many experts think that this trend will overwhelm the programs set up by the Obama Administration and further weaken our financial institutions. This tells me that this crisis is far from over - as more middle and upper class mortgages go into default, as a result of mounting job losses.
Polina Viasenko is overly optimistic about the "pain" and "more pain" that lies ahead for the world as this "depression" deepens. Capitalism, as a viable economic system, is going to be threatened and questioned as this economic collapse builds up momentum.
I know a lot of people on unemployment, and the longer their checks keep coming, the longer they stay unmotivated and unemployed. I hate this crap. Road repair and public projects, anything is better than further extension of unemployment benefits.