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Thousands set to lose jobless benefits

They are Ohioans whose extended benefits will end early next year.

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By Randy Tucker, Staff Writer Updated 1:19 PM Monday, July 18, 2011

Jobless benefits for thousands of displaced Ohio workers are set to expire at the beginning of next year, an event some economists fear will sap hundreds of millions of dollars in personal income from the state’s economy and further stall the economic recovery.

Others, however, say the end of extended benefits will be good for the economy because it will force jobless workers to step up their job searches and bring down the unemployment rate.

The end of extended unemployment benefits that Congress approved in December 2010 for up to 99 weeks will, at least in the short run, put added pressure on food pantries and other social service agencies that are already struggling with growing demand from jobless workers.

More than 33,000 Ohioans have exhausted their unemployment benefits so far this year, putting the state on pace to exceed the 47,241 beneficiaries who received their final unemployment checks in 2010, based on figures from the Ohio Department of Job and Family Services.

In Ohio, unemployment checks average just over $287 a week, which means about $1.2 billion a year in income derived from jobless benefits has disappeared from the state economy.

That doesn’t bode well for an economy driven by consumer spending, which accounts for about two-thirds of all economic growth. A recent study published by the Labor Department concluded that every dollar in jobless benefits generated as much as $2 in the economic impact.

“When that money is cut off, spending on movies, restaurants and other recreational types of spending is going to go out the window,” said Charles Showell, dean of the business school at Central State University.

Any income the jobless receive from savings, personal loans or returns on assets will be spent on essentials, such as groceries, rent and mortgage payments, Showell said, and that will slow momentum in a fragile economic recovery.

Still, Showell isn’t predicting economic collapse, at least not tied to jobless benefits.

“At worst case, we’ll see the status quo maintained,” he said. “You won’t see too many companies going out of business because of the loss of jobless benefits, but you’re definitely not going to see any growth when that happens.”

Nationwide, economists are anticipating $37 billion in lost benefits when the federal extensions end. And since unemployment remains high — climbing to 9.2 percent last month — it’s far from certain those lost benefits will be replaced with income from jobs.

But Makoto Nakajima, an economist at the Federal Reserve Bank of Philadelphia, wrote earlier this year that the last extension of unemployment benefits slowed down recovery of the unemployment rate by about 0.4 percentage points this year because those benefits create a disincentive for the jobless to look for work.

In a story in May, the Dayton Daily News reported how some displaced workers had quit looking for work, figuring that with high gas prices they wouldn’t be able to find a job that paid them more than they got from their weekly unemployment benefits.

Some people, like April Stephens of Dayton, say they have little choice but to turn to social service agencies for help.

The 49-year-old divorced mother of two teenage sons said she’s been looking for work diligently since she was laid off from a small machine shop in Xenia two years ago.

“I went to the food pantry a few times while on unemployment,’’ she said. “I’ll probably be a regular now that my unemployment has expired,’’ she said.

Local food banks are serving an increasing number of jobless workers, said Michelle Riley, chief executive of The Foodbank Inc., which supplies 77 food banks and pantries throughout the Dayton area.

Through the end of last month, The Foodbank had distributed more than 2.4 million pounds of food, which already exceeds the record 2.3 million pounds distributed last year, Riley said.

“Every time there’s a funding cut, it forces us to do more with less,’’ Riley said. “That’s concerning because demand just keeps going up. As soon as it comes in, the food goes right back out the door.’’

Contact this reporter at (937) 225-2437 or rtucker@DaytonDailyNews.com.