California Economy: $80 Million in Unemployment Insurance Being Paid out Per Day. 143,000 Exhausted Their Jobless Benefits on September 1. One in Four Unemployed Workers without a Job for 27 Weeks or More.
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In another sign that California is inching back to the financial edge, earlier this week 143,000 unemployed Californians exhausted their unemployment benefits. Now, you might think that this is simply a function of a normal recession. It is not. In fact, many of these people have exhausted their 26 weeks of benefits plus three additional extensions. That is, Californians are eligible for up to 79 weeks of benefits and that is still not enough! That is why even though the layoffs are tempering off, the major question is who is hiring and hiring at a high enough pace to make up for the new workers and displaced workers currently in the economy?
California this year has had to plug some $60 billion in budget deficits. The state moves slowly and many of the cuts are still coming through the pipeline. With an unemployment rate of 12 percent this will grow in the next few months. But take a look at the duration of unemployment in the state:
Source: OC Register
Last year, those designated as long-term unemployed made up 18% of the unemployed in the state. Now, that group is the largest category making up 28% of all those without work. This is crucial because the state is currently paying out $80 million a day from the unemployment insurance fund that has been in the negative since the start of the year:
Another bill has been introduced to extend benefits for a fourth extension bringing the amount of unemployment insurance available for up to 92 weeks! This is no minor recession but a major economic shift in our economy. Without the extension being passed there will be 264,000 Californians with no unemployment insurance by the end of the year. Congress returns in a few days but they have their hands full with the healthcare debate which seems to be dominating the entire dialogue of the country. The reality is, we have multiple issues that need to be addressed at once while the American public has lost confidence with Wall Street and their politicians.
So far this year California has dished out some $11 billion in unemployment insurance. This is the biggest amount on record dwarfing the previous record set last year at $8.1 billion. It is hard to say what industry is going to drag the state out of recession. California has been heavily dependent on housing and finance for the prosperity of this decade. To bet the economy of the largest state on an epic bubble has proven to be disastrous. It is highly unlikely that we will have another bubble to save us like the technology bubble of the 1990s or the real estate bubble of this decade.
Weekly benefits range from $65 on the lower end all the way up to $475. The insurance people receive depends on their previous income. The average weekly amount is $319.
In a previous post, I discussed how 34 million Americans are receiving food stamps. Of that, California has 2.2 million. What the state is realizing is that you cannot keep spending at levels at peak bubble points and expect revenues to come in when the economy has radically shifted. Money is going out of the state even in light of the all the budget cuts. The state heavily depends on personal income tax and sales tax. Both of these volatile sources go down in recession. Not only that, but you also have many not working and drawing on funds. That is why California always finds itself in feast or famine. Until California learns to have a more sensible budget with contingencies for recessions, this is going to be the status quo for years to come.