Sequester Begins to Bite the Unemployed

Monday, 08 Jul 2013 03:13 PM

By Michelle Smith

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The sequester's bite is not limited to furloughed government workers or contractors. People without jobs are now set to share the pain of federal spending cuts.

Millions of unemployed Americans will start to feel their pockets getting lighter as the impact of federal spending cuts trickles to the Emergency Unemployment Compensation (EUC) program, according to CNBC.

As of July 1, the average weekly benefit of $289 will be reduced by $43 per week, a cut of about 15 percent. U.S. News & World Report says the cuts are set to amount to $2.4 billion.

Editor's Note:
Economist Warns: 50% Unemployment, 100% Inflation Possible

The pain will vary from one state to another. Generally, states pay the first 26 weeks of unemployment benefits. Money to pay benefits thereafter comes from EUC programs, which provide another 47 weeks of benefits, U.S. News explains.

Though the EUC is federally funded and the cuts extend from the drama in Washington, each state is allowed to determine how the cuts will be made to its citizens' benefits.

So far, Maryland and New Jersey have slashed benefits the most, each reducing long-term unemployment benefits by 22.2 percent. But even between these two states, the cuts are not of equal amounts because benefits in Maryland average $325 per week, but in New Jersey the average weekly payment is $382.

Citizens in states with more robust job markets are expected are not expected to feel the pinch as badly. In Texas, for example, the unemployment rate of 6.5 percent is below the national average. With fewer people relying on unemployment, CNBC notes that state chose to only cut benefits by slightly over 10 percent.

Louisiana and Nevada have not made any efforts to address the shortfall created by federal cuts. Their failure to adjust benefits now means that when they do, the cuts are likely to be much more painful warns U.S. News.

Spending cuts have helped to reduce the federal deficit. And although the broader economy has yet to feel adverse effects from the reductions, many are still concerned that economic hardship could lie ahead. Economists fear harsher side effects will come during the final half of this year, according to CNBC.

For those who are unemployed that may be especially true. Joblessness continues to be stubborn problem, with over 4 million Americans out of work for 27 weeks or more.

"[I]t is the workers who have benefited least from the economic recovery who are bearing the largest share of the burden of these domestic sequester reductions," the National Employment Law Project said in a statement, U.S. News reports.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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