On June 6, the Bureau of Labor Statistics (BLS) reported a jump in the national unemployment rate from 5.0 percent in April to 5.5 percent in May, the single biggest month-to-month increase in 22 years. Another 49,000 Americans joined the ranks of the unemployed in May, bringing the yearly total thus far to 324,000. The news took analysts by surprise, and along with rising oil prices, helped push stocks down by three percent on all three major American exchanges and re-ignited talk of a possible recession. The new jobs report also restarted discussions in Congress about extending state unemployment insurance (UI) an extra 13 weeks. Merely days before, the House Democratic leadership had indicated that it would remove a provision extending unemployment benefits that was added to the war supplemental bill by the Senate on May 22, but the BLS figures immediately spurred renewed talks in Washington and added pressure to pass a UI benefits extension.

The UI extension provision in the Senate bill is similar to one approved by the House Ways and Means Committee in April. It calls for up to 13 additional weeks of federal UI benefits in every state for workers who have exhausted the 26 weeks of regular state unemployment insurance payments. In states with unemployment rates exceeding six percent, extensions of 26 weeks would be available.

Two days before the May Senate vote that added UI benefits to the war supplemental, the Bush administration issued a veto threat of the Senate war supplemental bill, specifically disapproving the UI extension on the grounds that "the unemployment rate is 5.0 percent — a low rate by historical and economic standards." Following the recent BLS report, the administration released a "fact sheet" on June 6, stating it had already taken action to alleviate employment problems by signing the stimulus bill — an "economic growth package" that is expected to "help create more than half a million jobs by the end of 2008."

Unfortunately, the Bush administration badly misread the BLS numbers, which are worse than they may appear and indicate an extension of UI benefits is long overdue. Those most directly affected by ongoing troubles in the job market are the long-term unemployed, a sizable proportion of whom are not even counted in unemployment rate statistics because they have stopped looking for work and are deemed to be no longer in the workforce. These citizens, not those who are unemployed for short periods, are the ones most in need of a UI benefits extension.

In testimony before the Income Security and Family Support Subcommittee of the House Ways and Means Committee on April 10, University of Michigan Economics Professor Rebecca M. Blank said that the standard unemployment rate measures those actively looking for work. If the "marginally attached," those who want a job and have recently looked for a job, but are currently not looking because jobs are so scarce, and the underemployed — those available for full-time work but who have had to settle for a part-time schedule — are added to the unemployment picture, the unemployment rate as of March 2008 would have been 9.1 percent. Today, that figure would be closer to 9.5 percent.

According to a Joint Economic Committee press release on May 21, there are 1.4 million unemployed workers who have been out of work and searching for a new job for at least six months. Regardless of the overall unemployment rate, the average duration of a jobless spell today is longer than at any time Congress has taken action to extend unemployment benefits in the past 30 years. The share and number of UI beneficiaries exhausting their benefits is already higher than at the beginning of the 2001 and 1990-91 recessions. 36.4 percent of unemployed workers had exhausted their UI benefits by the end of the first quarter of 2008.

These facts argue for immediate extension of UI benefits for the marginally attached and underemployed, and macroeconomic conditions support an even broader extension. The Congressional Budget Office has estimated that, once up and running, a national UI extension would put more than $1 billion per month in the hands of jobless workers and their families. As the Economic Policy Institute reminds us, Mark Zandi of Economy.com estimates that every dollar spent on unemployment insurance boosts the economy by $1.73. UI stimulus is effective because the long-term unemployed, who are likely to have depleted their savings, tend to quickly spend every dollar they receive on necessities.

The spike in the unemployment rate announced June 6 caught the attention of almost everyone in Congress, which is now much more likely to act. The proposal to extend benefits that the House Ways and Means Committee approved in April has seen no action since then, but the House leadership has announced that it seeks a floor vote on a stand-alone UI extension measure sometime during the week of June 9. It seems likely that the issue will be revisited by the Senate, although the method by which the extension is approved has not yet been determined. It could be attached to the war supplemental bill or a broader stimulus package, or passed as a companion to the House stand-alone bill.

It is unclear if the president would still veto an extension of UI benefits given the new economic and employment data, but strong support in Congress and an impending election could yield sufficient votes in Congress to override a presidential veto.