The national job numbers released today help illustrate a worrisome trend that Wisconsin has been experiencing.  Although job growth is only barely keeping up with population growth, the unemployment rate is dropping because many workers are deciding to drop out of the workforce.   Once they are no longer actively looking for employment, they don’t count as being unemployed and the official unemployment rate drops.

At the national level a net decrease of 164,000 people in the workforce in March meant that the unemployment rate edged down to 8.2% today, even though job growth slowed and is only keeping up with population growth.  In Wisconsin, we were the only state in the nation to have a net loss of jobs in the last calendar year, yet the unemployment rate gradually declined.  And it has recently slipped just below 7%, which is triggering a 3-month reduction in the duration of federally-funded unemployment benefits.

Unfortunately, that’s just the first of three contractions in the length of jobless benefits that will occur between now and September – thanks in large part to a drop in unemployment rates that doesn’t reflect much of an increase in jobs.The employment statistics released today show that discouraged workers continue to leave the workforce.  Despite the declining unemployment rate, the job market is still leaving a huge number of people on the sideline.  According to the Center on Budget and Policy Priorities: “The combination of high unemployment and depressed labor force participation leaves the share of Americans with a job at levels last seen in the mid-1980s.” The chart below shows this drop.

The phenomenon of little or no job growth yet a declining unemployment rate is a lose-lose scenario for the long-term unemployed in Wisconsin.  After this Saturday, April 7, the maximum length of jobless benefits for the long-term unemployed will fall by three months in Wisconsin – from the current limit of 86 weeks down to 73 weeks.  (That includes the regular 26 weeks of state-funded jobless benefits plus 47 weeks of federally-funded benefits.)   The change will immediately affect almost 8,000 Wisconsin workers who have been unemployed for at least 73 weeks, but it will gradually affect many more as they reach the new 73-week limit. 

Assuming Wisconsin’s unemployment rate remains below 7 percent, federally-funded unemployment benefits will contract again around June 1 and in September.  And regardless of how high the unemployment rate is (or how anemic job growth is), federal benefits for the unemployed will cease altogether at the end of 2012 – unless Congress acts this fall to renew some form of assistance for the long-term unemployed.

For more information about the three-step contraction in unemployment benefits over the next six months, see our most recent Wisconsin Budget Project Blog post, “Honey, I Shrunk the Unemployment Benefits.”

Jon Peacock and Tamarine Cornelius