Extended Benefits and Exhaustion Rate (Updated)

The details on exhaustees — the people have used up their total Unemployment benefits — are pretty daunting. I mentioned this to Doug Kass last week, who referenced our prior post on the subject at Real Money, and it caused quite a stir.

Let’s explain what this means and update a chart on the subject.

If you lose your job, you get Unemployment Benefits, an insurance program that you pay into so long as you are getting a salary.  After 26 weeks, you will exhaust those benefits and become an exhaustee.

But, wait, there’s more!

These days, via the stimulus plan, we have the Emergency Unemployment Compensation (EUC)  which is good for 20 weeks. Then, there is the Supplemental EUC, which depending upon what your state thinks of the Federal largesse of handing out money to the recently unemployed, ranges anywhere from 13 to 20 more weeks.

The most recent data run was for the week of July 11. As of that week, the Extendees — which consists of soon-to-be-Exhaustees — gained 25k, raising the total unemployed receiving extended benefits to about 2.66 million people. One year ago, there were only 127 thousand receiving extended benefits.

And, as the NYT noted yesterday, there are another 1.5 million people likely to become Exhaustees over the next few months. . . .

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Nice graphic from Calculated Risk showing how severe this is:

unemployedover26weeks

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Previously:
Continuing Claims “Exhaustion Rate” (June 22nd, 2009)
http://www.ritholtz.com/blog/2009/06/continuing-claims-exhaustion-rate/

Continuing Claims vs. Economically Lagging Unemployment (May 10th, 200)
http://www.ritholtz.com/blog/2009/05/continuing-claims-vs-economically-lagging-unemployment/

Source:
Prolonged Aid to Unemployed Is Running Out
ERIK ECKHOLM
NYT August 1, 2009
http://www.nytimes.com/2009/08/02/us/02unemploy.html


More Exhaustees Coming

The details on exhaustees — the people have used up their total Unemployment benefits — are pretty daunting. I mentioned this to Doug Kass last week, who referred to our prior post in one of his recent missives.

Now, the Sunday NYT looks at the same issue prospectively, to guesstimate how many more exhaustees there will be in the next few months.

Short answer: 1.5 million.

Longer answer:

“Over the coming months, as many as 1.5 million jobless Americans will exhaust their unemployment insurance benefits, ending what for some has been a last bulwark against foreclosures and destitution.

Because of emergency extensions already enacted by Congress, laid-off workers in nearly half the states can collect benefits for up to 79 weeks, the longest period since the unemployment insurance program was created in the 1930s. But unemployment in this recession has proved to be especially tenacious, and a wave of job-seekers is using up even this prolonged aid.

Tens of thousands of workers have already used up their benefits, and the numbers are expected to soar in the months to come, reaching half a million by the end of September and 1.5 million by the end of the year, according to new projections by the National Employment Law Project, a private research group.”

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02unemploygraphicenlarge
Graphic courtesy of NYT

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Previously:
Continuing Claims “Exhaustion Rate” (June 22nd, 2009)
http://www.ritholtz.com/blog/2009/06/continuing-claims-exhaustion-rate/

Continuing Claims vs. Economically Lagging Unemployment (May 10th, 200)
http://www.ritholtz.com/blog/2009/05/continuing-claims-vs-economically-lagging-unemployment/

Source:
Prolonged Aid to Unemployed Is Running Out
ERIK ECKHOLM
NYT August 1, 2009
http://www.nytimes.com/2009/08/02/us/02unemploy.html


Looking at Wall Street Pay

“There’s a huge disconnect between what the average American worker receives in terms of compensation and some of what we’re hearing about on Wall Street. We do believe that when the taxpayer monies are invested that compensation should be fair.”

-White House senior adviser Valerie Jarrett

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Well, yes and no.

There is clearly a disconnect between Wall Street and Main Street.

But remember that there are several different aspects to Wall Street Compensation:

1) Stock Options for C level execs;

2) Commissions for Sales people

3) Bonuses for Traders

My biggest issue is with the first item — Stock options. They get issued when stocks are up, and more are given when stocks are down. Eventually, some slug of these options will hit pay dirt. Thus, stock option compensation works out to be a big payoff for Volatility, not Performance.

This includes the CEOs/CFOs/Senior Execs of companies that have been bankrupted/bailed out, and recieved insane windfalls for helping to destroy these firms. It makes no sense, shows that the Boards of Director and large sharegolders are either corrupt, or clueless.

As to commission sales, I have zero issue with that, regardless of what these employees are selling: Cars, Frozen Steaks, Institutional Sales, Mutual Funds. The guys that can close these deals should get whatever their employment contract states.

As to the P&L Traders whose bonuses are dependent upon profitability, as long as there is some appropriate w/h for future risk — meaning, they can’t bankrupt the company — than those contracts should be honored.

My suspicion is that some of the anger over compensation is misdirected . . .


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31paygrfx-lrge

Courtesy NYT

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Source:
Bankers Reaped Lavish Bonuses During Bailouts
LOUISE STORY and ERIC DASH
NYT July 30, 2009
http://www.nytimes.com/2009/07/31/business/31pay.html

Biggest banks in US reward stars with huge bonuses
ADAM GELLER
AP, July 31, 2009
http://www.google.com/hostednews/ap/article/ALeqM5hDoEn8Uu3hgHZTzv2bM03eLCUFCgD99PMIAG1

Wall Street Executive Pay Shows ‘Huge Disconnect,’ Jarrett Says
Nicholas Johnston
Bloomberg, August 1, 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=aN.QDeYjf4qI

House Gives Regulators Incentive Pay Role; Senate Prospects Dim
Jesse Westbrook and Ian Katz
Bloomberg, August 1, 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPcjPb7SuWVw


Job Losses Greater Than Decline

I am traveling today, about to hop onto an Air Canada flight out of Vancouver — but I had to share this one WSJ article:

The job market is doing even worse than the overall economy, prompting concern inside and outside the government that deeper-than-expected joblessness could persist once the recession ends.

Breaking from historical patterns, the unemployment rate — currently at 9.5% — is 1 to 1.5 percentage points higher than would be expected under one economic rule of thumb, says Lawrence Summers, President Barack Obama’s top economic adviser. Since the recession began in December 2007, the economy has lost 6.5 million jobs, 4.7% of total employment. The unemployment rate has jumped five percentage points, while the economy has contracted by roughly 2.5%.

I have a few goodies planned for throughout the day.

Spam filter in highest setting; I’ll sift thru the net later.

Catch y’all Stateside . . .

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Source:
Job Cuts Outpace Economic Decline
JON HILSENRATH and DEBORAH SOLOMON
WSJ, July 23, 2009
http://online.wsj.com/article/SB124830700226074069.html