Economy Watch: Extended Unemployment Benefits Lapse for 1.3 Million Recipients

Extended unemployment benefits expire for 1.3 million people, and Freddie Mac's delinquency rate drops to 2.43 percent—its lowest level since March 2009.

Extended unemployment benefits expired over the weekend, cutting off an average of $300 a week to 1.3 million long-term unemployed recipients. The program, which had the federal government paying benefits until week 73 of unemployment (state payments last until week 26) in states with the worst joblessness, wasn’t extended as part of the budget deal passed by Congress a few weeks ago and signed into law by President Obama on Friday.

The cost to renew the program—started during the worst days of the early recession in 2008—would be about $25 billion a year in federal outlays, according to the Congressional Budget Office. The cost of not renewing the program, since the benefits tend to be spent immediately and locally—would be to shave 0.2 percent off of U.S. GDP in the first quarter of 2014, predicts HIS Global Insights. Currently the company estimates that the economy will grow at 2 percent to 2.5 percent next year.

Early next month, the Senate is expected to take up a bill to extend the benefits once again, and the president has voiced his support. The fate of any such measure in the House is uncertain at best.

Freddie Mac Delinquency Rate Still Dropping

Freddie Mac reported on Friday that its single-family serious delinquency rate dropped to 2.43 percent in November from 2.48 percent in October. Freddie’s rate was 3.25 percent in November 2012, with November 2013 marking the lowest level since March 2009, when the rate was on its way skyward.

The GSE’s serious delinquency rate peaked in February 2010 at 4.2 percent. According to Freddie, serious delinquency describes mortgage loans that are “three monthly payments or more past due or in foreclosure.” Most mortgages that reach three months or more in missing payments are eventually foreclosure or are the subject of a short sale.

If Freddie Mac’s serious delinquency rate continues to drop at that pace, it will be another two years or so before it returns to a “normal”—that is, pre-recession—rate of about 1 percent. Fannie Mae will report its single-family delinquency rate later this week.

Wall Street ended the week on Friday on a modestly down note, with the Dow Jones Industrial Average losing a slight 1.47 points, or 0.01 percent. The S&P 500 was down 0.03 percent and the Nasdaq declined 0.25 percent.