Trend and Cycle Analysis of Unemployment

 Insurance and the Employment Service 

by

Wayne Vroman,

The Urban Institute

and 

Stephen Woodbury,

The W.E. Upjohn Institute

December 2004

This report was prepared under terms of a contract between the Urban Institute and the 

Office of Workforce Security of the U.S. Department of Labor. The W.E. Upjohn 

Institute for Employment Research was a sub-contractor to the project. The project 

director was Dr. Wayne Vroman who had primary responsibility for coordinating the data 

assembly and for drafting Chapters 1, 2 and 4. Dr. Stephen Woodbury of the W.E. 

Upjohn Institute had primary responsibility for drafting Chapters 3 and 5. Support from 

the Office of Workforce Security of the U.S. Department of Labor is gratefully 

acknowledged. In particular, we thank Aquila Branch, our COTR, Dave Balducchi, 

Wayne Gordon and Steve Wandner for help and encouragement throughout the project 

and for useful comments on an earlier draft of this report. The conclusions of the report 

are those of the authors and do not necessarily represent the views of the U.S. 

Department of Labor, the Urban Institute or the W.E. Upjohn Institute. 
Table of Contents 

 Page

Introduction 1 

Chapter 1. Overview of Recessions, UI Benefits, and Unemployment Duration 4 

 1.1. Post World War II Recessions 5 

 1.2. Aggregate UI Benefit Payments, 1948 to 2002 8 

 1.3. Unemployment Duration and Occurrences 12 

 1.4. Regression Analysis of Unemployment Duration 26 

 1.5. Developments in the States Affecting UI Benefit Duration 31 

 1.6. Summary 37 

Chapter 2. Expenditures on UI Benefits 38 

 2.1. Data Considerations 38 

 2.2. Regional Unemployment Patterns 40 

 2.3. Regular UI Benefits by DOL Region 43 

 2.4. Receipt of EB 45 

 2.5. Temporary Federal Benefits 52 

 2.6. Summary 58 

Chapter 3. Alternative Triggers for the Federal-State Extended Benefit Program 60 

 3.1. A Brief History of Extended Benefit Programs 62 

 3.2. Simulating the Impact of Alternative EB Triggers 68 

 3.2.1. Choice of a trigger 69 

 3.2.2. Triggers simulated 74 

 3.2.3. Outcomes examined 74 

 3.2.4. Data and approach used in the simulations 76 

 3.3. Results of the Simulations 77 

 3.4. Conclusions 86 

Chapter 4. Aggregate Employment Service Activities 87 

 4.1. ES National Aggregates 87 

 4.2. ES Activities in the Regions 92 

 4.3. Analysis of ES Activities 95 

 4.4. Summary 102 

Chapter 5. Trends and Cycles in Employment Service Delivery 103 

 5.1. The Changing Role of the ES 104 

 5.2. A Model of Employment Service Delivery 106 

 5.3. Results of the Estimation 110 

 5.4. Conclusions 121 

Chapter 6. Conclusions and Further Research 124 
 Page

References 128 

 

Appendix A. UI Benefits by State and Year 131 

Appendix B. Employment Service Activities by State and Year 134 

Appendix C. States, Regions and Census Division Summary Data 144 

List of Tables 

Table 1.1. Summary of Post World War II Business Cycles: Dates, 

 Duration and Maximum Unemployment Rates 7 

Table 1.2. Aggregate UI Expenditures by Year, 1948 to 2002 9 

Table 1.3. Unemployment Rates and Average Unemployment Duration, 

 1950 to 2002 14 

Table 1.4. Unemployment Rates and Rates of Unemployment Occurrences, 

 1950 to 2002 21 

Table 1.5. Explanatory Power of Alternative Regressions Explaining 

 Unemployment Duration 29 

Table 1.6. Summary of State Laws Affecting UI Benefit Duration, 1954 to 2003 33 

Table 2.1. Relative Unemployment Rates for DOL Regions, 1967 to 2002 41 

Table 2.2. Regular UI Benefit Payments for DOL Regions, 1967 to 2002 44 

Table 2.3. Regular UI and EB Benefit Payments for DOL Regions, 

1971 to 1983 47 

Table 2.4. Proportion of Years EB Payments by States Met Indicated 

 Thresholds Relative to Regular UI Benefits, 1971 to 2002 50 

Table 2.5. Regular UI and TFB Benefit Payments for DOL Regions, Nine 

 Years from 1975 to 2002 53 

Table 2.6. Proportion of State-Year Observations when TFB Payments 

 Relative to Regular UI Benefits Met Indicated Thresholds 56 

Table 3.1. Extended Unemployment Benefit Programs, 1958 to Present 63 

Table 3.2. Triggers Used to Activate Standby and Emergency Extended Benefits 70 

Table 3.3. Simulated Impacts of Alternative TUR-based EB Triggers 

 (1978-2002) and Adjusted-IUR-based EB Triggers (1987-2002) 78 

Table 3.4. Number of States Triggering On at Least Once Under Alternative 

 EB Triggers, Selected Time Periods 80 

Table 3.5. Percentage of Time EB Activated Under Alternative EB Triggers, 

 Selected Time Periods 81 

Table 3.6. Percentage of Unemployed in States on EB Under Alternative EB 

 Triggers, Selected Time Periods 82 
 Page

Table 3.7. Percentage of Exhaustees in States on EB Under Alternative EB 

 Triggers, Selected Time Periods 83 

Table 3.8. Estimated Benefits Paid Under Alternative EB Triggers, Selected 

 Time Periods (in millions of $) 84 

Table 4.1 Aggregate Measures of ES Activities, 1967 to 2001 88 

Table 4.2. Application Rates for ES Services, National and DOL Regional 

 Data, 1967 to 2001 94 

Table 4.3. Entered Employment Rates, National and DOL Regional Data, 

 1967 to 2001 96 

Table 4.4. Regression Analysis of ES Application Rates by Region, 

 1967 to 2001 98 

Table 4.5. Regression Analysis of Entered Employment Rates by Region, 

 1967 to 2001 99 

Table 5.1. Employment and Training Legislation and the Changing Role 

 of the Employment Service 105 

Table 5.2. First-difference Loglinear Models of ES Activities 111 

Table 5.3. Fixed-effects Loglinear Models of ES Activities 115 

Table 5.4. Proportional Deviations of States’ ES Activities from Reference 117 

 State (Florida); Estimates with Fixed-effects Loglinear Models 117 

Table 5.5. First-difference Models of ES Activity Rates 120 

Table 5.6. Fixed-effects Models of ES Activity Rates 122 

Table B.1. Summary of ES Activities and Services in Data File, State-by-Year 

 Information, 1967 to 2001 135 

Table B.2. Characteristics of Applicants for ES Services, 1967 to 2001 138 

Table C.1. Average Unemployment Rates and UI Recipiency Rates for States 

 by DOL Region and Census Division 145 

Table C.2. Relative Unemployment Rates by Census Division, 1967 to 2002 146 

Table C.3. Regular UI Benefit Payments for Census Divisions, 1967 to 2002 148 

List of Charts 

Chart 1.1. Average Unemployment Duration, Centered Five Year Averages, 

 1950 to 2000 17 

Chart 1.2. UI Actual Dur./Potential Dur. Ratio and Exhaustion Rate, 

 Centered FiveYear Averages, 1950 to 2000 19 

Chart 1.3. Temporary Layoff and Other Job Loser Shares of Unemployment, 

 1967 to 2002 25 

Chart 4.1. ES Application Rates, 1967 to 2001 90 

Chart 4.2. Placement Rates and Entered Employment Rates, 1967 to 2001 93 
Executive Summary 

This report traces historical developments in two major DOL programs: State 

Unemployment Insurance (UI) and the federal-state Employment Service (ES). 

Developments in the UI program are traced from the late 1940s while ES program 

activities are traced from the late 1960s. For both programs, the report emphasizes long 

term trends as well as changes that have occurred over the course of the business cycle. 

The analysis uses annual data and is conducted at three levels of geographic detail: 

national, regional and state. 

A major objective of the project was to create data files useful for other 

researchers in studying the UI and ES programs. For both programs, data were assembled 

to be delivered to DOL and for transmission to archival repositories such as the 

Employment Data Center at the W.E. Upjohn Institute for Employment Research. Key 

deliverables for the project were spreadsheets with state, regional and national detail that 

span extended time periods since World War II. 

The report has five main substantive chapters. Chapter 1 provides an overview of 

recessions in the U.S. since World War II, noting their duration and severity as reflected 

by changes in the national unemployment rate. It summarizes aggregate developments in 

UI benefit payments back to 1948. It documents the reduction of the scope of the FederalState Extended Benefits (EB) program following the downturn of 1980-1983 and the 

growth in the importance of Temporary Federal Benefits (TFB) programs in subsequent 

recessions. 

Chapter 1 also reviews developments in the labor market related to 

unemployment occurrences and the average duration of unemployment. A pervasive 

upward trend in average unemployment duration is documented. Regressions establish 

that the upward trend in average duration accelerated starting in the early 1980s. Finally, 

the chapter traces developments in state UI statutes that affect duration in benefit status 

for workers in the regular UI program. In sum, Chapter 1 provides an overview of 

important macro and labor market developments that have been impinging upon the UI 

and ES programs since World War II. 

Chapter 2 traces the evolution of UI benefit payments. Because of the importance 

of unemployment in determining benefit payments, the chapter reviews developments in 

unemployment in the (former) ten DOL regions since 1967. It then documents the 

connection between unemployment and UI recipiency rates and expenditures for UI 

benefits. The analysis of expenditures covers the regular UI program as well as programs 

for the long term unemployed who exhaust regular UI benefits. 

The federal-state extended benefits (EB) program was established in 1970 to 

provide automatic extensions of benefits when unemployment rates in the states exceed 

specified thresholds. Chapter 3 undertakes a simulation analysis of the EB program to 

examine its performance under alternative trigger mechanisms. It simulates the share of 

time EB would have been activated during sub-periods of the 1980s and 1990s using 
alternative trigger mechanisms. The chapter also examines related questions of targeting 

benefits on the long term unemployed and the cost of EB payments. 

Chapters 4 and 5 focus on the ES program. Chapter 4 provides a historical 

overview of key ES activities from 1967 to 2001. It conducts an analysis of ES 

applications and entered employment rates nationwide and in the ten DOL regions. Wide 

and persistent diversity across regions is documented. The chapter also utilizes 

regressions to demonstrate that applications and entered employment rates are sensitive 

to the business cycle (as proxied by the unemployment rate) in all regions. 

Chapter 5 conducts a pooled state-year regression analysis of four ES activities: 

applications, counseling, referral rates and placement rates. A model is specified and 

fitted using four methods of data measurement: loglinear first differences, loglinear fixed 

effects, first differences and fixed effects. Strong and positive effects of unemployment 

on applications are found throughout the analysis. Unemployment also has important 

negative effects on placement rates. Unionization is found to have generally weak effects 

on all four ES activities. Some inconsistencies are found in parameter estimates based on 

different methods of data measurement. The inconsistent findings are suggestive 

specification errors, possibly omitted variables. Overall, the results pertaining to the 

effects of unemployment found in Chapter 5 were similar to results found in Chapter 4. 

Chapter 6 reviews key research activities of the project and identifies four priority 

areas for future research. The four areas are the following. 1) Further research into the 

changing patterns of unemployment occurrences and unemployment duration should be 

undertaken. 2) More analysis of EB triggers is warranted. A good starting point for this 

would be to extend the simulation analysis summarized in Chapter 3. 3) There should be 

an analysis the linkages between the resources devoted to ES administration in individual 

states and the labor market outcomes linked to ES activities. This analysis would require 

information not only on the Wagner-Peyser ES administrative allocations to the states but 

also the amount of state supplementation of federal ES administrative monies. 4) Finally, 

while the report documented changes in entered employment rates and changes in the 

mix of placement rates versus obtained employment rates in the ES program, no attempt 

was made to tie these changes to the evolution of ES administrative structures and/or the 

contrasts in the one-stop operations across the states. Examining this linkage will be of 

continuing interest as ES programs strive to provide effective reemployment support for 

workers who experience new onsets of unemployment. 
1 

Introduction 

The programs supported by the U.S. Department of Labor (DOL) have as their 

ultimate objective the promotion of meaningful and useful employment for American 

workers. This report traces historical developments in two major DOL programs: State 

Unemployment Insurance (UI) and the federal-state Employment Service (ES). Both 

programs have operated successfully as federal-state partnerships for more than 60 years. 

Developments in the UI program are traced from the late 1940s while ES program 

activities are traced from the late 1960s. For both programs, the report emphasizes long 

term trends as well as changes that have occurred over the course of the business cycle. 

The text of the report’s five main chapters provides details of past UI support for the 

unemployed and ES activities designed to enhance the labor market success of job 

seekers. The analysis uses annual data and is conducted at three levels of geographic 

detail: national, regional and state. 

A major objective of the project was to create data files useful for other 

researchers in studying the UI and ES programs. For both programs, data were assembled 

to be delivered to DOL and for transmission to archival repositories. Key deliverables for 

the project were spreadsheets with state, regional and national detail that span extended 

time periods since World War II. Important details of the data assembly activities for the 

UI program are given in Appendix A and for the ES program in Appendix B. Pooled 

state-year data for both UI and ES activities have been assembled that extend back to 

1967. 

The report has five main substantive chapters. Chapter 1 provides an overview of 

recessions in the U.S. since World War II, noting their duration and severity as reflected 

by changes in the national unemployment rate. It summarizes aggregate developments in 

UI benefit payments back to 1948. It also reviews developments in the labor market 

related to unemployment occurrences and the average duration of unemployment. A 

pervasive upward trend in average unemployment duration is documented. Regressions 

establish that the upward trend in average duration accelerated starting in the early 1980s. 

Finally, the chapter traces developments in state UI statutes that affect duration in benefit 
2 

status for workers in the regular UI program. In sum, Chapter 1 provides an overview of 

important macro and labor market developments that have been impinging upon the UI 

and ES programs since World War II. 

Chapter 2 traces the evolution of UI benefit payments across regions. Because of 

the importance of unemployment in determining benefit payments, the chapter reviews 

developments in unemployment in the (former) ten DOL regions since 1967. It then 

documents the connection between unemployment and UI recipiency rates and 

expenditures for UI benefits. The analysis of expenditures covers the regular UI program 

as well as programs for the long term unemployed who exhaust regular UI benefits. 

The federal-state extended benefits (EB) program was established in 1970 to 

provide automatic extensions of benefits when unemployment rates in the states exceed 

specified thresholds. Chapter 3 undertakes a simulation analysis of the EB program to 

examine its performance under alternative trigger mechanisms. It simulates the share of 

time EB would have been activated during sub-periods of the 1980s and 1990s using 

alternative trigger mechanisms. The chapter also examines related questions of targeting 

benefits on the long term unemployed and the cost of EB payments. 

Chapters 4 and 5 focus on the ES program. Chapter 4 provides a historical 

overview of key ES activities from 1967 to 2001. It analyzes ES applications and entered 

employment rates nationwide and in the ten DOL regions. Wide and persistent diversity 

across regions is documented. The chapter also utilizes regressions to demonstrate that 

applications and entered employment rates are sensitive to the business cycle (as proxied 

by the unemployment rate) in all regions. 

Chapter 5 conducts a pooled state-year regression analysis of four ES activities: 

applications, counseling, referral rates and placement rates. A model is specified and 

fitted using four methods of data measurement: loglinear first differences, loglinear fixed 

effects, first differences and fixed effects. Strong and positive effects of unemployment 

on applications are found throughout the analysis. Unemployment also has important 

negative effects on placement rates. Unionization is found to have generally weak effects 

on all four ES activities. Some inconsistencies are found in parameter estimates based on 

different methods of data measurement. The inconsistent findings are suggestive of 
3 

specification errors, possibly omitted variables. Overall, the results pertaining to the 

effects of unemployment found in Chapter 5 were similar to results found in Chapter 4. 

The analysis of the report is presented as illustrative of research that can be 

undertaken with the data assembled in the course of the project. All UI and ES data from 

the project are available from the Employment Data Center at the W.E. Upjohn Institute 

for Employment Research (www.upjohninstitute.org). It is anticipated that follow-up 

research using these data will take place at the U.S. Department of Labor and by its 

contractors and other labor market researchers. 
4 

Chapter 1. Overview of Recessions, UI Benefits and Unemployment Duration 

 Cyclical swings in economic activity are a prominent feature of the U.S. 

economy. In the labor market, recessions are characterized by increases in the 

unemployment rate that reflect increases in unemployment occurrences and increases in 

the average duration of unemployment spells. 

There have been ten recessions in the United States since World War II. While the 

individual recessions have differed from one another in important ways, e.g., in their 

severity, duration and the associated rate of inflation, they all have been characterized by 

a decrease in real economic activity (Gross Domestic Product or GDP). In mid-2003, the 

economy has started to recover from the most recent decline in real GDP that occurred 

during the first three calendar quarters of 2001. However, even though the decline in real 

output was modest, the overall unemployment rate in mid-2003 stood two full percentage 

points higher than at the end of 2000. 

 This project documents the cyclical patterns of participation in Unemployment 

Insurance (UI) and Federal-State Employment Service (ES) programs with particular 

attention to recessionary periods. The approach to be followed can be described as 

quantitative-descriptive. This chapter briefly reviews selected aspects of past recessions, 

summarizes information on unemployment and UI benefit payments, describes 

developments in unemployment duration and reviews important aspects of the state UI 

programs that affect UI benefit duration. Later chapters focus on other aspects of UI and 

ES activities with attention to changes that take place during recessions. 

 Any contemporary project focused on the labor market and the place of UI and ES 

activities must recognize the fluid situation of the state ES programs within the larger 

system of reemployment support, training activities and other forms of worker support 

that extend beyond the traditional ES role of promoting job matching. The states are at 

differing stages in developing their own unique approaches to reemployment using onestop career centers and other initiatives. The ES programs in the individual states have 

differing and evolving roles. Compared to this, the role of the UI program in providing 
5 

passive income support to the unemployed during the most recent downturn has 

displayed much more continuity with earlier recessions. 

 While the changes affecting ES must be acknowledged, these developments have 

taken place mainly in the years following the enactment of the Workforce Investment Act 

of 1998. The present project has a strong historical focus and a focus on recessions. In 

past recessions as in the current recession, the income support role of UI has remained 

important. Also, the federal policy response to higher unemployment, i.e., enacting a 

temporary federally-financed program of extended UI benefits, has been similar to that of 

past recessions. Because of the strong historical element in the current project, the report 

will not prominently emphasize the changes in ES and one-stop activities. Of course, 

where these changes are important to the analysis, they will receive proper emphasis.1 

 It should also be noted that traditional ideas of the appropriate role of UI 

payments to cushion the effects of unemployment are also subject to challenge. Because 

UI payments implicitly endorse wait (or search) unemployment and leave the initiative 

for securing reemployment mainly with the claimant, some would place greater emphasis 

on measures to encourage (or even require) more active job search . While this debate is 

undoubtedly important, it again is less germane in a project that places heavy emphasis 

on history and earlier recessionary episodes. For purposes of this report, larger payments 

of UI are viewed positively in easing the hardships caused by unemployment in families 

and in providing automatic (or built-in) stability to the macro economy. 

 

1.1. Post World War II Recessions 

 Table 1.1 provides summary details on U.S. business cycles since World War II. 

It displays important features of ten cyclical episodes dating back to the 1949 recession. 

The timing of the peaks and troughs in economic activity as determined by the National 

Bureau of Economic Research (NBER) are shown in columns [1] and [2]. The NBER has 

official responsibility for dating cyclical turning points. Note that the most recent 

 

1

 One obvious example is the change in placement activities in an environment where job seekers 

increasingly rely on self-service in using on-line information to secure job matches. The measures of job 

accession rates will include within the entered employment rates both ES placements and counts of 

“obtained employment.” Chart 4.2 in Chapter 4 provides a graphic summary of changes in recent years. 
6 

recession-recovery episode is incomplete as this report is being written. At the present 

time (August 2003), the peak and trough have been designated (March 2001 and 

November 2001 respectively), but the recovery phase to the next peak will probably not 

be known for a number of years. Thus the tenth cyclical episode is incomplete. 

 Table 1.1 vividly illustrates that the expansion phases of U.S. business cycles 

typically last much longer than the contractions. The averages for nine recessions were 59 

months for expansions but only 11 months for contractions. The duration of expansions 

has had much greater variability than for contractions. Three expansions lasted more than 

90 months with the recent 1991-2001 expansion lasting a full ten years. An emerging 

theme of macroeconomic literature is the increased length of the business cycle in recent 

periods. See, for example, Blanchard and Simon(2001) and McConnell and PerezQuiros(2000). Evolutionary changes in the economy such as increased reliance on just-intime inventory policies and the declining importance of the manufacturing sector are 

often identified as contributing to the changing character of the U.S. business cycle. 

The years 1980 to 1982 were unusual in that two recessions occurred within a 

very short period. Many refer to this period as having back-to-back recessions and treat 

the two as a single recessionary episode. In the labor market, there was no sustained 

downward movement of unemployment during the short expansionary period from July 

1980 to July 1981. Between December 1979 and November 1982 the unemployment rate 

increased by five full percentage points, the largest increase for any recessionary period 

since World War II. In the current project, these two recessions will be treated as single 

(albeit extended) recessionary episode. 

 Table 1.1 also shows that peak unemployment rates have varied widely from one 

recession to the next. Two had peaks of 9.0 percent or higher (May 1975 and November 

1982) while three had peaks that were close to 6.0 percent (September 1954, December 

1970 and the most recent downturn where the peak was 6.4 percent). From the historical 

perspective provided by Table 1.1 it is clear that the most recent downturn has been quite 

mild. Unemployment rates during 2002 and 2003 have averaged some 1.8 to 2.1 

percentage points above the lows reached during 2000. 

 In the NBER methodology for dating business cycles, the unemployment rate is 

considered a coincident indicator, and it figures prominently in the dating of business 
Table 1.1. Summary of Post World War II Business Cycles: Dates, Duration and Maximum Unemployment Rates

Months from

Duration of Duration of Highest Highest Trough to

Peak Trough Peak Recession, Expansion, Unemployment Unemployment Highest

Months Months Rate Rate, Percent Unemployment

[1] [2] [3] [4] [5] [6] [7] [8]

 1. November 1948 October 1949 July 1953 11 45 October 1949 7.9 0 2. July 1953 May 1954 August 1957 10 39 September 1954 6.1 4 3. August 1957 April 1958 April 1960 8 24 July 1958 7.5 3 4. April 1960 February 1961 December 1969 10 106 May 1961 7.1 3 5. December 1969 November 1970 November 1973 11 36 December 1970-b 6.1 1 6. November 1973 March 1975 January 1980 16 58 May 1975 9.0 2 7. January 1980 July 1980 July 1981 6 12 July 1980 7.8 0 8. July 1981 November 1982 July 1990 16 92 November 1982 10.6 0 9. July 1990 March 1991 March 2001 8 120 June 1992 7.6 1510. March 2001 November 2001 NA 8 NA June 2003 6.3 19 Averages of Nine 11 59 7.7 3 Recessions Source: Business cycle peaks and troughs from the National Bureau of Economic Research. Peak unemployment rates from BLS.  a - Date for this trough estimated by the author. NA - Not applicable as the economic expansion has only recently commenced.

 b - Tie between December 1970 and August 1971, each with an unemployment rate of 6.1 percent. NA - Not applicable as the most recent economic expansion has not peaked as of April 2004.
8 

cycle turning points. It thus provides important information for dating business cycle 

troughs. For all but two of the recessions summarized in Table 1.1 the period from the 

month of the cyclical trough to the month of peak unemployment (column [8]) was four 

or months or less. The two exceptions have been the time intervals between March 1991 

and June 1992 and from December 2001 to June 2003. In both periods the recovery was 

weak in its initial stages and did not generate enough jobs to reduce unemployment 

quickly. Note that the description of the most recent downturn is subject to change. 

While the last two recessions have been mild by historic standards, the early 

stages of the subsequent economic recoveries have also been quite weak. During 2002 

and the early months of 2003 journalists and others have referred to the most recent 

recovery as a jobless recovery. Based on the two most recent recessions, it may be that 

the nature of the U.S. business cycle has changed permanently. It appears, superficially at 

least, that the economy eases into and out of recessions rather than experiencing sharp 

falloffs in output followed by sharp economic recoveries. With only two recessions 

during the last 20 years, however, there is not much evidence for drawing robust 

conclusions about changes in the nature of the U.S. business cycle. 

1.2. Aggregate UI Benefit Payments, 1948 to 2002 

Unemployment insurance (UI) has been available to eligible claimants during all 

recessions since World War II. Table 1.2 summarizes annual UI benefit payments over 

the 55 years from 1948 to 2002. Column [1] shows annual unemployment rates for 

persons 16 and older while column [2] highlights increases in unemployment rates during 

each recessionary period. For nine periods it shows the increase in the unemployment rate 

from the pre-recessionary year. Note that the two official recessions of 1980 and 1982 are 

treated as a single long recession in the table. The annual average unemployment rates 

during 1982 and 1983 were nearly four full percentage points higher than for the prerecession year 1979. More typically, the increases shown in column [2] fall into the range 

from 1.2 to 2.7 percentage points. Note also that the increases in unemployment during 

1990-1993 and 2001-2002 were modest when compared with the increases of most 

earlier recessions. 
Table 1.2. Aggregate UI Expenditures by Year, 1948 to 2002.

Unem- Increase Regular Federal- Temporary Total Reg UI EB/ TFB/ Increase Total Total 

ployment in U Rate State UI State Federal Benefits, Benefits/ Total Total in Benefits Benefits, Benefits, 

Year Rate, Pct. from Pre- Benefits Extended Benefits All Three Total Benefits Benefits from Pre- Pct. of Pct. of

Recession Benefits Tiers Benefits Recession GDP Covered

Year Reg UI EB TFB [3]+[4]+[5] [3]/[6] [4]/[6] [5]/[6] Year, Pct. Wages

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12]

1948 3.8 0.8 NA NA 0.8 1.00 NA NA 0.29 0.82

1949 5.9 2.1 1.7 NA NA 1.7 1.00 NA NA 120 0.65 1.85

1950 5.3 1.4 NA NA 1.4 1.00 NA NA 0.47 1.33

1951 3.3 0.8 NA NA 0.8 1.00 NA NA 0.25 0.71

1952 3.0 1.0 NA NA 1.0 1.00 NA NA 0.28 0.78

1953 2.9 1.0 NA NA 1.0 1.00 NA NA 0.25 0.69

1954 5.5 2.6 2.0 NA NA 2.0 1.00 NA NA 111 0.53 1.48

1955 4.4 1.4 NA NA 1.4 1.00 NA NA 0.33 0.91

1956 4.1 1.4 NA NA 1.4 1.00 NA NA 0.32 0.84

1957 4.3 1.7 NA NA 1.7 1.00 NA NA 0.38 1.00

1958 6.8 2.5 3.5 NA 0.3 3.8 0.92 NA 0.08 120 0.81 2.22

1959 5.5 2.3 NA 0.1 2.4 0.96 NA 0.04 0.47 1.27

1960 5.5 2.7 NA NA 2.7 1.00 NA NA 0.52 1.40

1961 6.7 1.2 3.4 NA 0.6 4.0 0.85 NA 0.15 47 0.74 2.02

1962 5.5 2.7 NA 0.2 2.9 0.93 NA 0.07 0.49 1.35

1963 5.7 2.8 NA NA 2.8 1.00 NA NA 0.45 1.24

1964 5.2 2.5 NA NA 2.5 1.00 NA NA 0.38 1.05

1965 4.5 2.1 NA NA 2.1 1.00 NA NA 0.30 0.84

1966 3.8 1.8 NA NA 1.8 1.00 NA NA 0.22 0.62

1967 3.8 2.1 NA NA 2.1 1.00 NA NA 0.25 0.69

1968 3.6 2.0 NA NA 2.0 1.00 NA NA 0.22 0.61

1969 3.5 2.1 NA NA 2.1 1.00 NA NA 0.21 0.58

1970 4.9 1.4 3.8 NA NA 3.8 1.00 NA NA 81 0.37 1.00

1971 5.9 2.4 4.9 0.7 NA 5.6 0.88 0.12 NA 166 0.49 1.36

1972 5.6 2.1 4.5 0.5 0.5 5.5 0.82 0.09 0.10 160 0.44 1.11

1973 4.9 4.0 0.1 0.0 4.2 0.96 0.03 0.00 0.30 0.76

1974 5.6 0.6 6.0 0.5 NA 6.6 0.92 0.08 NA 57 0.44 1.08

1975 8.5 3.5 11.9 2.5 2.1 16.5 0.72 0.15 0.13 294 1.01 2.58

1976 7.7 2.7 9.2 2.3 2.8 14.2 0.65 0.16 0.19 240 0.78 1.99

1977 7.1 2.2 8.6 1.7 1.2 11.5 0.74 0.15 0.11 175 0.57 1.45

1978 6.1 7.9 0.7 0.0 8.6 0.92 0.08 0.00 0.38 0.87

1979 5.8 8.8 0.2 NA 9.1 0.98 0.02 NA 0.35 0.81

1980 7.1 1.3 14.1 1.7 NA 15.8 0.89 0.11 NA 74 0.56 1.29

1981 7.6 1.8 13.7 1.3 NA 15.0 0.91 0.09 NA 66 0.48 1.11

1982 9.7 3.9 21.3 2.4 1.2 24.9 0.85 0.10 0.05 175 0.76 1.76

1983 9.6 3.8 18.4 1.7 5.4 25.5 0.72 0.07 0.21 182 0.72 1.71

1984 7.5 1.7 13.1 0.0 2.2 15.4 0.85 0.00 0.14 70 0.39 0.94

1985 7.2 14.6 0.0 0.7 15.3 0.95 0.00 0.05 0.36 0.87

1986 7.0 15.8 0.1 NA 16.0 0.99 0.01 NA 0.36 0.85

1987 6.2 14.1 0.1 NA 14.2 1.00 0.00 NA 0.30 0.70

1988 5.5 13.0 0.0 NA 13.0 1.00 0.00 NA 0.25 0.59

1989 5.3 14.1 0.0 NA 14.1 1.00 0.00 NA 0.26 0.61

1990 5.6 0.3 17.8 0.0 NA 17.8 1.00 0.00 NA 27 0.31 0.72

1991 6.8 1.6 25.3 0.3 0.8 26.3 0.96 0.01 0.03 87 0.44 1.04

1992 7.5 2.2 24.9 0.0 13.5 38.4 0.65 0.00 0.35 172 0.61 1.44

1993 6.9 1.6 21.5 0.0 11.8 33.4 0.64 0.00 0.35 137 0.50 1.21

1994 6.1 0.8 21.3 0.1 1.4 22.9 0.93 0.01 0.06 62 0.32 0.78

1995 5.6 21.0 0.0 NA 21.0 1.00 0.00 NA 0.28 0.68

1996 5.4 21.6 0.0 NA 21.6 1.00 0.00 NA 0.28 0.65

1997 4.9 19.5 0.0 NA 19.5 1.00 0.00 NA 0.23 0.55

1998 4.5 19.2 0.0 NA 19.2 1.00 0.00 NA 0.22 0.50

1999 4.2 20.0 0.0 NA 20.0 1.00 0.00 NA 0.22 0.49

2000 4.0 20.2 0.0 NA 20.2 1.00 0.00 NA 0.21 0.45

2001 4.7 0.7 31.4 0.0 NA 31.4 1.00 0.00 NA 55 0.31 0.69

2002 5.8 1.8 41.9 0.2 10.6 52.7 0.80 0.00 0.20 161 0.50 1.12

 Source: Unemployment benefits from U.S. Department of Labor, Office of Workforce Security. Benefits in billions of dollars and include 

 reimbursable benefits. Data refer to the 50 states plus the Disctict of Columbia. NA - Not applicable as there was no program in the year.
10 

Columns [3]-[6] display data on UI benefit payments. The data show expenditures 

for the three “tiers” of UI, i.e., the regular UI program, the Federal-State Extended 

Benefits (EB) program and temporary federal benefits (TFB). In 2003, regular UI 

benefits can be paid for up to 26 weeks in all states except Massachusetts and 

Washington where potential duration is 30 weeks. This first tier of UI is fully financed by 

payroll taxes levied on employers in the individual states and deposited into state trust 

fund accounts maintained at the U.S. Treasury. These accounts are the immediate source 

for regular UI benefits paid to unemployed workers. 

In recessions, payouts of regular UI benefits can increase by 100 percent or more. 

This cyclical responsiveness is intended, and UI is often described as an automatic 

stabilizer of economic activity. Benefits provide partial wage loss replacement for 

individuals who experience unemployment. Note in column [3] that payouts of regular UI 

benefits doubled during every recessionary period except the recession of 1961. 

Since the mid 1950s it has been observed that large numbers of recipients of 

regular UI benefits use up (exhaust) their benefits during recessions. Between 1957 and 

1958, for example, the exhaustion rate (exhaustions as a percent of first payments) 

increased from 23 percent to 31 percent. The phenomenon of high exhaustions was a 

motive force behind the creation of two additional tiers of UI benefits intended to assist 

the long term unemployed. One is the Federal-State Extended Benefits (EB) program. 

The other is the temporary federal benefit (TFB) programs. High exhaustions also have 

affected benefit duration provisions in the regular UI programs. This latter phenomenon 

will be examined later in this chapter. 

The second tier of UI is the EB program which provides up to 13 weeks of 

benefits to exhaustees of regular UI benefits. EB was created in 1970 and paid substantial 

amounts of benefits through the early 1980s. Total payouts of EB exceeded $5.0 billion 

during 1975-1977 and again during 1980-1983. Since 1983, however, EB has never paid 

as much as $0.3 billion in any single year. This second “tier” has ceased to be an 

important source of income support to the unemployed. The reasons for the demise of EB 

are well understood. The triggers that activate EB were modified in the early 1980s 

making it much more difficult to turn “On” EB. Chapter 3 examines EB triggers in more 

detail and also describes the changes in the EB trigger mechanism of the early 1980s. 
11 

Starting with the recession of 1958 some type of temporary federal benefit (TFB) 

program has been enacted during each recession. These programs have provided from 13 

to 26 weeks of additional entitlements to persons who have used up (exhausted) their 

eligibility for regular UI and EB. TFB programs since the early 1960s have had full 

federal financing but the means have differed, e.g., by general revenues, from a federal 

UI trust fund or by an addition to federal UI payroll taxes. During the two most recent 

recessions, TFB payments have been the main form of support for exhaustees of regular 

UI. Payments of TFB exceeded $10 billion in 1992, 1993 and again during 2002. TFB 

programs are created through emergency federal legislation, and they operate for only 

finite periods. The most extensive TFB program was Emergency Unemployment 

Compensation (EUC) which paid benefits during the 30 months from October 1991 to 

April 1994. Section 3.1 of Chapter 3 gives a more detailed history of both the EB and 

TFB programs operative during past recessions. 

Columns [7]-[9] display proportionate shares of benefit payments for the three 

tiers of UI . Prior to 1971 there was just one year (1961) when regular UI benefits did not 

constitute at least 90 percent of annual benefit payments. After 1971, however, the 

combined proportions for EB and TFB equaled or exceeded 15 percent of total UI 

payouts in ten separate years and from 10 to 15 percent in two other years.2

 In other 

words, during all recessions since 1970, EB and TFB have constituted an important 

component of total UI benefit payments. Since EB has become unimportant, it is 

appropriate to describe UI as now having two not three tiers of benefits available during 

recessions. Note in column [9] that TFB benefits represented more than one third of the 

total during both 1992 and 1993. They constituted 20 percent of the total during 2002 

even though the TEUC program was effective only from mid-March of 2002. 

Column [10] focuses on the response of total benefit payments during the various 

recessions. It shows the percentage increase in benefit payments from the pre-recession 

year. For thirteen separate years the increase was at least 100 percent with the largest 

increases occurring in 1975 and 1976, 294 and 240 percent respectively. This response 

 

2

 The ten years when the column [7] proportion was 0.85 or lower were 1972, 1975, 1976, 1977, 1982, 

1983, 1984, 1992, 1993, and 2002. The proportions were between 0.86 and 0.90 in 1971 and 1980. 
12 

was foreseen by the founders of UI. During recessions the increases in benefit payouts 

provide a modest but self-limiting source of stimulus to the overall economy. 

Columns [11] and [12] place UI benefit payments into a comparative context by 

showing total payouts as a percent of GDP and of total covered wages. Over these 55 

years total UI benefits averaged 0.41 percent of GDP and 1.06 percent of wages in UI 

covered employment. These percentages are much higher during recessions than in other 

years. For both series, the highest percentage occurred in 1975. It is also clear that the 

percentages were lower during 1991-1994 and 2001-2002 than in earlier recessions. 

Over the period spanned by Table 1.2, UI benefit payments relative to the overall 

scale of the economy have declined. For example, total benefits averaged 0.44 percent of 

GDP between 1948 and 1980, but 0.38 percent between 1981 and 2002. The percentage 

during 1981-2002 was about 14 percent lower than during 1948-1980. The lower 

percentage obtained despite the fact that average unemployment rates were higher during 

1981-2002 than during 1948-1980, i.e., 6.3 percent versus 5.2 percent. During these 55 

years the UI recipiency rate has decreased for the regular UI program. The picture for EB 

is a precipitous decline in importance after 1983. 

1.3. Unemployment Duration and Occurrences 

 In any year the average weekly volume of unemployment can be expressed as the 

product of the number of unemployment occurrences (new spells) and average duration, 

with unemployment duration measured in weeks and expressed as a fraction of the year. 

(1) U = O*d where 

U = weekly unemployment, 

O = number of new unemployment occurrences, and 

d = mean weeks of unemployment, but expressed as a fraction of 52 weeks. 

From expression (1) it can be seen that a given volume of weekly unemployment can be 

the result of differing combinations of occurrences (O) and duration (d). 

 Both sides of expression (1) can be divided by the labor force yielding a 

convenient expression for the unemployment rate. 

(2) U/L = TUR = (O/L)*d = f*d where 

L = the labor force, 
13 

TUR = the unemployment rate (or total unemployment rate) in literature where the TUR 

is contrasted with the unemployment rate based on unemployment insurance claims, e.g., 

insured unemployment rate or IUR, and 

f = (O/L) = the frequency or rate of unemployment occurrences in the labor force. 

The final right-hand term in expression (2) provides a convenient framework for 

decomposing a given unemployment rate into two components, the rate of occurrences (f) 

and average duration as a proportion of the year (d). The remainder of this section 

discusses patterns of f and d observed in time series data from the U.S. economy. 

 Table 1.3 displays ten series related to unemployment and unemployment 

duration spanning 53 years from 1950 to 2002. The data are from two sources: the 

monthly household labor force survey (the Current Population Survey or CPS, in 

columns [1]-[5]) and UI program data (columns [6]-[10]). For some series, data are not 

available for all years, e.g., the median duration in column [3] is unavailable for years 

prior to 1967. All six series showing estimates of average duration are measured in 

weeks. Because the table has so many annual entries, summaries for five decades appear 

in the bottom rows. The summaries are averages for the ten year periods from the 1950s 

through the 1990s. 

 Five of the six duration series convey a common message which is clearly seen in 

the decade averages at the bottom of Table 1.3. During the most recent two decades, i.e., 

the 1980s and the 1990s, unemployment duration was systematically longer than during 

the preceding three decades. This is true for the three household labor force survey (CPS) 

series (columns [2]-[4]) and for two UI series (columns [6] and [8]). In contrast, note that 

average potential duration for UI recipients (column [7]) was little changed in the 1980s 

and 1990s compared to the preceding two decades. 

Column [5] provides insight into the increased average duration shown in the CPS 

data. There has been a large increase in spells of unemployment lasting 27 weeks and 

longer. These very long duration spells averaged 9.4 percent of unemployment during the 

1950s but 16.1 percent during the 1990s. As the prevalence of long duration spells has 

increased, it has affected the mean (column [2]) in the expected way. 

 All the duration measures in Table 1.3 are affected by the phenomenon of 

truncation. The measures are restricted in one or more ways, yielding an estimate that is 
Table 1.3. Unemployment Rates and Average Unemployment Duration, 1950 to 2002.

 Household Labor Force Survey, CPS UI Program Data

Year Unem- Mean, Median, Mean, Proportion Actual Potential Actual Exhaustion Act. Dur./

ployment Monthly Monthly Work Exp. Unemployed Benefit Benefit Duration Rate - Pct. Pot. Dur.

Rate, Pct. Avg. Dur. Avg. Dur. Avg. Dur. 27+ Weeks Duration Duration Exhaust. = [6]/[7]

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

1950 5.3 12.1 NA NA 0.11 13.0 21.1 19.3 35.6 0.62

1951 3.3 9.7 NA NA 0.07 10.1 21.4 17.9 19.6 0.47

1952 3.0 8.4 NA NA 0.04 10.4 22.0 19.3 21.2 0.47

1953 2.9 8.0 NA NA 0.04 10.1 22.1 19.2 18.1 0.46

1954 5.5 11.8 NA NA 0.09 12.8 22.4 20.0 26.8 0.57

1955 4.4 13.0 NA 12.0 0.12 12.4 22.7 20.3 28.2 0.55

1956 4.1 11.3 NA 12.8 0.08 11.4 23.0 20.0 21.0 0.50

1957 4.3 10.5 NA 13.4 0.08 11.5 23.4 20.5 20.4 0.49

1958 6.8 13.9 NA 15.9 0.14 14.8 23.5 21.7 32.0 0.63

1959 5.5 14.4 NA 13.9 0.15 13.1 23.6 21.7 28.8 0.55

1960 5.5 12.8 NA 14.3 0.12 12.7 24.0 21.4 23.7 0.53

1961 6.7 15.6 NA 14.8 0.17 14.8 23.9 21.8 33.3 0.62

1962 5.5 14.7 NA 14.2 0.15 13.1 23.9 21.6 26.7 0.55

1963 5.7 14.0 NA 14.1 0.14 13.3 24.1 21.6 25.8 0.55

1964 5.2 13.3 NA 13.2 0.13 13.0 24.2 21.9 24.7 0.54

1965 4.5 11.8 NA 11.6 0.10 12.0 24.1 21.3 21.8 0.50

1966 3.8 10.4 NA 10.3 0.08 11.3 24.2 21.1 18.4 0.47

1967 3.8 8.7 2.3 10.1 0.06 11.5 24.5 20.9 18.2 0.47

1968 3.6 8.4 4.5 9.6 0.06 11.6 24.3 21.2 19.5 0.48

1969 3.5 7.8 4.4 9.8 0.05 11.4 24.4 21.4 18.6 0.47

1970 4.9 8.6 4.9 12.5 0.06 12.3 24.6 22.1 20.0 0.50

1971 5.9 11.3 6.3 14.2 0.10 14.4 24.5 22.7 30.8 0.59

1972 5.6 12.0 6.2 13.6 0.12 14.2 24.3 22.7 31.2 0.58

1973 4.9 10.0 5.2 12.1 0.08 13.3 24.3 22.5 27.6 0.55

1974 5.6 9.8 5.2 12.3 0.07 12.6 24.4 22.4 24.5 0.52

1975 8.5 14.2 8.4 16.4 0.15 15.7 24.3 22.4 37.2 0.65

1976 7.7 15.8 8.2 15.9 0.18 14.9 24.0 22.6 37.6 0.62

1977 7.1 14.3 7.0 14.8 0.15 14.2 24.1 22.1 34.2 0.59

1978 6.1 11.9 5.9 13.9 0.10 13.3 24.5 22.5 26.6 0.54

1979 5.8 10.8 5.4 13.4 0.09 13.0 24.2 22.4 24.6 0.54

1980 7.1 11.9 6.5 15.8 0.11 14.8 24.3 22.7 30.5 0.61

1981 7.6 13.7 6.9 15.9 0.14 14.4 24.2 23.0 31.8 0.59

1982 9.7 15.6 8.7 18.2 0.17 15.9 24.3 23.2 35.8 0.65

1983 9.6 20.0 10.1 18.2 0.24 17.4 24.1 23.4 46.9 0.72

1984 7.5 18.2 7.9 16.7 0.19 14.3 23.7 22.8 33.4 0.60

1985 7.2 15.6 6.8 16.1 0.15 14.2 24.1 22.7 30.6 0.59

1986 7.0 15.0 6.9 16.4 0.14 14.5 23.9 22.9 32.0 0.61

1987 6.2 14.5 6.5 16.1 0.14 14.6 23.7 22.7 33.2 0.61

1988 5.5 13.5 5.9 15.3 0.12 13.7 24.1 22.7 28.6 0.57

1989 5.3 11.9 4.8 14.5 0.10 13.2 24.2 22.9 26.1 0.55

1990 5.6 12.0 5.3 15.1 0.10 13.4 24.1 23.1 26.6 0.56

1991 6.8 13.7 6.8 16.9 0.13 15.4 23.9 23.2 34.2 0.64

1992 7.5 17.7 8.7 17.9 0.20 16.2 23.7 23.3 41.3 0.68

1993 6.9 18.0 8.3 18.9 0.20 15.9 23.9 23.4 40.5 0.67

1994 6.1 18.8 9.2 17.2 0.20 15.4 23.7 23.2 49.9 0.65

1995 5.6 16.6 8.3 17.2 0.17 14.7 24.0 23.1 32.8 0.61

1996 5.4 16.7 8.3 17.2 0.17 14.8 24.0 23.2 34.0 0.62

1997 4.9 15.8 8.0 16.8 0.16 14.5 23.9 23.0 33.7 0.61

1998 4.5 14.5 6.7 16.4 0.14 13.8 23.7 22.2 30.8 0.58

1999 4.2 13.4 6.4 16.0 0.12 14.4 23.8 22.2 31.4 0.60

2000 4.0 12.6 5.9 16.1 0.11 13.6 23.9 22.8 31.8 0.57

2001 4.7 13.1 6.8 17.1 0.12 13.7 24.1 22.6 34.1 0.57

2002 5.8 16.6 9.1 NA 0.18 16.4 24.0 23.0 43.6 0.69

Avg.

 1950s 4.5 11.3 NA NA 0.09 12.0 22.5 20.0 25.2 0.53

 1960s 4.8 11.8 NA 12.2 0.11 12.5 24.2 21.4 23.1 0.52

 1970s 6.2 11.9 6.3 13.9 0.11 13.8 24.3 22.4 29.4 0.57

 1980s 7.3 15.0 7.1 16.3 0.15 14.7 24.1 22.9 32.9 0.61

 1990s 5.8 15.7 7.6 17.0 0.16 14.9 23.9 23.0 35.5 0.62

 Source: Bureau of Labor Statistics and Office of Workforce Security. Data in weeks except for the unemployment rate, unemployment of 27+ weeks,

 the exhaustion rate and the ratio of actual to potential duration. Average duration in work experience data derived by the author. 

 NA = Information not available.

14
15 

 lower than the true duration of unemployment if it were followed to the end of each 

spell. Some descriptive details of the individual duration measures may be helpful. 

 The series in columns [2] and [3], the mean and median monthly averages, 

measure the duration of individual spells of unemployment. If a person experiences two 

or more spells in a given year, these series show averages based on the duration of each 

separate spell measured from the onset of unemployment up to the time of the labor force 

survey. In cases where the spell started in the previous year, duration is still measured 

from the onset of the spell. The mean and median in columns [2] and [3] are both 

truncated in that the unemployment spells extend past the point in time when 

measurement takes place in the labor force survey. 

 Analyses of unemployment duration find that the escape rate from unemployment 

is linked to the length of time an individual is unemployed. The longer a person is 

unemployed the more likely he or she will remain unemployed in the following week. 

Thus for a given week, those measured as unemployed include a disproportionate 

representation of persons with long spells. This phenomenon, termed duration 

dependence, is manifest in Table 1.3 in the relative magnitudes of the means and 

medians. The means (column [2]) are uniformly much higher than the medians (column 

[3]), with mean/median ratios falling into the range between 1.7 and 2.5 for 35 of the 36 

years where both averages are displayed (all but 1967). 

 Column [4] of Table 1.3 shows estimates of mean duration based on work 

experience data. These data come from March supplements to the CPS which ask 

questions about unemployment during the preceding calendar year. The data combine 

information on all yearly spells in the estimate of unemployment duration. In recent 

years, 20 to 30 percent of those reporting unemployment in a given year have two or 

more spells. The truncation in these duration data arises from the CPS survey question 

that restricts unemployment experiences to the 52 weeks of the preceding year. 

 Mean duration in work experience data was estimated using tabular summaries of 

unemployment duration arranged as interval data.3

 The means were derived starting in 

1955 when the tabular data on duration were first available. 

 

3

 The micro data record reported weeks of unemployment duration only for 1975 and later years. 
16 

 Unemployment duration in the work experience data provide estimates of annual 

duration summing across all spells of unemployment. Averages for the 1980s and 1990s 

fall into the 16-17 weeks range and are higher than the averages from the 1960s and 

1970s. The increase between the 1970s and the 1980s was especially large at 2.4 weeks. 

Thus, all four series based on the CPS (columns [2]-[5]) show longer average 

unemployment duration during the past two decades than in earlier periods. 

 Average duration in unemployment insurance data also increased during the 

1980s and 1990s. The measurement of average actual duration (column [6]) should be 

noted. It is the ratio of weeks compensated during the year to first payments for that year. 

While actual duration increased in these UI data from 12.0 weeks in the 1950s to 14.9 

weeks in the 1990s, there was little change in UI potential duration (column [7]). The 

annual averages between 1960 and 2002 all fall into the range between 23.7 to 24.6 

weeks. The potential duration of benefit eligibility in the UI program (measured at the 

start of unemployment spells for those monetarily eligible) has not changed much since 

1960.4

 Over the same period, actual duration for exhaustees (column[8]) has increased 

somewhat, but the increase between, say, the 1960s and the 1990s has been much less 

than in CPS data, e.g., 1.6 weeks in column [8] compared to 3.9 weeks in column [2]. 

The final duration-related measures in Table 1.3 are the UI exhaustion rate (final 

payments as a ratio to first payments) and the ratio of actual to potential benefit duration 

shown in columns [9] and [10] respectively. During the 1990s, the average exhaustion 

rate of 35.5 percent was a full ten percentage points above the exhaustion rate of the 

1950s. The increase in the UI exhaustion rate can be seen as a consequence of longer 

average benefit duration coupled with potential benefit duration which has not changed 

since 1960. During the 1980s and 1990s somewhat more than one third of recipients 

exhausted their UI benefits. Actual duration relative to potential duration (column [10]) 

has increased along with the exhaustion rate. 

 To help summarize long term developments in unemployment duration, two 

summary charts were prepared. Chart 1.1 displays centered five year averages of three 

unemployment duration indicators in national data, respectively columns [2], [4] and [6]] 

of Table 1.3. Five year averages were used to reduce the variation present in the 

 

4

 Average potential duration did increase during the 1950s. This is examined later in the chapter. 
Chart 1.1. Average Unemployment Duration, 

Centered Five Year Averages, 1950 to 2000

9.07.0

19.017.015.013.011.0

1950

1960

1970

1980

1990

2000

CPS-Monthly CPS-Work Exp. UI Actual Duration
18 

underlying annual data, a reflection of the sensitivity of unemployment duration to the 

business cycle. 

 Two features in Chart 1.1 should be noted. 1) All three duration measures 

increase when viewed over the full period and when traced from the late 1960s. 2) Both 

CPS measures are somewhat higher in the 1990s than in the 1980s while UI actual 

duration was at about the same level during these two most recent decades. People report 

a lengthening average unemployment duration during the 1990s compared to the 1980s in 

the CPS, but their average duration in UI benefit status was almost unchanged, i.e., 14.7 

weeks for 1980-1989 versus 14.9 weeks for 1990-1999. While the UI duration measure 

did not increase much between the two most recent decades, the exhaustion rate data 

suggest that long duration spells among UI recipients have increased over the last four 

decades. Perhaps the increase in long duration spells was offset by an increase in short 

duration spells yielding similar overall averages for the 1980s and the 1990s. These 

comments repeat earlier observations about the data displayed in Table 1.3. 

 The increase in the UI exhaustion rate apparent in Table 1.3 seems to reflect the 

increase in actual UI duration relative to potential UI duration. The latter (column [7]) 

has remained relatively stable. The ratio of actual UI duration to potential duration is 

plotted in Chart 1.2, again with the data measured as five year averages. Note that the 

ratio of actual to potential duration was much higher in the last two decades than in the 

first three decades in the chart. During the 30 years between 1950 and 1979 the ratio 

equaled or exceeded 0.60 just five times (column [10]) while it equaled or exceeded 0.60 

in 15 of the final 23 years.5

 The time series pattern of the exhaustion rate in Chart 1.2 is 

remarkably similar to that of the actual duration/potential duration ratio. The exhaustion 

rate equaled or exceeded 0.30 in just eight of the 30 years between 1950 and 1979, but it 

equaled or exceeded 0.30 in 20 of the 23 years between 1980 and 2002. 

 A final noteworthy development in the years covered by Table 1.3 arises from 

considering both unemployment duration, the focus of the preceding discussion, and the 

overall unemployment rate. Note in column [1] that the average unemployment rate 

during the 1970s (6.2 percent) was somewhat higher than the average during the 1990s 

 

5

 Using a threshold of 0.55, the threshold was equaled or exceeded in 14 of the 30 years between 1950 and 

1979, but then it was equaled or exceeded in all 23 years between 1980 and 2002. 
Chart 1.2. UI Actual Dur./Potential Dur. Ratio and Exhaustion 

Rate, Centered Five Year Averages, 1950 to 2000

0.700.600.500.400.300.200.10

1950

1960

1970

1980

1990

2000

UI Actual Duration/Potential Duration Exhaustion Rate
20 

(5.8 percent). Despite the lower unemployment of the 1990s, the duration measures in 

Table 1.3 all indicate that duration was longer during the 1990s than during the 1970s. 

Since the unemployment rate was previously shown in relationship (2) to be the 

product of the occurrence rate (f) and average duration (d), the pace of unemployment 

occurrences would also seem to have been evolving. The following paragraphs examine 

data on unemployment occurrences in more detail. 

Table 1.4 displays several series that are helpful in understanding changes in 

patterns of unemployment occurrences. Columns [1]-[3] display standard data on the 

unemployment rate, average unemployment and the labor force based on the monthly 

averages from the CPS. As with the preceding Table 1.3, the data span the 53 years from 

1950 to 2002 with decade averages shown in the bottom rows. Note that the labor force 

during the 1990s was twice as large as during the 1950s. 

Columns [4] and [5] show two estimates of the annual number of unemployment 

occurrences, column [4] from monthly data and column [5] from the March work 

experience supplements. Both estimates were derived. Each month the CPS asks 

questions about the duration of unemployment and the shortest interval in published data 

is less than five weeks. Summing these counts for each of twelve months yields the 

annual estimate of unemployment occurrences appearing in column [4]. This estimate 

does not capture very short spells that both start and end between successive months of 

the survey. Because consistent measurement has been followed in the CPS, any errors 

from the omission of short spells would be present in all years covered by Table 1.4. The 

annual estimates of new spells averaged about 35 million per year during the 1990s. 

Column [5] shows work experience estimates of new spells. The March work 

experience supplement to the CPS asks about all spells of unemployment during the 

previous year. Responses are coded into three categories: one, two and three or more. It 

has been assumed that the average for the 3 or more category has been a constant 3.2 for 

all years. The series in column [5] was derived under this assumption.6

 

 

6

 Note that this measure pertains to spells. One can also count the number who reported any unemployment 

during the year for years extending back to 1955. The work experience duration data shown previously in 

column [4] of Table 1.3 pertain to duration across all spells. However, the CPS question on the number of 

occurrences was different between 1955 and 1958 than the question that has been used since 1959 

(recording only one and two or more spells rather than one, two and three or more spells). For the 1955-

1958 period it has been assumed that the average number for those with two or more spells was 2.6. 
Table 1.4. Unemployment Rates and Rates of Unemployment Occurrences, 1950 to 2002.

Year Unem- Average Civilian New Spells New Spells Unemp. Unemp. Job Loser Temp. Job Loser T Layoff

ployment Unem- Labor Monthly Work Exp. Frequency Frequency Unemp. Layoff Share of Share of

Rate, Pct. ployment Force Data-a Data-b f-Mon. f-WExp. Unemp. Unemp. Unemp.

= [4]/[3] = [5]/[3] = [8]/[2] =[9]/[2]

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11]

1950 5.3 3,288 62,208 17,400 NA 0.280 NA NA NA NA NA

1951 3.3 2,055 62,017 14,124 NA 0.228 NA NA NA NA NA

1952 3.0 1,883 62,138 13,620 NA 0.219 NA NA NA NA NA

1953 2.9 1,834 63,015 13,704 NA 0.217 NA NA NA NA NA

1954 5.5 3,532 63,643 19,260 NA 0.303 NA NA NA NA NA

1955 4.4 2,852 65,023 16,020 16,718 0.246 0.257 NA NA NA NA

1956 4.1 2,750 66,552 16,944 15,219 0.255 0.229 NA NA NA NA

1957 4.3 2,859 66,929 16,896 18,574 0.252 0.278 NA NA NA NA

1958 6.8 4,602 67,639 21,036 22,306 0.311 0.330 NA NA NA NA

1959 5.5 3,740 68,369 19,020 19,321 0.278 0.283 NA NA NA NA

1960 5.5 3,852 69,628 20,628 21,834 0.296 0.314 NA NA NA NA

1961 6.7 4,714 70,459 21,672 23,256 0.308 0.330 NA NA NA NA

1962 5.5 3,911 70,614 19,956 23,709 0.283 0.336 NA NA NA NA

1963 5.7 4,070 71,833 21,012 21,713 0.293 0.302 NA NA NA NA

1964 5.2 3,786 73,091 20,364 21,703 0.279 0.297 NA NA NA NA

1965 4.5 3,366 74,455 19,536 18,888 0.262 0.254 NA NA NA NA

1966 3.8 2,875 75,770 18,876 17,133 0.249 0.226 NA NA NA NA

1967 3.8 2,975 77,347 19,608 17,146 0.254 0.222 1,229 394 0.413 0.132

1968 3.6 2,817 78,737 19,128 16,435 0.243 0.209 1,070 334 0.380 0.119

1969 3.5 2,832 80,734 19,548 17,338 0.242 0.215 1,017 339 0.359 0.120

1970 4.9 4,093 82,771 25,668 21,541 0.310 0.260 1,811 675 0.442 0.165

1971 5.9 5,016 84,382 26,940 22,998 0.319 0.273 2,323 735 0.463 0.147

1972 5.6 4,882 87,034 26,904 22,248 0.309 0.256 2,108 582 0.432 0.119

1973 4.9 4,365 89,429 26,688 21,284 0.298 0.238 1,694 472 0.388 0.108

1974 5.6 5,156 91,949 31,248 26,888 0.340 0.292 2,242 746 0.435 0.145

1975 8.5 7,929 93,775 35,280 29,841 0.376 0.318 4,386 1,671 0.553 0.211

1976 7.7 7,406 96,158 34,128 29,499 0.355 0.307 3,679 1,050 0.497 0.142

1977 7.1 6,991 99,009 35,028 28,180 0.354 0.285 3,166 865 0.453 0.124

1978 6.1 6,202 102,251 34,380 26,762 0.336 0.262 2,585 712 0.417 0.115

1979 5.8 6,137 104,962 35,400 26,035 0.337 0.248 2,635 851 0.429 0.139

1980 7.1 7,637 106,940 39,540 30,751 0.370 0.288 3,947 1,488 0.517 0.195

1981 7.6 8,273 108,670 41,388 34,251 0.381 0.315 4,267 1,430 0.516 0.173

1982 9.7 10,678 110,204 46,596 38,528 0.423 0.350 6,268 2,127 0.587 0.199

1983 9.6 10,717 111,550 42,840 34,006 0.384 0.305 6,258 1,780 0.584 0.166

1984 7.5 8,539 113,544 40,200 31,460 0.354 0.277 4,421 1,171 0.518 0.137

1985 7.2 8,312 115,461 41,976 30,535 0.364 0.264 4,139 1,157 0.498 0.139

1986 7.0 8,237 117,834 41,376 30,065 0.351 0.255 4,033 1,090 0.490 0.132

1987 6.2 7,425 119,865 38,952 26,990 0.325 0.225 3,566 943 0.480 0.127

1988 5.5 6,701 121,669 37,008 25,442 0.304 0.209 3,092 851 0.461 0.127

1989 5.3 6,528 123,869 38,088 25,464 0.307 0.206 2,983 850 0.457 0.130

1990 5.6 7,047 125,840 39,180 29,134 0.311 0.232 3,387 1,028 0.481 0.146

1991 6.8 8,628 126,346 41,760 30,860 0.331 0.244 4,694 1,292 0.544 0.150

1992 7.5 9,613 128,105 40,512 30,817 0.316 0.241 5,389 1,260 0.561 0.131

1993 6.9 8,920 129,200 39,144 29,170 0.303 0.226 4,848 1,115 0.543 0.125

1994 6.1 7,996 131,056 32,736 26,804 0.250 0.205 3,815 977 0.477 0.122

1995 5.6 7,404 132,304 32,400 25,536 0.245 0.193 3,476 1,030 0.469 0.139

1996 5.4 7,236 133,943 31,596 23,727 0.236 0.177 3,370 1,021 0.466 0.141

1997 4.9 6,739 136,297 30,456 22,292 0.223 0.164 3,037 931 0.451 0.138

1998 4.5 6,210 137,673 31,464 20,044 0.229 0.146 2,822 866 0.454 0.139

1999 4.2 5,880 139,368 30,816 18,403 0.221 0.132 2,622 848 0.446 0.144

2000 4.0 5,692 142,583 30,696 18,292 0.215 0.128 2,517 852 0.442 0.150

2001 4.7 6,801 143,734 34,236 21,387 0.238 0.149 3,476 1,067 0.511 0.157

2002 5.8 8,378 144,863 34,716 NA 0.240 NA 4,607 1,124 0.550 0.134

Avg.

 1950s 4.5 2,940 64,753 16,802 NA 0.259 NA NA NA NA NA

 1960s 4.8 3,520 74,267 20,033 19,916 0.271 0.270 NA NA NA NA

 1970s 6.2 5,818 93,172 31,166 25,528 0.334 0.274 2,663 836 0.451 0.141

 1980s 7.3 8,305 114,961 40,796 30,749 0.356 0.269 4,297 1,289 0.511 0.153

 1990s 5.8 7,567 132,013 35,006 25,679 0.266 0.196 3,746 1,037 0.489 0.138

 Source: Bureau of Labor Statistics. Columns [2]-[5] and [8]-[9] in thousands. 'a - Estimated as 12 times unemployment of less than five weeks.

 b - Estimated by author using an estimate of 3.2 spells for persons reporting 3 and more spells in the year. 

 NA - Information not available. 21
22 

For the earliest years when the two estimates of occurrences can be compared 

they are quite similar, e.g., averages of 20.0 million and 19.9 million respectively during 

the 1960s. However, in moving towards the present, the two series increasingly diverge 

with the work experience estimates being consistently lower than the monthly estimates. 

Their respective averages for the 1990s were 35.0 million and 25.7 million. No 

explanation for this divergence has been uncovered. In earlier comparisons between the 

monthly data and the work experience data on unemployment (Ackerloff and Main 

(1980)) the two series when combined with their respective duration estimates were 

found to yield similar aggregate estimates of total unemployment. For this report, we note 

that substantial differences have emerged between the two estimates of new spells of 

unemployment and that work experience data now suggest lower overall unemployment. 

Columns [6] and [7] show estimates of annual rates of unemployment occurrences 

using the preceding two series on new spells, each divided by the annual labor force 

shown in column [3]. Since the estimates use the identical labor force series, all 

differences arise from differences in the estimates of new spells. Note the obvious 

cyclical pattern in both series, e.g., the increases during 1970-1971, 1974-1975 and 1980-

1982. Then note the smaller increases during 1990-1992 and 2001-2002. The cyclical 

pattern for the past two downturns seems quite different from that of earlier recessions. 

Since all of the differences in the two estimated rates of new spells arise from 

differences in their numerators, the decade averages at the bottom of Table 1.4 show an 

increasing divergence. Note that the averages for the1960s were both about 0.27. Then 

for the 1970s and 1980s the average occurrence rate based on the monthly data increases 

to 0.33 and 0.36 while the rate in work experience data remains stable at roughly 0.27. 

Both series show a sharp decrease in the rate of new unemployment spells during the 

1990s with reductions in the 0.07-0.09 range. 

While the two series agree in showing a reduction in the rate of occurrences 

during the 1990s, the average in the monthly data is similar to averages from the 1950s 

and 1960s whereas the work experience average is by far the lowest for the four decade 

averages shown in Table 1.4. This contrast between the two series presents a problem of 

interpretation. For the monthly data in column [6], the 1990s average suggests a return to 
23 

rates of new occurrences observed in both the 1950s and 1960s. For the work experience 

data, the rate of occurrences during the 1990s is more than seven full percentage points 

(or roughly one fourth) less than the averages for each of the preceding three decades. 

This data puzzle would seem worthy of further analysis. 

One important contrast between monthly data and work experience data on 

unemployment is that detail on the reason for unemployment is present in monthly data 

but absent from work experience data. There are four main “reason” for unemployment 

categories: job losers, job leavers, labor force reentrants and new entrants. Job losers are 

further divided into persons on layoff and “other” job losers. Among the four “reason” 

categories, unemployment duration is consistently highest for job losers. Among job 

losers, unemployment duration is consistently higher among “other” job losers than for 

those on layoff. The latter contrast is hardly surprising since most on layoff will 

eventually return to the same job where they worked prior to becoming unemployed. This 

reemployment option is usually not available for “other” job losers. 

Columns [8]-[11] of Table 1.4 present summary information on reason for 

unemployment as reported in monthly CPS data. The annual averages of job losers and 

those on layoff appear in columns [8] and [9] respectively while their shares of total 

unemployment are shown in columns [10] and [11]. Because these data are available only 

since 1967, just three decades of experiences are summarized in the table’s bottom lines. 

Note how the job loser share (column [10]) increases during recessions, e.g., 

1974-1975, 1980-1983, 1991-1993 and 2001-2002. This pattern reflects the increased 

number of employer-initiated separations typical of recessions. Those terminated during 

recessions are disproportionately eligible for UI benefits and the ratio of beneficiaries to 

unemployment also increases. These patterns have been observed in all business cycles. 

The reason-for-unemployment data in Table 1.4 also show interesting trends. 

Recall that the average unemployment rates were quite similar for the 1970s and 1990s, 

in fact, somewhat lower during the 1990s. Yet, note in column [10] that the average job 

loser share during the 1990s was higher than during the 1970s, e.g., 0.489 in the 1990s 

compared to 0.451 during the 1970s. At the same time, there was no important contrast in 

the share of the unemployed who were on layoff. The shares (column [11]) were 0.141 
24 

during the 1970s and 0.138 during the 1990s. In other words, all of the increase in the job 

loser share between the 1970s and the 1990s was concentrated among “other” job losers. 

These data on reason for unemployment may provide an important clue as to the 

increases in unemployment duration apparent in several series in Table 1.3. Employerinitiated permanent terminations from jobs have become relatively more important as a 

“reason” for unemployment during the past 36 years. The affected workers experience 

longer spells of unemployment than others, and they are numerous enough to affect 

measures of average unemployment duration.7

 In UI programs where potential benefit 

duration has not changed significantly since 1960, the effect of this change is to increase 

average UI actual benefit duration and cause an increase in the benefit exhaustion rate. 

Chart 1.3 gives a visual summary of how the job loser share of unemployment has 

been evolving since the late 1960s. The chart plots the two components of the job loser 

proportion whose sum is shown in column [10] of Table 1.4, i.e., the temporary layoff 

share (column [11]) and the other job loser share (column [10] less column [11]). The 

time legend at the bottom of the chart shows years when the temporary layoff share 

peaked as a proportion of unemployment during each recession since 1970, including the 

double dip recession of 1980-1983. Note that three of the peaks are close to 0.20 (1975, 

1980 and 1982). In contrast, there is little evidence of a major increase in temporary 

layoff unemployment (as a proportion of all unemployment) during 1990-1991 or 2001. 

Employers placed much less reliance on temporary layoffs during these two most recent 

downturns than previously. 

Next in Chart 1.3, observe the cyclical patterns for the other job loser proportions. 

In particular, note that the peaks in these proportions generally occur later in the 

recession than the temporary layoff peaks, e.g., 1971-1972, 1975-1976, 1982-1983, 1991-

1993 and 2002. Note also that the peaks were much higher during the three most recent 

recessionary periods (above 0.40 for at least one year) than for the two earlier recessions. 

Finally, observe that the long expansions of the 1980s and 1990s were characterized by 

persistently high levels of the other job loser proportions. Between 1967 and 1979 seven 

 

7

 Consider the following data from 2002. Overall, 18.3 percent of the unemployed had spells of 27 weeks 

or longer (recall Table 1.3). Among those on temporary layoff the corresponding percentage was 5.5 

percent while among “other” job losers it was 23.5 percent. See Employment and Earnings, (January 2003), 

Table 29, page 196. 
Chart 1.3. Temporary Layoff and Other Job Loser 

Shares of Unemployment, 1967 to 2002

0.500.400.300.200.100.00

1970

1975

1980

1982

1990

2001

Temp. Layoff Share Other Job Loser Share
26 

of 13 were less than 0.30 whereas between 1980 and 2002 just one of 23 was less than 

0.30. That single year, 2000, was the final year of a decade long expansion which 

reduced the unemployment rate to 4.0 percent, the lowest rate since the late 1960s. Chart 

1.3 provides strong visual evidence that the nature of job losses (employer-initiated 

separations) has evolved with an increasing share being permanent separations and a 

reduced share being temporary layoffs. 

Since workers on temporary layoff experience shorter spells than those who 

experience permanent job loss, the mix of unemployment by reason has been evolving 

within the broad category of job losers. This probably reflects the confluence of several 

factors. Three candidates are: 1) a change in employer personnel practices with less 

commitment to long term employment relationships (just-in-time workers to go along 

with modified inventory practices), 2) a greater degree of competition in (domestic and 

international) product markets with an attendant reduction in economic rents (returns 

above those needed to attract resources) within businesses and 3) a declining importance 

of sectors such as manufacturing that traditionally have placed heavy reliance on 

temporary layoffs in making cyclical workforce adjustments. Whatever the explanation, 

however, the changes have been accompanied by a decrease in the rate of new 

unemployment occurrences. The estimated rates of occurrences appearing in columns [6] 

and [7] of Table 1.4 were both lower during the 1990s than during the 1980s. 

Thus the data in columns [8]-[11] of Table 1.4 point back to the question of 

increased unemployment duration. This question is examined in the next section using 

multiple regression analysis. The purpose of the regressions was to document the timing 

and the size of changes in average unemployment duration using a statistical procedure to 

hold constant the effects of the business cycle. 

1.4. Regression Analysis of Unemployment Duration 

The regression analysis tested alternative hypotheses about the nature and timing 

of changes in unemployment duration using data for the years 1950 to 2002. Use of the 

lengthy time period permitted testing of several alternative specifications. The analysis 

utilized nine different variables related to unemployment duration and three different 
27 

variables to control for the effects of the business cycle. Three alternatives specifications 

for the change unemployment duration were tested. The product of all the various 

alternatives is 81 individual regression equations. Before summarizing the findings, some 

added comments about the specifications of the regressions are probably appropriate. 

In annual data, unemployment duration is known to lag many other variables 

related to the business cycle. Years when real output expands rapidly and unemployment 

declines from its cyclical peak are often characterized by unemployment duration that is 

not only high but actually higher than in the previous year, e.g., 1976, 1994 in column [2] 

of Table 1.3. This “fact” about unemployment duration over the business cycle affects the 

way the variable that controls for the business cycle enters the analysis. In the regressions 

to be summarized here, the cyclical control variables enter both for the current year and 

with a one year lag. 

The choice of cyclical control is also important to note. Three variables were 

tested: 1) the CPS unemployment rate, 2) the deviation of real GDP from capacity real 

GDP and 3) the index of capacity utilization published by the Federal Reserve Board. 

The latter two are capacity utilization indices that decrease during recessions. For the real 

GDP utilization, capacity output was estimated by interpolating between cyclical peaks 

when the economy was operating close to (or even above) its normal capacity.8

 Utilizing 

the latter two measures also ensures that the results are not unduly affected by a problem 

of simultaneity. Four of the duration measures were derived from the same labor force 

survey (the CPS) that is the source for the estimates of the unemployment rate. Thus the 

CPS-based duration measures are not independently derived from the cyclical control 

variable in regressions where the latter is the CPS unemployment rate. Having alternative 

cyclical controls provides an assurance of greater reliability in the findings. 

The three cyclical control variables do not trace out identical patterns through 

time. For the years of interest, 1950 to 2002, the three pairwise simple correlations 

between the three series all fell into the range between 0.75 and 0.78. Thus each exhibited 

considerable independence from the other two during these years. More important, this 

independence allows the regressions to yield differing estimates of the effects of the trend 

 

8

 Capacity real GDP was below actual real GDP in six years: 1952, 1953, 1966, 1968, 1969, and 1973. 

Estimates for years prior to 1990 were obtained from staff of the Congressional Budget Office. Data from 

1990 were estimated by the principal investigator assuming three percent annual growth in potential GDP. 
28 

and/or shift variables on unemployment duration due to potentially differing effects of the 

cyclical control variables used in the regressions. 

To test for a time-dependent change in average duration, three alternatives were 

explored. The first was a linear trend that commenced in 1950. This assumes the 

evolution of average duration has been occurring smoothly during the 53 years between 

1950 and 2002. The second tested for an acceleration of the trend in 1981. This variant 

allows for the trend rate of change to accelerate (or decelerate ) starting in 1981 relative 

to the 1950-1980 period. The choice of 1981 is arbitrary, but several earlier analysis of 

UI recipiency have pinpointed the early 1980s as the period when major changes in 

recipiency occurred. The concern with dislocated workers also started in this period and 

the periodic CPS supplements that focus on worker dislocation date from 1984. The first 

dislocated worker supplement had a look-back to 1980, i.e., a five year retrospective 

period for measuring permanent job losses. The third alternative was a dummy variable 

test for a one-time shift in average duration with the dating of the shift being 1981. From 

some of the duration series shown earlier in Table 1.3 it appears there was a discontinuity 

in duration between the 1980s and 1990s when compared to decades. This dummy 

variable specification allows for an explicit test for a discontinuity starting in 1981. 

To help ensure that the findings were not dependent on any single measure of 

unemployment duration, the regressions were fitted using nine duration-related variables. 

Four were from the CPS and were displayed earlier in columns [2], [3], [4], and [5] of 

Table 1.3. Five were from the UI reporting system, and four were displayed previously in 

columns [6], [8], [9] and [10] of Table 1.3. The fifth is the ratio of the actual duration for 

UI exhaustees to potential benefit duration, i.e., the ratio of column [8] to column [7] in 

Table 1.3. Since the latter five measures are all derived from the UI reporting system, 

there is no possibility of simultaneity between these duration measures and the CPS 

unemployment rate when the latter is used as the cyclical control. 

Table 1.5 provides a summary of the regressions showing adjusted R2

s for the full 

set of 81 equations. Because even this limited detail (one summary statistic per 

regression) is so extensive, two kinds of summaries are also included. An average across 

the nine dependent variables for each specification appears in the bottom row of Table 
Table 1.5. Explanatory Power of Alternative Regressions Explaining Unemployment Duration

 Labor Force Survey - CPS Capacity Utilization Capacity Utilization

Duration Unemployment Rate Real GDP Federal Reserve Index

Measure T50 T50,T81 D81 T50 T50,T81 D81 T50 T50,T81 D81

[1] [2] [3] [4] [5] [6] [7] [8] [9]

CPS - Mean 0.659 0.898 0.704 0.866 0.864 0.828 0.662 0.662 0.670

CPS - Median - a 0.663 0.859 0.527 0.825 0.869 0.807 0.603 0.590 0.563

CPS - Work 0.753 0.945 0.769 0.914 0.912 0.821 0.832 0.856 0.811

 Experience - b

CPS - Proportion 0.677 0.882 0.695 0.866 0.864 0.805 0.677 0.671 0.665

 27+ Weeks

UI Duration - c 0.856 0.907 0.797 0.790 0.809 0.715 0.804 0.801 0.778

UI Duration for 0.933 0.934 0.903 0.912 0.928 0.878 0.913 0.917 0.897

 Exhaustees - c

UI Duration/ UI 0.733 0.888 0.739 0.747 0.743 0.674 0.768 0.764 0.739

 Potential Dur.

UI Dur. Exhaustees/ 0.825 0.852 0.784 0.809 0.817 0.700 0.813 0.815 0.726

 UI Potential Dur.

UI Exhaustion 0.623 0.807 0.610 0.674 0.668 0.581 0.728 0.729 0.680

 Rate

Average for Nine 0.747 0.886 0.725 0.823 0.830 0.757 0.756 0.756 0.725

 Regressions

Source: Regressions fitted at the Urban Institute with duration data from BLS and the UI reporting systems.

 Estimation period is from 1950 to 2002 unless otherwise noted. Duration measured in weeks or

 as a ratio to UI potential duration. For each row, the best fits and second best fits are highlighted.

 a - 1968 to 2002 b - 1955 to 2001 c - UI potential duration also included as a regressor.

29
30 

1.5. Also, the equations with the highest and the second highest adjusted R2s in each row 

are highlighted by bordering and shading respectively. 

Three findings are noteworthy in Table 1.5. 1) The fits are best when the cyclical 

control is the CPS unemployment rate (columns [1], [2] and [3]). This holds not only for 

the CPS-based duration variables but also for the UI-based duration variables. In many 

rows, however, fits using capacity utilization based on real GDP (columns [4], [5] and 

[6]) are nearly as good. 2) Holding constant the effects of the business cycle, the 

evolution of average duration between 1950 and 2002 was more a trendwise phenomenon 

than a one-time shift that occurred during the early 1980s. Even though most of the 

dummy variable tests were significant (in the regressions underlying columns [3], [6] and 

[9]), the fits were generally less satisfactory than the fits using T50 or T50 with T81. 

None of the regressions with dummy variable tests has the highest or second highest 

adjusted R2 for any of the nine dependent variables (rows). 3) The preponderance of 

evidence suggests the trend towards increased average unemployment duration did 

accelerate in 1981 compared to the trend between 1950 and 1980. Of the 27 pairs of 

comparisons possible in Table 1.5, the adjusted R2 was higher in 17 instances when T81 

was included along with T50. In many situations the differences in fit were very modest, 

but in eight equations the R2 increased by at least 0.05 when T81 was added. Average 

duration has been increasing at a more rapid pace since 1981 than previously. 

These regression findings provide statistical support for the patterns of average 

duration by decade observed previously in Table 1.3. Moving towards the present from 

1950, unemployment duration has been increasing, and there is evidence that the rate of 

increase accelerated starting in 1981. 

How large have the trendwise changes been? Using the regressions whose R2

s are 

summarized in Table 1.5, the changes in predicted values were computed for the 50 year 

period from 1950 to 1999. The total trendwise change was the sum of two products: the 

coefficient for T50 times 30 (the effect of the trend from 1950 to 1980) and 19 times the 

net coefficient of T50 plus T81 (the effect of the combined trends from 1981 to 1999). 

These are the estimated effects of the trends derived by holding constant the effects of the 

business cycle control variables. 
31 

The exercise was done for four average duration series: the CPS mean, the CPS 

work experience mean, UI duration and UI duration for exhaustees. The total 50 year 

change was then calculated as a percentage of the mean duration for the entire period. For 

the CPS-based means, the range of estimated changes (increases) was from 1.84 to 5.11 

weeks, and the simple average of the percentage increases was 25.1 percent. For the UIbased means the changes were smaller. The range of estimated increases in these data 

was from 1.45 weeks to 3.01 weeks, and the simple average of the percentage changes 

was 12.3 percent. Across both groups of means, the largest changes were derived from 

regressions using real GDP capacity utilization as the cyclical control while the smallest 

increases were derived using the CPS unemployment rate as the cyclical control. 

While there were large estimated differences in the size of the trendwise increases 

in average duration, there was no disagreement among the various regressions in the 

direction of the estimated change. Every data series pointed to significantly longer 

average unemployment duration at the end of the period compared to 1950. The size of 

the trendwise increases implies that a typical spell of unemployment in 1999 was some 

1.8 to 5.1 weeks longer than in 1950 and that regular UI benefits lasted on average 1.5 to 

3.0 weeks longer in 1999 than in 1950. While individual readers may disagree as to the 

social significance of these evolutionary changes in average unemployment duration, 

there should be no disputing that average duration is now significantly longer than it was 

in the early 1950s. 

1.5. Developments in the States Affecting UI Benefit Duration 

 Benefit provisions in the regular state UI programs are determined by state laws 

with no significant federal input. State laws cover both potential benefit duration and the 

level of benefits, e.g., the statutory replacement rate and the minimum and maximum 

weekly benefit. Each year the states enact important modifications in their UI benefit 

provisions. This section reviews changes in statutes affecting UI benefit duration in the 

regular state UI programs. 

The earlier discussion of the EB and TFB programs illustrated their importance to 

the long term unemployed during recessionary periods. However, statutes governing the 
32 

regular UI programs in the states influence the duration of benefits in all phases of the 

business cycle. 

 Benefit duration in regular UI programs is affected by state statutes governing 

entry into benefit status and by the maximum potential duration of benefits. Other aspects 

of UI program administration, e.g., the degree to which work search is actively 

monitored, and the unemployment situation in local labor markets are also important in 

determining actual UI benefit duration. However, the present discussion focuses just on 

state laws related to benefit duration. 

Table 1.6 summarizes four distinct aspects of duration-related state benefit 

statutes over the period from 1954 to 2003. Each column shows the number of states (out 

of 51)9 that have the particular feature identified in the column heading. Several columns 

in Table 1.6 show large changes over these 50 years. 

Information on the waiting period is summarized in columns [1]-[3]. The presence 

of uniform duration formulas is summarized in column [4] while columns [5]-[8] focus 

on maximum potential benefit duration. Finally, column [9] summarizes the prevalence 

of state-financed added benefits (AB) programs. These provide added weeks of benefits 

beyond the 26 which typifies all but two state UI programs. AB programs add weeks to 

potential entitlements for those who exhaust regular UI benefits. The financing of AB 

programs is fully a state responsibility, the same as for regular UI benefits. AB is 

activated when a state’s unemployment rate exceeds a trigger specified in its UI law. 

Changes in UI statutes take place for many reasons. Three are emphasized in the 

present discussion. 1) High unemployment can motivate benefit liberalizations intended 

to lessen the hardships experienced by the long term unemployed. 2) Because state UI is 

a federal-state partnership, state-level changes may be induced or mandated by actions of 

the federal partner. In particular, federal financial inducements may motivate state-level 

changes. 3) States may modify statutes when their trust funds are depleted. Here the 

motivation is to prevent or minimize borrowing by restricting access to benefits. All three 

motivations have been important in the years covered by Table 1.6. Inferences about 

 

9

 The 51 jurisdictions are the 50 states plus the District of Columbia. Puerto Rico and the Virgin Islands are 

not included in the analysis. 
Table 1.6. Summary of State Laws Affecting UI Benefit Duration, 1954 to 2003

 Waiting Waiting Waiting Uniform Max. Max. Max. Average States

Year Period, Period, Period, Duration Duration Duration Duration Max. With AB

= 0 >0, <1 <1 < 26 26 > 26 Duration Program

[1] [2] [3] [4] [5] [6] [7] [8] [9]

1954 3 2 5 14 28 22 1 22.8 0

1955 3 3 6 14 26 24 1 23.0 0

1956 4 3 7 14 24 25 2 23.6 0

1957 4 3 7 14 20 29 2 24.0 0

1958 5 3 8 15 18 31 2 24.3 0

1959 5 4 9 13 10 34 7 26.1 0

1960 5 4 9 13 9 34 8 26.3 6

1961 5 4 9 12 6 37 8 26.6 6

1962 3 6 9 11 5 37 9 26.8 7

1963 3 6 9 11 3 39 9 27.0 7

1964 4 6 10 9 3 39 9 27.0 7

1965 3 8 11 8 2 40 9 27.0 7

1966 3 8 11 7 2 40 9 27.0 8

1967 3 8 11 7 2 39 10 27.0 8

1968 4 8 12 7 1 40 10 27.1 8

1969 4 8 12 7 1 40 10 27.1 8

1970 4 8 12 7 0 41 10 27.2 8

1971 5 9 14 7 0 41 10 27.2 9

1972 7 11 18 8 0 41 10 27.2 3

1973 8 11 19 8 0 41 10 27.2 3

1974 9 11 20 8 0 41 10 27.2 3

1975 9 11 20 9 0 41 10 27.2 3

1976 12 11 23 9 0 41 10 27.2 3

1977 12 11 23 9 0 41 10 27.2 3

1978 13 10 23 9 0 41 10 27.2 3

1979 13 10 23 9 0 41 10 27.2 3

1980 13 10 23 9 0 41 10 27.1 3

1981 12 11 23 8 0 42 9 27.1 3

1982 12 8 20 8 0 42 9 27.1 8

1983 12 7 19 8 0 44 7 26.6 3

1984 12 5 17 8 0 48 3 26.2 5

1985 11 5 16 8 0 48 3 26.2 4

1986 11 5 16 8 0 49 2 26.2 5

1987 11 5 16 8 0 49 2 26.2 3

1988 12 5 17 8 0 49 2 26.2 3

1989 12 5 17 8 0 49 2 26.2 4

1990 12 5 17 8 0 49 2 26.2 4

1991 11 5 16 8 0 49 2 26.2 5

1992 11 5 16 8 0 49 2 26.2 5

1993 11 5 16 8 0 49 2 26.2 5

1994 11 5 16 8 0 49 2 26.2 5

1995 11 4 15 8 0 49 2 26.2 5

1996 11 4 15 8 0 49 2 26.2 5

1997 11 4 15 8 0 49 2 26.2 5

1998 11 4 15 8 0 49 2 26.2 5

1999 11 4 15 8 0 49 2 26.2 5

2000 11 4 15 8 0 49 2 26.2 5

2001 12 5 17 8 0 49 2 26.2 3

2002 12 5 17 8 0 49 2 26.2 3

2003 14 4 18 8 0 49 2 26.2 3

Source: Significant Provisions of State Unemployment Insurance Laws, various issues. Data refer to

 January 1 of each year. Average maximum duration (in weeks) is the average of 51 state maxima.

33
34 

these influences will be drawn by noting the timing of certain federal statutes and 

changes in the number of states with particular statutory provisions. 

Most states require claimants to wait one week before starting to collect UI 

benefits. The number requiring a one week wait in 2003 is 33 but in the mid 1950s the 

number ranged between 44 and 46.10 Two aspects of waiting period provisions are 

summarized in columns [1] and [2]. The number of states with no waiting period has 

increased from the 3-5 range for the years between 1954 and 1971 to the 11-14 range for 

all years between 1976 and 2003. The administrative feasibility of operating with no 

waiting period has undoubtedly improved as automation of UI administration has 

advanced. However, the timing of the adoptions in the early to mid 1970s suggests that 

easing hardships due to recessions also played a role in these adoptions. 

Column [2] identifies states where one of two situations obtain. In a few, the 

waiting period is a number of days greater than zero but less than a full week. In most, 

retroactive compensation of the waiting week occurs after benefits have been received for 

a specific number of weeks, typically from three to five weeks. This type of retroactive 

compensation is present in many state Workers’ Compensation programs. There was a 

net increase of about six states with such UI provisions between 1964 and 1981, but a 

like number discontinued this feature between 1982 and 1984. Problems related to low UI 

trust fund balances undoubtedly motivated some states to revoke these provisions during 

the early 1980s. Many states that changed their retroactive feature, however, did so in 

response to changes in the EB program. After December 5, 1980, the federal partner 

would not provide compensation for the first week of EB benefits in situations where 

there was not a one week waiting period. The retroactive compensation of the waiting 

week effectively meant there was a zero waiting period for everyone who exhausted 

regular UI benefits. Thus, the first week of EB would have to be fully state financed. To 

retain 50 percent federal financing of the first week of EB, the retroactive provisions 

were eliminated in most states with such provisions. As a consequence, the number of 

states with a waiting period of less than one week has been noticeably lower since 1981. 

Uniform benefit duration has been noticeably less prevalent in recent years 

compared to the earliest years covered by Table 1.6. In the years since 1965, the count of 

 

10 These counts are derived by subtracting the entry in column [3] from 51. 
35 

states has been consistently in the 7-9 range whereas the counts were consistently in the 

13-15 range before 1960. However in the pre-1965 years most states with uniform 

durations had a maximum duration below 26 weeks.11 On balance, the change away from 

uniform durations had only a small effect on overall potential duration because of the 

offsetting effects of a higher potential duration for some coupled with a shorter potential 

duration for others. 

From the perspective of recent decades, it is appropriate to describe potential 

benefit duration in regular UI as being 26 weeks in all states except Massachusetts and 

Washington (where it is 30 weeks). Since 1986, maximum potential duration has been 26 

weeks in 49 of the 51 programs. This will change when a new 26 week potential duration 

becomes effective in Washington following legislation of 2003. 

Columns [5]-[7] trace the developments in potential duration by showing counts 

of states with less than and more than 26 weeks as well as exactly 26 weeks. In 1954 

more states (28) had a potential duration of less than 26 weeks than states at 26 weeks 

(22). Note the timing of developments in columns [5] and [7] during the late 1950s. 

Between 1956 and 1960 the former decreased from 24 to 9 while the latter increased 

from 2 to 8. The severe recession of 1958, with its high exhaustion rates, occurred in the 

middle of these years. The recession motivated changes that lengthened potential duration 

in many states. After 1960, the numbers with potential durations of less than 26 weeks 

continued to decrease, and by 1970 all had a maximum of at least 26 weeks.12 

States where regular UI could pay more than 26 weeks of benefits numbered 

between 8 and 10 in all years between 1960 and 1982. Adoption of these provisions was 

spurred by the recession of 1958 and the associated increase in benefit exhaustions. 

Discontinuation of these long potential durations took place mainly in 1982 and 1983, 

and state-level financial considerations motivated the changes. State trust funds were 

severely depleted during these years. By reducing potential duration to 26 weeks, a full 

13 weeks of EB would receive 50 percent federal funding. To maximize the 50 percent 

federal EB contribution, states restricted maximum duration in the regular programs to 26 

 

11 For example, of the 14 states with uniform durations in 1954, 10 had a potential duration of less than 26 

weeks. However, of the seven with uniform durations in 1966, all seven had a 26-week potential duration. 12 One discussion of perspectives on uniform versus variable duration and the appropriate length of 

potential benefit duration is found in Chapters 8 and 12 of Haber and Murray (1966). 
36 

weeks. Thus all 13 weeks between 27 and 39 for an individual claimant would be eligible 

for the 50 percent federal cost share. This financial consideration motivated the states to 

shorten potential duration to 26 weeks. When West Virginia did this in 1985, it left just 

Massachusetts and Washington with potential durations above 26 weeks in their regular 

UI programs. This situation persisted through 2003 when Washington reduced potential 

duration for regular UI from 30 to 26 weeks. 

Column [8] summarizes these developments in potential benefit duration by 

displaying a simple (unweighted) average of potential durations across all 51 programs. 

This average increased from 22.8 weeks in 1954 to 27.0 weeks in 1963 as 17 states 

adopted maximums of 26 weeks and 8 states adopted maximums above 26 weeks. 

Averages on the 27.0-27.2 plateau persisted until 1982-1983 when most states eliminated 

their long (greater than 26 weeks) durations. The simple average has been 26.2 weeks 

since 1984. 

The final development to be summarized is the state adoption of Additional 

Benefit (AB) programs. Again, the effects of the 1958 recession are apparent in the initial 

set of adoptions. There were no AB programs prior to 1960 when six adopted AB. The 

number of states with AB increased from 6 in 1960 to a maximum of 9 in 1971. Because 

AB was (is) fully state-financed, these programs were mostly eliminated in 1971 when 

EB became operative. The financial motivation for states was direct. For weeks of AB 

compensation, the state share was 100 percent compared to only 50 percent if the same 

weeks were compensated under the EB program. 

The only other noteworthy development in AB was its re-adoption by 5 states in 

1982. In 1981 and early 1982, there was considerable uncertainty about the adoption of a 

temporary federal benefits (TFB) program. Given the high rate of exhaustions and 

impending changes in EB, a few states instituted AB to provide benefits to their long 

term unemployed. Following the adoption of the TFB program (Federal Supplemental 

Compensation or FSC) of 1982, the AB programs were discontinued in the states. Again, 

states dropped their initiatives in response an alternative program (FSC) that had full 

federal financing. 

Two themes are present in the state actions described in the preceding paragraphs. 

1) There is a strong motivation to help the long term unemployed through benefit 
37 

extensions. 2) Financial incentives figure prominently in state laws affecting the long 

term unemployed. When federal programs exist to serve the same long term client base, 

the states will terminate existing programs and/or modify their programs to minimize 

state expenditures and maximize federal spending on behalf of the same clients. 

1.6. Summary

This chapter has summarized important evolutionary developments in the U.S. 

economy during the past five decades. Its purpose was to provide an overview of the 

labor market within which two major U.S. Department of Labor programs, 

Unemployment Insurance (UI) and the Employment Service (ES), have been operating. 

Key aspects of the business cycle extending back to the late 1940s were reviewed. 

Annual benefit payments for the three tiers of UI were described with attention to 

expenditures during recessionary periods. Absolute levels of spending and spending 

relative to both GDP and UI covered wages were reviewed. 

The chapter also summarized developments in unemployment duration and 

unemployment occurrences back to 1950. A strong upward trend in average 

unemployment duration was documented in data from the monthly labor force survey and 

data from the state UI programs. The trend towards increased duration accelerated in the 

early 1980s. This trend has been a key factor underlying the secular increase in 

exhaustion rates in UI. During the 1990s exhaustion rates averaged 35.5 percent 

compared to 25.2 percent in the 1950s. Finally, the chapter reviewed key UI statutes in 

the states that affect benefit duration in the regular state UI programs. Potential duration 

in 8-10 states exceeded 26 weeks between 1960 and 1982 (Table 1.6). Because they were 

mainly smaller states, the cutback to 26 weeks in most states during the early 1980s had 

only a small effect on potential duration nationwide (Table 1.3). Because UI statutes on 

potential duration have been very stable since the early 1980s, the increases in exhaustion 

rates of recent decades have arisen from developments in the labor market rather than 

changes in UI duration statutes. 
38 

Chapter 2. Expenditures on UI Benefits 

 The present project assembled extensive data on UI benefits and ES activities. 

Chapters 2 and 3 examine aspects of UI benefit availability and benefit payments while 

Chapters 4 and 5 focus on ES activities. In all four chapters, the analysis is constrained by 

the availability of data. A brief discussion of these constraints is given in the following 

paragraphs. Appendices A and B provide more details about data assembly. 

2.1. Data Considerations 

 The purpose of UI and ES activities is to assist workers experiencing difficulties 

in the labor market. The client base is unemployed workers and workers requiring 

assistance to secure more productive and fulfilling employment. 

 A convenient signal of the need for UI and ES services is the volume of 

unemployment and the associated unemployment rate (those unemployed as a fraction (or 

percent) of the total employed plus unemployed). The most widely recognized measures 

of unemployment are derived from monthly household labor force survey (the Current 

Population Survey or CPS), an ongoing survey that has operated continuously since the 

mid-1940s. Since 1967, the CPS design has included geographic controls so that state and 

regional measures of unemployment are available from that date. This and subsequent 

chapters emphasize UI and ES developments in states and regions. The analysis covers 

the time period from 1967 to 2001-2002. 

 Data on UI benefits (benefit amounts, first payments, weeks compensated, 

average duration and exhaustions) extend back to the 1940s as shown in the previous 

chapter. State data for the regular UI program also extend back to the 1940s. Data for the 

Federal-State Extended Benefits (EB) program with state detail are available for all years 

between 1971 (when benefits were first paid) and the present. For the programs that paid 

Temporary Federal Benefits (TFB), however state-level details are available only from 

1975. Appendix A describes procedures used to develop state estimates during 1975, 

1976 and 1977. For earlier recessions, however, details on TFB payments are available 

nationally (as shown in Table 1.2 of Chapter 1) but not for individual states. 
39 

 This chapter’s analysis of UI spending will focus on each of the three tiers of 

benefits: regular UI, EB and TFB. It should be noted that while individual states have 

supported additional benefits (AB) programs in the past, there are no data that separately 

identify these benefits. Like regular UI benefits, they are fully state financed. Thus, in the 

reporting system for the individual state UI trust fund accounts, withdrawals from state 

trust funds to pay AB are not distinguished from withdrawals to pay regular UI benefits. 

Given the differing availability of state unemployment data and the differing 

availability of the three tiers of benefits, the time periods for the separate analyses differ. 

Regular UI benefits by state are traced from 1967 to 2002. EB is traced from 1971 to 

2002 while TFB is traced from 1975 to 2002 for years when there was a TFB program. 

The intent of the present chapter is to provide a summary overview of UI 

spending with geographic detail. Recipiency rates and associated spending in state UI 

programs vary widely (Vroman (2002)). Because of the large volume of information 

from the states, it was decided to conduct the analysis at the level of regions as well as 

states, but to emphasize regional detail in the tabular summaries. 

There are two widely used regional aggregations of states. The U.S. Department 

of Labor (DOL) has traditionally administered its programs using ten regions. Recently 

this administrative structure was consolidated into six regions. The second set of regional 

aggregations is the set of nine divisions specified by U.S. Bureau of the Census, the so 

called Census Divisions. This is a nine-way grouping of states which aggregates to four 

regions (North East, Midwest, South and West) and to the nationwide total. The main 

choice for the present analysis was between the ten DOL regions and the nine Census 

Divisions. Because the project was supported by DOL, it seemed likely that more readers 

would prefer to have summaries based on the 10 DOL regions with associated tables 

showing DOL regional data. Appendix C presents some information on UI benefits for 

the nine Census Divisions. It also identifies the regional and divisional affiliations of the 

individual states. For the DOL regions, Table C.1 shows each state’s regional affiliation 

using both the earlier 10 region classification scheme and the present six region 

classification scheme. 
40 

2.2. Regional Unemployment Patterns 

Since unemployment drives so much of UI and ES activities, it seemed 

appropriate to review regional developments in unemployment prior to examining UI 

program activities. Table 2.1 summarizes relative unemployment rates for the 10 DOL 

regions spanning the 36 years from 1967 to 2002. (Table C.1 shows the states in each 

DOL region.) Each entry is the regional unemployment rate divided by the national 

unemployment rate for the year. Entries above and below 1.0 identify situations with 

above-average and below-average unemployment rates respectively. Summary statistics 

at the bottom of Table 2.1 are shown to provide an idea of how much the regional 

unemployment rates varied about the national unemployment rate during this period. 

Because Table 2.1 has so much detail (360 region-year data points), the lowest 

and highest relative unemployment rates are highlighted for each year. Brackets identify 

the region with the lowest unemployment rate. Three regions had all the observations 

with the lowest unemployment rates, i.e., DOL regions 1, 7 and 8. Each had the lowest 

rate during at least nine separate years. Note that the lowest-ever relative rates occurred 

during 1986-1988 in Region 1 when rates were less than 60 percent of the national 

average. Observe that Region 7’s rate exceeded 0.90 of the national rate just once (1987). 

For Region 8, only five years had unemployment rates at or above the national average. 

The distribution of highest regional unemployment rates (cells with dark 

backgrounds) was much more widespread. Six separate regions experienced the highest 

relative unemployment rates with the most persistent patterns of high unemployment 

found in the far western states, i.e., Regions 9 and 10. Respectively, the two regions 

accounted for 10 and 11 years of highest unemployment, including all years since 1992. 

Regional averages appear at the bottom of Table 2.1. The lowest 36-year averages 

obtained in the three regions with persistently low unemployment, Regions 1, 7 and 8. 

Their averages over the period were 0.89, 0.75 and 0.83 respectively. Regions 9 and 10 

had the highest relative unemployment with respective 36-year averages of 1.17 and 1.20. 

Note that the other five regions had averages within five percentage points of 1.00. 

Table 2.1 also shows that the regions differ in the extent to which their average 

unemployment rates have deviated from the national average. The standard deviation 
Table 2.1. Relative Unemployment Rates for DOL Regions, 1967 to 2002.

DOL DOL DOL DOL DOL DOL DOL DOL DOL DOL

Year Reg 1 Reg 2 Reg 3 Reg 4 Reg 5 Reg 6 Reg 7 Reg 8 Reg 9 Reg 10

1967 0.70 0.97 0.95 1.05 0.90 1.07 0.61 0.94 1.46 1.26

1968 0.76 0.89 0.95 1.07 0.90 1.15 0.62 0.98 1.39 1.31

1969 0.79 0.93 0.92 1.00 0.90 1.14 0.66 1.04 1.41 1.41

1970 0.99 0.91 0.87 0.91 0.99 1.00 0.65 0.88 1.41 1.61

1971 1.16 1.06 0.84 0.81 0.99 0.91 0.70 0.79 1.42 1.49

1972 1.23 1.15 0.91 0.80 0.96 0.92 0.63 0.82 1.32 1.48

1973 1.25 1.11 0.93 0.80 0.92 0.91 0.64 0.94 1.37 1.48

1974 1.17 1.14 0.92 0.95 0.92 0.89 0.65 0.82 1.29 1.31

1975 1.19 1.15 0.90 1.04 1.02 0.77 0.65 0.76 1.15 1.12

1976 1.19 1.34 0.95 0.94 0.93 0.81 0.63 0.68 1.20 1.12

1977 1.10 1.31 0.99 0.98 0.91 0.83 0.68 0.78 1.17 1.14

1978 0.95 1.25 1.05 0.96 0.95 0.87 0.68 0.81 1.15 1.10

1979 0.94 1.22 1.08 0.97 1.02 0.83 0.69 0.75 1.05 1.17

1980 0.83 1.04 0.99 0.97 1.25 0.80 0.82 0.79 0.94 1.13

1981 0.83 0.99 1.03 1.01 1.22 0.79 0.83 0.75 0.95 1.23

1982 0.81 0.90 1.02 1.02 1.24 0.79 0.83 0.76 1.02 1.19

1983 0.71 0.87 1.03 1.03 1.21 0.93 0.84 0.76 0.99 1.13

1984 0.65 0.91 1.03 1.02 1.21 0.93 0.85 0.78 0.99 1.22

1985 0.61 0.87 0.98 0.98 1.19 1.10 0.88 0.85 0.99 1.17

1986 0.56 0.84 0.89 1.00 1.10 1.35 0.86 1.00 0.95 1.21

1987 0.54 0.74 0.86 0.99 1.13 1.42 0.92 1.11 0.93 1.19

1988 0.57 0.74 0.89 1.01 1.10 1.42 0.89 1.05 0.97 1.13

1989 0.73 0.91 0.84 1.03 1.06 1.29 0.87 1.01 0.95 1.13

1990 1.02 0.93 0.93 1.00 1.06 1.13 0.84 0.86 1.00 0.96

1991 1.18 1.04 0.99 0.98 1.01 1.01 0.76 0.74 1.07 0.94

1992 1.07 1.14 0.97 0.96 0.95 1.00 0.64 0.74 1.18 1.01

1993 0.98 1.12 0.96 0.92 0.92 1.02 0.73 0.70 1.28 1.07

1994 0.97 1.13 0.95 0.93 0.87 1.06 0.72 0.68 1.34 1.00

1995 0.96 1.14 0.98 0.94 0.85 1.06 0.74 0.73 1.32 1.04

1996 0.89 1.15 0.96 0.94 0.86 1.06 0.77 0.75 1.28 1.16

1997 0.89 1.21 1.01 0.96 0.84 1.09 0.75 0.70 1.22 1.08

1998 0.78 1.17 0.97 0.93 0.84 1.11 0.79 0.87 1.26 1.13

1999 0.78 1.18 0.94 0.95 0.89 1.09 0.72 0.82 1.21 1.22

2000 0.69 1.08 0.92 0.97 0.94 1.08 0.81 0.78 1.19 1.29

2001 0.77 0.98 0.89 1.03 0.99 1.03 0.86 0.82 1.11 1.31

2002 0.84 1.04 0.86 0.99 0.99 1.04 0.83 0.92 1.12 1.25

Average 0.89 1.04 0.95 0.97 1.00 1.02 0.75 0.83 1.17 1.20

Std. Dev. 0.20 0.15 0.06 0.06 0.12 0.17 0.09 0.11 0.17 0.15

Coeff. Var. 0.23 0.15 0.06 0.06 0.12 0.17 0.12 0.13 0.14 0.13

 Source: Based on data in U.S. Department of Labor, Bureau of Labor Statistics, "Geographic Profile of 

 Employment and Unemployment," various issues and state data developed in Vroman, Worden and

 Acs (1992). Regional unemployment rates measured a ratio to the national unemployment rate.

41
42 

shows the average (absolute) deviation of the state’s relative unemployment rate from 

1.0. Region 1 (New England) has by far the largest standard deviation (0.20) while 

Regions 3 and 4 have the smallest (0.06). These represent the extremes of deviations 

from the national average unemployment rate. The other seven regions had standard 

deviations that ranged between 0.09 and 0.17. 

The coefficient of variation (CV, bottom row of Table 2.1) is defined as the ratio 

of the standard deviation to the mean, i.e., the ratio of the immediately higher two rows. 

It is a gauge of relative variability. In these data, the CVs are dominated by the standard 

deviations. Thus the largest CV is in Region 1 (0.23) and the smallest ones are Regions 3 

and 4 (0.06). The remaining seven fall into the range between 0.12 and 0.17. The fact that 

the standard deviation and the CV are both largest in Region 1 is hardly surprising since 

it is unique in having experienced both the lowest and the highest relative unemployment 

rates in different years. 

In considering the regional patterns displayed in Table 2.1, three final comments 

may be appropriate. 1) There are some systematic differences in unemployment rates 

across these ten regions. Regions 1, 7 and 8 have had below-average unemployment rates 

in most years, i.e., 93 of 108 region-year observations. In contrast, Regions 9 and 10 had 

above-average unemployment in 61 of 72 region-year observations. These five regions 

have displayed unemployment rates that deviated systematically from the national 

average and all by more than 10 full percentage points, i.e., below 0.90 or above 1.10. 

Unemployment rates in the other regions have moved much more like the national 

average during these 36 years. 2) Certain past economic crises and booms experienced by 

individual regions are apparent in Table 2.1. Thus the rust belt unemployment problem of 

the early 1980s is apparent in the Region 5 data and the energy crisis of the mid to late 

1980s is apparent in the Region 6 data. Finally, the so called Massachusetts miracle of the 

mid-to-late1980s is also apparent in the data for Region 1 with relative unemployment 

rates below 0.75 of the national average for seven successive years. 3) Unemployment 

rates in the DOL regions do not march in lock step with the national unemployment rate. 

In considering the unemployment rates in the states, there would be even more variation 

and deviations from the national unemployment rate than suggested by the regional 

relative unemployment rates shown in Table 2.1. 
43 

2.3. Regular UI Benefits by DOL Region 

The payment of regular UI benefits varies widely by state and region. Table 2.2 

summarizes spending by DOL region using averages for the 36 years from 1967 to 2002. 

The data are arrayed by region with national data in the bottom line. Column [1] shows 

average unemployment rates (TURs) for these years while column [2] shows relative 

unemployment rates. The entries in column [2] are very similar to the averages displayed 

previously at the bottom of Table 2.1.13 Thus Regions 9 and 10 stand out as having high 

unemployment rates while Regions 1, 7 and 8 have low unemployment rates. 

Columns [3] and [4] show averages of unemployment (from the CPS) and of 

weekly regular UI beneficiaries. Their ratio, column [5], illustrates the range of regional 

recipiency rates, from a high of 0.43 in Region 1 to a low of 0.21 in Region 6. Recipiency 

in the region with highest recipiency is about twice as likely as in the region with lowest 

recipiency. Over these 36 years, three regions have high recipiency (Regions 1, 2, and 10) 

while three have low recipiency (Regions 4, 6 and 8). Column [6] shows these contrasts 

in relative terms expressing each regional recipiency rate as a ratio to the national rate. 

Similar regional contrasts are obtain using insured unemployment to measure recipiency. 

Columns [7]-[9] then focus on regular UI benefit payments. Regional averages 

appear in column [7] while averages per unemployed person appear in column [8]. The 

latter, which adjusts for the size of the regional labor force and unemployment, again 

shows a range that has the highest average ($3,211 in Region 1) more than twice the 

lowest average ($1,429 in Region 4). The latter ratios divided by the national average of 

$2,165 provide a relative index of benefit costs per unemployed person (column [9]). 

Relative recipiency (column [6]) and relative costs (column [9]) across regions 

are closely related. Their simple correlation in Table 2.2 is 0.964. Most of the regional 

variation in regular UI costs per unemployed person reflects differing recipiency rates. 

 

13 The two sets of averages are computed differently. The Table 2.1 averages are based on 36 calculations 

of the regional unemployment divided by the national unemployment rate, i.e., 36 relative unemployment 

rates, whereas in Table 2.2 the relatives are computed from the 36 year averages of regional unemployment 

rates (column [1]) divided by the 36 year national average. While the two calculations are not necessarily 

identical, they are very similar. The largest contrast for a given region is only 0.02. 
Table 2.2. Regular UI Benefit Payments for DOL Regions, 1967 to 2002.

Unemploy- Relative Unem- Weekly UI Reci- Relative Regular Benefits Relative

ment Rate, TUR ployment UI Bene- piency UI Reci- UI per Unem- Benefits

DOL TUR % ficiaries Rate piency Benefits ployed per Unem.Region = [1]/6.05 = [4]/[3] = [5]/0.31 = [7]/[3] = [8]/2165

[1] [2] [3] [4] [5] [6] [7] [8] [9]

Region 1 5.42 0.90 342 148 0.43 1.37 1100 3211 1.48Region 2 6.30 1.04 749 307 0.41 1.31 2169 2896 1.34Region 3 5.77 0.95 690 235 0.34 1.09 1691 2451 1.13Region 4 5.87 0.97 1139 270 0.24 0.76 1628 1429 0.66Region 5 6.18 1.02 1383 428 0.31 0.99 3195 2310 1.07Region 6 6.05 1.00 760 157 0.21 0.66 1104 1452 0.67Region 7 4.58 0.76 270 83 0.31 0.98 530 1964 0.91Region 8 4.96 0.82 178 41 0.23 0.73 301 1692 0.78Region 9 6.93 1.15 1040 364 0.35 1.12 2251 2165 1.00Region 10 7.18 1.19 297 115 0.39 1.23 860 2894 1.34U.S. 6.05 1.00 6848 2148 0.31 1.00 14829 2165 1.00 Source: Data from the Bureau of Labor Statistics and the Office of Workforce Security. Unemployment and weekly UI beneficiaries in thousands. UI benefits in millions. Data are averages for 1967 to 2002
45 

The close linkage between the average recipiency rate and the average cost rate 

also obtains across the individual states. When averages like those in columns [6] and [9] 

were computed for states during the same 36 years, the resulting correlation was found to 

be 0.946, nearly as high as for the regional data. The recipiency rate in the regular UI 

program (beneficiaries as a fraction of the unemployed) is the primary determinant of the 

relative cost rate (benefit costs per unemployed person relative to the national average). 

Access to regular UI benefits and benefit generosity are primarily matters 

determined by the individual states. Thus it should not be a surprise that recipiency varies 

widely across states and regions. This variation is longstanding and the patterns have 

been quite stable since 1967.14 The decisions regarding eligibility have traditionally been 

state prerogatives with no substantive federal input. Interstate differences in political 

forces and concerns over labor costs undoubtedly both play a role in how states set the 

rules governing both monetary and nonmonetary eligibility requirements. Absent federal 

mandates and/or minimum performance standards governing benefits, it is not surprising 

that outcomes regarding regular UI benefits should be highly varied by state and region. 

For persons who exhaust regular UI benefits, access to EB and/or TFB may be 

possible if the latter programs are activated when the exhaustions take place. However, 

receipt of regular UI acts as a screen that governs access to the latter programs even when 

one or both are active. The screening role of regular UI could influence the interstate 

distribution of benefits from EB and/or FSB. Subsequent sections examine this question. 

2.4. Receipt of EB 

As noted, the EB program started to pay benefits in 1971. Its subsequent history 

falls into two broad periods. During the 13 years between 1971 and 1983 it was widely 

used with total benefit payouts exceeding $16 billion. For most of these years, the 

program operated with the initial, comparatively low trigger thresholds. 

Legislation of late 1980 modified the trigger mechanism for EB with provisions 

that became effective during 1981 and 1982. However many states continued to pay EB 

through 1983 because the level of unemployment was so high that the EB triggers 

 

14 See, for example, Chart II-4 in Vroman(2002) for a visual representation of this stability. 
46 

remained active. Note in Table 1.2 that EB payouts totaled $1.3 billion, $2.4 billion and 

$1.7 billion for the three years 1981, 1982 and 1983. 

After 1983, EB has ceased to be an important program for the unemployed. The 

highest annual payout in the nineteen years between 1984 and 2002 was $264 million in 

1991.15 The initial analysis of this section focuses on the years 1971 to 1983. 

Table 2.3 displays 1971-1983 data for the DOL regions divided into two subperiods. Panel A pertains to the four years when the national EB trigger was “On” for a 

significant portion of the year. The threshold selected was five or more months. Under 

this threshold there were four individual years when EB was “On,” 1975, 1976, 1977 and 

1980.16 Data for the remaining nine years between 1971 and 1983 appear in Panel B of 

Table 2.3. During both sub-periods EB paid out about $8.1 billion. 

Panels A and B of Table 2.3 are arranged to allow comparisons between the 

regular UI program and EB during these two periods. The format of the table closely 

parallels that of Table 2.2. Columns [1] and [2] display average and relative 

unemployment rates for the indicated periods. Columns [3]-[6] display regional data 

related to regular UI recipiency, respectively average unemployment, average 

beneficiaries, the recipiency rate and the relative recipiency rate. In column [6] of both 

panels there is roughly a two to one range of relative recipiency rates, as noted previously 

in Table 2.2 for the 1967-2002 period. As before, relatively high recipiency is observed 

in Regions 1, 2 and 10 and relatively low recipiency in Regions 4, 6 and 8. 

Columns [7]-[9] focus on regular UI benefit payments for the two time periods, 

showing respectively averages, averages per unemployed person and benefit costs per 

person measured relative to the national average. In both panels, a close association 

between relative recipiency (column [6]) and relative costs per unemployed person 

(column [9]) is observed. The correlation between the two series is 0.942 in Panel A and 

0.878 in Panel B. Again, the principal determinant of relative costs per unemployed 

person for the regular UI program during both periods is the relative recipiency rate. 

 

15 The total given in Table 1.2 and in the text excludes Puerto Rico and the Virgin Islands. Adding their EB 

payments raises the national total to $294 million in 1991. 

16 The national trigger was also “On” for about three months in 1972. Despite this activation, EB actually 

paid fewer benefits in 1972 than in 1971. When individual state data for 1972 were examined it was 

apparent that in many states the program never served many claimants. This probably reflects lags in 

establishing EB since it was just the program’s second year of operation. 
Table 2.3. Regular UI and EB Benefit Payments for DOL Regions, 1971 to 1983

Unemploy- Relative Unem- Regular UI Reci- Relative Regular Reg. Ben. Relative EB EB Ben. Relative

ment Rate, TUR ployment UI Bene- piency UI Reci- UI per Unem- Reg. Ben. Benefits per Unem- EB Ben.

DOL TUR % ficiaries Rate piency Benefits ployed per Unem. ployed per Unem.Region = [1]/U.S. = [4]/[3] = [5]/U.S. = [7]/[3] = [8]/U.S. = [10]/[3] = [11]/U.S.

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12]

Panel A. Four years when the national EB trigger was "On" for five or more months: 1975, 1976, 1977 and 1980Region 1 8.23 1.08 477 199 0.42 1.17 782 1641 1.12 156 327 1.20Region 2 9.18 1.21 1021 420 0.41 1.15 1683 1649 1.13 407 399 1.47Region 3 7.24 0.95 789 328 0.41 1.16 1413 1791 1.23 179 227 0.83Region 4 7.45 0.98 1196 355 0.30 0.83 1218 1018 0.70 222 185 0.68Region 5 7.79 1.03 1622 610 0.38 1.05 2888 1781 1.22 580 357 1.32Region 6 6.06 0.80 617 138 0.22 0.63 488 790 0.54 79 129 0.47Region 7 5.25 0.69 284 105 0.37 1.03 426 1497 1.02 68 240 0.88Region 8 5.72 0.75 172 44 0.26 0.72 189 1099 0.75 23 134 0.49Region 9 8.48 1.12 1020 366 0.36 1.00 1402 1375 0.94 256 251 0.92Region 10 8.56 1.13 293 111 0.38 1.06 455 1555 1.06 66 227 0.83U.S. 7.59 1.00 7491 2677 0.36 1.00 10944 1461 1.00 2036 272 1.00Panel B. The other nine years between 1971 and 1983Region 1 6.51 0.96 378 158 0.42 1.31 666 1759 1.21 50 133 1.01Region 2 7.09 1.05 795 339 0.43 1.34 1410 1774 1.22 144 181 1.37Region 3 6.67 0.99 737 258 0.35 1.10 1278 1734 1.19 92 124 0.95Region 4 6.38 0.94 1065 249 0.23 0.73 962 903 0.62 52 49 0.37Region 5 7.29 1.08 1539 470 0.31 0.96 2550 1657 1.14 327 213 1.62Region 6 5.84 0.86 624 133 0.21 0.67 650 1042 0.71 23 37 0.28Region 7 5.00 0.74 272 86 0.31 0.99 385 1416 0.97 18 66 0.50Region 8 5.34 0.79 165 40 0.24 0.77 214 1299 0.89 7 43 0.33Region 9 7.71 1.14 950 331 0.35 1.10 1352 1423 0.97 119 125 0.95Region 10 8.56 1.27 300 105 0.35 1.10 492 1643 1.13 66 220 1.67U.S. 6.76 1.00 6825 2168 0.32 1.00 9960 1459 1.00 897 131 1.00 Source: Data from the Bureau of Labor Statistics and the Office of Workforce Security. Unemployment and regular UI beneficiaries in

 thousands. Regular UI and EB benefits in millions. Data are averages for indicated sets of four and nine years respectively.
48 

The final three columns in Table 2.3 focus on regional EB costs during these two 

periods. Inspection of column [11] shows clearly that there is much wider variation in EB 

costs per unemployed person across the regions than in regular UI costs. The high to low 

ratio in Panel A is the ratio of $399 (Region 2) to $129 (Region 6) or 3.09 while in Panel 

B it is the ratio of $220 (Region 10) to $37 (Region 6) or 5.95. The analogous high-tolow ratios for regular UI (column [8]) are 1.75 in Panel A and 1.96 in Panel B. 

Two aspects of the greater variation in EB costs by region are noteworthy. First, 

the three regions with lowest regular UI costs per unemployed (column [8]) also have the 

lowest EB costs (column [11]), i.e., Regions 4, 6 and 8.17 Second, the wider variability of 

EB costs in Panel B compared to Panel A would be anticipated since the national trigger 

activated the EB program in all states for a substantial share of each of the four years that 

underlie the Panel A data. 

In both panels of Table 2.3, there is a statistically significant association between 

relative costs of regular UI and EB across the ten regions. The correlation between 

columns [9] and [12] in Panel A is 0.780 and in Panel B it is 0.781. Thus, a strong 

positive association held during both periods between regular UI costs and EB costs 

when both were measured per unemployed person. 

The analyses of the Table 2.3 regional data as just described were also conducted 

using data for the individual states. The set-up was the same as in Table 2.3 with the data 

spanning 1971 to 1983 divided into the same four and nine year periods. At the state 

level, the correlation between the relative recipiency rate and relative regular UI benefits 

was 0.945 for the four years when the national EB trigger was “On” for five or more 

months. For the other nine years of the 1971-1983 period the correlation was 0.884. For 

both periods, the relative recipiency rate was the main determinant of relative benefit 

costs per unemployed person. 

As with the regional data of Table 2.3, however, there was a significant but less 

tight association across the states between relative regular UI costs and EB costs. The 

correlation was 0.659 for the four-year period and 0.688 for the nine-year period. Even 

though these correlations were similar, the regression equation for the nine-year period 

 

17 The pattern for the high cost regions is less dramatic, partly because of high costs in Regions 3 and 5 as 

well as Regions 1, 2 and 10. 
49 

was much less precise in its estimation of the individual state averages. Thus the standard 

error of estimate (the average distance between actual and predicted values) was $293 for 

the four year national trigger period but $749 for the other nine year period. In years 

where the national EB trigger was not active for five or more months, there was a strong 

positive association with regular UI costs, but at the same time a much less precise 

association when compared to the years when the national EB trigger was “On.” 

The findings of analysis at the state level strongly paralleled the findings for the 

regional data from Table 2.3. This held for both periods within the thirteen year interval 

1971 to 1983. The state-level analysis of EB expenditures reinforces the findings of the 

analysis of data from the ten DOL regions. There is a strong positive association between 

regular UI spending and EB spending, but the connection is, as would be expected, less 

tight than the connection between the recipiency rate and the costs of benefits in the 

regular UI program. 

As noted previously, EB spending since 1983 has been much lower than in the 

1971-1983 period. While several factors help to explain this change, the most obvious is 

the change in the EB triggering mechanism. The net effect of the changes legislated in 

1980 is to make it much more difficult to activate EB. A second factor is that 

unemployment rates between 1984 and 2002 were generally low with only two annual 

average TURs at 7.5 percent and four in the range between 7.2 percent and 6.9 percent.18

A third factor has been the lower recipiency rates in regular UI programs since 1980. 

To examine the changes in EB availability Table 2.4 displays summaries of 

annual state data spanning the full 32 years between 1971 and 2002. The data have been 

aggregated into three time periods: the four year and the nine year periods between 1971 

and 1983 (differentiated by whether EB was “On” for five or more months), and the 

remaining nineteen years between 1984 and 2002. 

Three other dimensions of information are included in Table 2.4. The 51 state UI 

programs (the fifty states plus the District of Columbia) have been divided into three 

groups according to the long run level of their regular UI recipiency rate. The ratio of 

beneficiaries to unemployment was averaged for each state for the full 36 years between 

1967 and 2002 and each state was classified as either high, medium or low. For the three 

 

18 Recall column [1] of Table 1.2. 
Table 2.4. Proportion of Years EB Payments by States Met the Indicated Thresholds Relative to Regular UI Benefits, 1971 to 2002

 Total EB - 2 Pct. of Regular UI Total EB - 5 Pct. of Regular UI Total EB - 10 Pct. of Regular UI

Relative Relative 1971-1983 1971-1983 1984-2002 1971-1983 1971-1983 1984-2002 1971-1983 1971-1983 1984-2002

Unem- UI Recip- National No Nat. No National No Nat. No National No Nat. No

ployment iency Trigger Trigger National Trigger Trigger National Trigger Trigger National

Rate Rate "On" Five of Five Trigger "On" Five of Five Trigger "On" Five of Five Trigger

Months, Months, Months, Months, Months, Months,

4 Years 9 Years 19 Years 4 Years 9 Years 19 Years 4 Years 9 Years 19 Years

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11]

High High 1.00 0.82 0.27 1.00 0.73 0.18 0.91 0.49 0.05

Medium 1.00 0.82 0.07 1.00 0.76 0.05 0.91 0.49 0.01

Low 1.00 0.65 0.03 1.00 0.57 0.03 1.00 0.39 0.01

Medium High 1.00 0.71 0.03 1.00 0.67 0.00 0.65 0.49 0.00

Medium 1.00 0.37 0.00 1.00 0.14 0.00 0.77 0.06 0.00

Low 1.00 0.29 0.00 0.91 0.04 0.00 0.83 0.00 0.00

Low High 1.00 0.27 0.00 1.00 0.14 0.00 0.65 0.10 0.00

Medium 1.00 0.24 0.00 0.92 0.20 0.00 0.73 0.08 0.00

Low 1.00 0.29 0.00 0.96 0.16 0.00 0.70 0.00 0.00

Total High 1.00 0.60 0.10 0.99 0.51 0.06 0.74 0.36 0.02

Medium 1.00 0.48 0.02 0.97 0.37 0.02 0.80 0.21 0.00

Low 1.00 0.41 0.01 0.99 0.25 0.01 0.84 0.13 0.00

Total Total 1.00 0.50 0.04 0.98 0.38 0.03 0.79 0.23 0.01

State-Year

Observations 204 459 969 204 459 969 204 459 969

 Source: Data from the Office of Workforce Security, "Unemployment Insurance Financial Handbook" and annual Handbook updates.

 Each proportion shows the fraction of state-year observations that EB payments met the designated threshold.
51 

periods of interest, the average unemployment rates (TURs) for each state were computed 

and states were again classified as either high, medium or low. Columns [1] and [2] in 

Table 2.4 display the crossclassification of the two three-way breakdowns. Finally, the 

annual level of EB benefits was measured as a fraction of regular UI benefits for the same 

year. Three thresholds for EB as a proportion of regular UI benefits are shown in Table 

2.4; 2 percent, 5 percent and 10 percent. 

Thus there are four dimensions of information in Table 2.4, each arranged as a 

three-way classification yielding 81 permutations. For each one, the table shows the 

number of state-year observations where the designated threshold is met, expressed as a 

proportion of all state-year observations that fall into the particular cell. The four bottom 

rows in the table provide summaries of the same proportions. 

Starting with column [3], note that every state regardless of TUR or regular UI 

recipiency rate met the 2 percent threshold during the four years when the national EB 

trigger was “On” for five or four months. The 5 percent threshold was also generally met 

(column [6]) during these years. About 80 percent of the (204) state-year observations 

also met the 10 percent threshold (column [9]). In this column, however, note that the 

likelihood of EB payouts meeting this threshold was higher in states where the relative 

unemployment rate was high, e.g., 0.91 or above compared to proportions in the 0.65-

0.83 range for states with medium and low unemployment. 

For the other nine years of the 1971-1983 period, there is a clear association 

between the likelihood of meeting a designated threshold and both the relative 

unemployment rate and the regular UI recipiency rate. For the 5 percent threshold, states 

where both unemployment and recipiency were in the top group had a proportion of 0.73 

whereas those where both were in the bottom group had a proportion of 0.16. 

The contrast between the two 1971-1983 subperiods and the 1984-2002 period is 

vivid. Just a single proportion in columns [5], [8], and [11] exceeds 0.25 and just two 

exceed 0.15. Both obtained in the states with high unemployment and with high 

recipiency, e.g., the first row. Of the remaining 25 entries (top nine rows), two were 0.05, 

three were 0.03, two were 0.01 and the other 18 were zero. 

Recipiency rates near the bottom of Table 2.4 show a strong relationship between 

likelihood of EB meeting the specified threshold and the state’s recipiency rate. For most 
52 

triplets in the top nine rows of columns [4]-[11] a strong relationship between the 

recipiency rate and the likelihood of EB meeting the designated threshold is present. The 

single large exception is found in column [9] and that occurred in years when the national 

EB trigger was “On” for five or more months. To have the possibility of receiving EB 

benefits in years when the national trigger is not active, it is best to be from a state with a 

high regular UI recipiency rate. That is the clear message from the data examined here. 

2.5. Temporary Federal Benefits 

Although Temporary Federal Benefits (TFB) programs have been enacted in 

every recession since the downturn of 1958, data at the level of states and regions are 

only available from 1975.19 During the 28 years between 1975 and 2002 there were nine 

separate years when TFB payments were made during most or all of the year. Thus the 

present analysis focuses on data from the years 1975, 1976, 1977, 1982, 1983, 1984, 

1992, 1993, and 2002. 

From column [5] of Table 1.2 it is clear that the level of TFB payments was much 

higher during the two most recent recessions than in the 1975-1977 and 1982-1984 

periods. The annual average for the six earlier years was $1.9 billion compared to $12.0 

billion for the three recent recessionary years. Because of this contrast in spending levels, 

the information on TFB expenditures was aggregated into two groupings; the six earlier 

years between 1975 and 1984 and the three later years between 1992 and 2002.20 

Table 2.5 presents summary data in two panels: the six earlier years of TFB in 

Panel A and the three recent years in Panel B. Note that the structure of information in 

the columns of Table 2.5 replicates the structure followed previously in Table 2.3 for the 

analysis of the EB program. The data are arranged by DOL region with attention to 

unemployment rates, regular UI recipiency rates, regular UI benefit payments and TFB 

benefit payments. National summaries appear at the bottom of each panel. 

 

19 Appendix A discusses the availability of TFB data including procedures to develop state estimates during 

the three years from 1975 to 1977. Details of individual TFB programs are given in Section 1 of Chapter 3. 

20 When the current recession ends, it is clear that TFB data from 2003 will also be important to study. The 

current program (Temporary Extended Unemployment Compensation or TEUC) will pay benefits 

throughout 2003. Note that data from 1991 and 1994 are not included in the present analysis. They were 

excluded because of the low level of total expenditures during both years compared to 1992 and 1993. 
Table 2.5. Regular UI and TFB Benefit Payments for DOL Regions, Nine Years from 1975 to 2002.

Unemploy- Relative Unem- Regular UI Reci- Relative Regular Reg. Ben. Relative Temp. TFB Relative

ment Rate, TUR ployment UI Bene- piency UI Reci- UI per Unem- Reg. Ben. Federal per Unem- TFB Ben.

DOL TUR % ficiaries Rate piency Benefits ployed per Unem. Benefits, ployed per Unem.Region = [1]/U.S. = [4]/[3] = [5]/U.S. = [7]/[3] = [8]/U.S. TFB = [10]/[3] = [11]/U.S.

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12]

Panel A. Six early years when a TFB program was active most of the year: 1975, 1976, 1977, 1982, 1983 and 1984Region 1 7.74 0.93 464 187 0.40 1.25 853 1838 1.19 280 604 2.75Region 2 8.86 1.06 1005 392 0.39 1.21 1768 1760 1.14 449 447 2.03Region 3 8.23 0.99 931 342 0.37 1.14 1799 1933 1.25 292 314 1.43Region 4 8.38 1.01 1452 376 0.26 0.80 1493 1028 0.67 261 180 0.82Region 5 9.17 1.10 1966 608 0.31 0.96 3455 1758 1.14 592 301 1.37Region 6 7.01 0.84 801 188 0.24 0.73 1007 1258 0.82 113 141 0.64Region 7 6.26 0.75 348 111 0.32 0.99 526 1511 0.98 84 243 1.10Region 8 6.28 0.75 207 56 0.27 0.84 319 1538 1.00 34 164 0.74Region 9 8.99 1.08 1181 416 0.35 1.09 1874 1587 1.03 268 227 1.03Region 10 9.63 1.16 357 128 0.36 1.11 656 1840 1.19 117 329 1.50U.S. 8.33 1.00 8711 2803 0.32 1.00 13423 1541 1.00 1917 220 1.00Panel B. Three recent years when a TFB program was active most of the year: 1992, 1993 and 2002Region 1 6.57 0.97 471 190 0.40 1.28 2326 4938 1.51 1227 2604 1.96Region 2 7.44 1.10 964 365 0.38 1.20 4275 4435 1.35 2385 2474 1.86Region 3 6.31 0.94 863 290 0.34 1.06 3193 3699 1.13 1586 1837 1.38Region 4 6.44 0.96 1545 379 0.25 0.78 3336 2160 0.66 1369 886 0.67Region 5 6.44 0.96 1602 517 0.32 1.02 5746 3587 1.10 1560 974 0.73Region 6 6.85 1.02 1031 231 0.22 0.71 2213 2146 0.66 811 787 0.59Region 7 4.90 0.73 323 107 0.33 1.05 993 3077 0.94 285 884 0.66Region 8 5.24 0.78 232 52 0.22 0.71 574 2471 0.75 182 785 0.59Region 9 8.07 1.20 1565 546 0.35 1.10 5047 3226 0.98 1930 1234 0.93Region 10 7.39 1.10 396 164 0.42 1.31 1751 4421 1.35 633 1600 1.20U.S. 6.74 1.00 8991 2844 0.32 1.00 29454 3276 1.00 11969 1331 1.00 Source: Data from the Bureau of Labor Statistics and the Office of Workforce Security. Unemployment and regular UI beneficiaries in thousands. Regular UI and TFB benefits in millions. Data are averages for indicated sets of six and three years respectively.
54 

Because TFB programs originate in periods of high unemployment, note that the 

national average unemployment rates in both Panels A and B (8.33 percent and 6.74 

percent respectively) are higher than the 36 year average of 6.05 percent displayed earlier 

in Table 2.2. The differences in national unemployment between Panels A and B provide 

another indication of how the past two recessions have been less severe than those of the 

mid 1970s and the early 1980s. 

The regular UI program recipiency rates in columns [5] and [6] repeat geographic 

patterns noted earlier. Recipiency is consistently above-average in Regions 1, 2 and 10 

and consistently below-average in Regions 4, 6 and 8. Also consistent with earlier 

findings, there is a close association between relative recipiency (column [6]) and relative 

regular UI costs per unemployed person (column [9]). Their correlation is 0.82 in Panel A 

and 0.94 in Panel B. 

In both periods, regular UI costs and TFB costs by region are positively and 

significantly associated. Their correlation is 0.67 over the earlier six year period and 0.88 

for the recent three year period.21 The regional pattern of TFB expenditures strongly 

follows the pattern for regular UI expenditures. 

A similar analysis, like that of the regional data displayed in Table 2.5, was also 

undertaken with the underlying state-level data. Because the results generally conformed 

with earlier findings regarding EB expenditures, they can be summarized briefly. 1) For 

both time periods, there was a strong positive link in the regular UI program between the 

relative recipiency rate and the relative cost of benefits per unemployed person. The 

correlations were 0.90 for the six year period and 0.91 for the more recent three year 

period. 2) The association between relative regular UI benefits and relative TFB benefits 

(analogous to columns [9] and [12] in Table 2.5) while clearly positive and statistically 

significant was not tight, particularly for the earlier six year period. For the two periods, 

the two correlations were 0.39 and 0.67 respectively. While knowledge about regular UI 

spending per unemployed person is useful for projecting relative TFB spending, there is 

considerable noise in the relationship. The loose association was especially noticeable for 

the earlier six year period of TFB, i.e., 1975, 1976, 1977, 1982, 1983 and 1984. 

 

21 For the earlier six-year period, the correlation between regular UI and TFB benefit costs per unemployed 

person is significant at the 0.05 level but not at the 0.01 level. All other correlations identified in this 

chapter are significant at the 0.01 level. 
55 

As with the payment of EB benefits, it is of interest to document the importance 

of TFB benefits in years when these programs were active for most of the year. Table 2.6 

summarizes state experiences with TFB payments showing the proportion of years when 

payments equaled or exceeded set proportions of regular UI benefits. As with the earlier 

analysis of EB payments, the table has four dimensions of information: 1) relative 

unemployment rates (three groups in column [1]), 2) relative regular UI recipiency rates 

(three groups in column [2]), two time periods (columns [3]-[7] and [8]-[12]) and 4) five 

threshold levels for the importance of TFB payments (2, 5,10, 20 and 30 percent of 

regular UI payments). Each cell in the table shows the proportion of state year 

observations in the cell that meet the indicated threshold. 

Table 2.6 vividly illustrates the greater importance of TFB payments in the three 

years between 1992 and 2002 relative to the six earlier years between 1975 and 1984. 

There are 45 interior cells in both halves of the table, e.g. the top nine lines for all five 

columns in each period. There are also four summary cells for each column, making a 

total of 20 summary cells in each half of Table 2.6. For all 65 possible comparisons, the 

proportion for the 1992-2002 period equals or exceeds the proportion for the 1975-1984 

period.22 During the last two recessions TFB payments have been much more important 

in the states than during the preceding two recessionary periods. 

These findings in Table 2.6 provide an alternative way of describing the 

importance of TFB payments besides the proportional shares of total benefit payments as 

shown previously in column [9] of Table 1.2. Between 1977 and 1984, 37 of the 306 

state-year observations (or 0.12) met the 30 percent threshold whereas 94 of 153 (or 0.61) 

met the same threshold during the 1992-2002 period. 

While the data in Table 2.6 and in column [9] of Table 1.2 are alike in showing 

the importance of TFB benefits during the past two recessions, there is a distinction that 

should be noted. An aggregate proportion as in Table 1.2 is dominated by events in the 

largest states, whereas the proportions in Table 2.6 weight the individual states equally 

regardless of size. Thus the entries in Table 2.6 provide an indication of how pervasive 

the TFB thresholds were met throughout the set of 51 UI programs in these years. TFB 

 

22 Since proportions cannot exceed 1.0, the comparison need to allocate ties. In fact, there is but a single 

interior cell for the 1975-1984 period that equals 1.0 (the second row in column [3]). Thus there was only 

one tie. 
Table 2.6. Proportion of State-Year Observations When TFB Payments Relative to Regular UI Benefits Met the Indicated Thresholds

Relative Relative Six years between 1975 and 1984 Three years between 1992 and 2002

Unem- UI Recip- 2 Pct. 5 Pct. 10 Pct. 20 Pct. 30 Pct. 2 Pct. 5 Pct. 10 Pct. 20 Pct. 30 Pct.

ployment iency Reg. UI Reg. UI Reg. UI Reg. UI Reg. UI Reg. UI Reg. UI Reg. UI Reg. UI Reg. UI

Rate Rate Benefits Benefits Benefits Benefits Benefits Benefits Benefits Benefits Benefits Benefits

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12]

High High 0.97 0.71 0.50 0.41 0.24 1.00 1.00 1.00 1.00 0.94

Medium 1.00 0.79 0.65 0.47 0.24 1.00 1.00 1.00 0.88 0.88

Low 0.97 0.91 0.82 0.53 0.24 1.00 1.00 1.00 1.00 1.00

Medium High 0.97 0.79 0.62 0.35 0.12 1.00 1.00 1.00 0.88 0.47

Medium 0.97 0.94 0.68 0.29 0.06 1.00 1.00 1.00 0.94 0.53

Low 0.88 0.76 0.56 0.18 0.06 1.00 1.00 1.00 1.00 0.82

Low High 0.97 0.91 0.59 0.15 0.12 1.00 1.00 1.00 0.65 0.24

Medium 0.91 0.79 0.53 0.21 0.03 1.00 1.00 0.94 0.35 0.18

Low 0.68 0.53 0.26 0.00 0.00 1.00 1.00 1.00 0.65 0.47

Total High 0.97 0.80 0.57 0.30 0.16 1.00 1.00 1.00 0.84 0.55

Medium 0.96 0.84 0.62 0.32 0.11 1.00 1.00 0.98 0.73 0.53

Low 0.84 0.74 0.55 0.33 0.10 1.00 1.00 1.00 0.88 0.76

Total Total 0.92 0.79 0.58 0.29 0.12 1.00 1.00 0.99 0.82 0.61

State-Year

Observations 306 306 306 306 306 153 153 153 153 153

 Source: Data from the Office of Workforce Security, "Unemployment Insurance Financial Handbook" and annual Handbook updates.

 Each proportion shows the fraction of state-year observations that TFB payments met the designated threshold.
57 

spending has represented 20 percent or more of regular UI benefits in roughly 80 percent 

of the 153 state-year observations during the past two recessions and 30 percent or more 

of regular UI benefits in roughly 60 percent of the same 153 state-year observations. The 

high TFB expenditure shares have been widespread across the states as well as 

quantitatively large in these years. 

Considering the findings of this section and the previous section on EB, it is clear 

that TFB payments have been much more important during the past two recessions than 

earlier while the quantitative importance of EB has diminished dramatically. In effect, the 

U.S. has been using a national trigger to activate long term UI benefits during the past 

two recessions and the associated benefit payments have been fully federally financed. 

The final point to note in Table 2.6 is the association of the proportions of stateyear observations that meet the indicated TFB payment thresholds with relative 

unemployment rates and with regular UI recipiency rates. No consistent patterns are 

apparent for either sub-period. Thus, for example, the proportion of states that met the 30 

percent threshold during 1975-1984 decreased with lower recipiency rates but not during 

the 1992-2002 period. During the latter period, in fact, a larger proportion of states in the 

low recipiency rate group met the 30 percent threshold (0.76) than in the high recipiency 

rate group (0.55).23 Further analysis of this change in pattern might be warranted. With 

the data assembled for this project, additional analysis would be possible. 

The pattern of the proportions in Table 2.6 stands in contrast to the pattern 

previously observed for the EB program in Table 2.4. Throughout Table 2.4, lower 

proportions meeting the indicated EB threshold proportions were observed in low 

recipiency rate states. For the long term unemployed who exhaust regular UI benefits, the 

receipt of long term unemployment support (EB plus TFB) has been more equal across 

states arrayed by recipiency rates during the two recent recessions when EB has been 

small while TFB has been large (both long term payments measured relative to benefit 

payments from the regular UI program). 

 

23 Recall Column [12] in Table 2.6. 
58 

2.6. Summary 

This chapter has undertaken a descriptive analysis of unemployment and UI 

benefit payments at the level of DOL regions and states. Noteworthy findings were 

obtained in five broad areas. 

1) Systematic differences in regional unemployment rates were documented. 

Across the ten DOL regions unemployment rates were consistently below-average in 

Regions 1, 7 and 8 while consistently above-average unemployment rates were present in 

Regions 9 and 10. There was also considerable variation of regional unemployment rates 

around the national unemployment rate. This relative variability was most apparent in 

Region 1 and least prominent in Regions 3 and 4. 

2) The recipiency rate in the regular UI program (weekly beneficiaries as a 

proportion of CPS unemployment) is the most important determinant of costs (benefits 

per unemployed person) in the regular UI program. Correlations consistently at or above 

0.85 were reported in both regional data and in state-level data for multi-year periods. 

This close association was documented for the long 36 year period between 1967 and 

2002 and for selected sub-periods between 1971 and 2002 when the analysis was focused 

on EB and TFB costs. While replacement rates and other factors are operative in the 

states, their quantitative importance is secondary to that of regular UI recipiency rates in 

determining regular UI costs. 

3) Costs in the regular UI programs play a large role in determining costs in both 

the EB and the TFB programs. In states and regions where regular UI costs are aboveaverage there is a clear tendency for EB and TFB costs to also be above-average. 

However these associations were generally lower than those between the recipiency rate 

and the cost rate in the regular UI program. The lower correlations were observed for the 

various sub-periods when EB and TFB costs were examined. These findings held both in 

regional data and in state data. 

4) Like Chapter 1, the present chapter documented the decline of the EB program 

as a source of support for the unemployed in recessions. During the past two recessions, 

the primary UI support for the long term unemployed who exhaust regular UI has been 

provided by TFB programs. 
59 

5) This change in the importance of TFB relative to EB has been accompanied by 

a different pattern of support in the states when arrayed by unemployment rates and 

regular UI recipiency rates. The increased reliance on TFB payments has been associated 

with more equal access to TFB regardless of the unemployment rate or the regular UI 

recipiency rate in individual states. Thus in Table 2.4 the proportions of state-year 

observations meeting designated thresholds (EB payments as a proportion of regular UI 

payments) were clearly higher in states with high unemployment rates and in states with 

high regular UI recipiency rates. The explanation for the changed pattern of support 

should be pursued in future research. 
60 

Chapter 3. Alternative Triggers for the Federal-State Extended Benefit Program 

As noted in Chapter 1, unemployment Insurance (UI) can be viewed as a threetiered program. The “regular” benefits that are financed and administered by each state 

constitute the program’s first tier. During 2003 all but two states provided up to 26 weeks 

of regular UI benefits to eligible claimants (Massachusetts and Washington provided up 

to 30 weeks). In ten states, every eligible claimant may receive up to 26 weeks of 

benefits, although Illinois and New York are the only large states that have such "uniform 

potential duration" of benefits. In the other 41 states, the maximum duration of benefits is 

linked to a worker’s earnings or work experience during the base period — roughly the 

year before the claimant files for benefits. 

The second tier of the UI system is the permanent or “standby” extended benefit 

(standby EB) program that Congress established in 1970. In principle, the standby EB 

program activates automatically when unemployment rises, extending the potential 

duration of a worker’s benefits by 50 percent (up to 13 weeks). 

The third tier of the UI system is made up of the “emergency” or temporary 

federal benefit (TFB) extensions that Congress has enacted in every recession since 

1958. TFB extensions have varied greatly in their generosity, financing, and eligibility 

criteria, as described below. 

Both standby EB and TFB are a response to the longer spells of unemployment 

and the increased rates of regular benefit exhaustion that accompany a recession. Because 

standby EB is automatic, it has three possible advantages over “emergency” or TFB 

programs. First, emergency extensions are subject to a “recognition lag” — it takes time 

for Congress to recognize the onset of a recession and to enact legislation, so there may 

be a significant lag between the onset of slack labor markets and the availability of 

extended benefits. Second, emergency extensions have been politically difficult to shut 

down; as a result, they may continue to pay extended benefits beyond the time when 

labor markets have recovered and when workers can reasonably be expected to find 

reemployment. This suggests that emergency extensions may be less efficient than 

automatic extensions. Third, emergency extensions have usually been made effective on 

the date of enactment, leaving UI administrators little or no time to implement the new 
61 

program. This again suggests that emergency extensions may be inefficient relative to a 

standby program that is ready to implement. 

Although standby EB has some advantages in principle, an effective standby EB 

program requires appropriate triggers. These triggers must balance the potential 

disincentive effects of longer potential benefit durations against the presumably greater 

demand for insurance that arises during a recession. 

For three reasons, the standby EB program has activated relatively rarely since 

1981. First, Congress revised the triggers in 1981 so as to make it more difficult for EB to 

activate. This policy choice was based on the belief that the existing triggers resulted in 

an EB program with work disincentive effects that were unacceptably high. Second, 

insured unemployment rates, which are used to trigger EB, have fallen secularly over the 

last two decades. Hence, even if the triggers had not been revised in 1981, the standby 

EB program would have activated less frequently in the past 20 years than before. As a 

result, the standby EB program has fallen into relative disuse, as documented earlier in 

Chapters 1 and 2. One might argue that such an outcome is appropriate — if 

unemployment has fallen secularly, then the demand for unemployment insurance might 

also fall. However, Congress has continued to pass emergency benefit extensions in each 

recession, which suggests that, at least in the view of lawmakers, benefit extensions 

remain desirable. Third, in the last two recessions, governors have frequently ended EB 

in a state when emergency extended benefits became available. When given this option 

governors did this because EB is financed half from state trust funds and half from 

federal funds, whereas TFB or emergency programs have been financed entirely from 

federal funds. Ending EB when an emergency program commences shifts the financing 

of extended benefits from the states to the federal government. The last 20 years, then, 

have seen the displacement of the EB program by a succession of emergency extensions. 

 The main purpose of this chapter is to examine the extent to which alternative 

mechanisms for activating EB — EB triggers — would result in greater availability of 

extended benefits to UI exhaustees. The chapter begins with a brief history of extended 

benefits in the United States (Section 3.1). We then develop a model to simulate the 

impact of different EB triggers on the extent to which EB activates and pays benefits 

(Section 3.2). The results of the simulations are described in Section 3.3. 
62 

3.1. A Brief History of Extended Benefit Programs 

Table 3.1 summarizes the main features of the extended benefit programs — 

including the Federal-State Extended Benefits program (EB) — that have been enacted 

starting in 1958. The first two temporary federal benefit (TFB) extensions, Temporary 

Unemployment Compensation (TUC) and Temporary Extended Unemployment 

Compensation (TEUC), were enacted in 1958 and 1961. They were similar in that each 

lasted slightly over a year and extended the potential duration of benefits to workers who 

exhausted their regular state benefits by 50 percent, up to a maximum of 13 additional 

weeks. They differed, however, in that TUC was a voluntary program financed by 

interest-free loans to 17 participating states. TEUC, on the other hand, was mandatory 

and was financed by increases in the federal unemployment tax. 

In 1965 and 1966 Congress considered a proposal to create a permanent (or 

“standby”) extended benefits program. The proposal was modeled on the earlier 

temporary programs, in that it extended the potential duration of benefits by 50 percent, 

up to 13 weeks, for workers who exhausted their regular state benefits. However, the 

extended benefits were to “trigger” automatically in a recession — rather than requiring 

congressional discretion and action — and were to be financed half-and-half by the states 

and the federal government. (Regular UI benefits are financed out of state UI trust funds, 

whereas TEUC and most subsequent emergency extended benefits have been financed 

out of the federal UI trust fund or from federal general revenues.) 

The proposal for a permanent standby extended benefit program failed in 1966, 

but Congress enacted essentially the same proposal in 1970 as the Extended 

Unemployment Compensation Act, known as the Extended Benefits program, or EB. The 

intent of the permanent “standby” EB program was and is to extend automatically the 

potential duration of benefits when the economy slumps into recession, rather than rely 

on Congress to react and pass specific legislation. EB extends benefits to claimants who 

exhaust their regular state benefits by an amount equal to one-half of their regular benefit 

duration, up to 13 weeks. The weekly benefit amount is the same as the weekly benefit 

amount under the regular state program. Unlike regular state benefits, which are financed 
63 

Table 3.1. Extended Unemployment Benefit Programs, 1958 to Present 

Program and 

enabling 

legislation

Effective 

dates and 

extensions

Potential 

duration 

of extended 

benefits provided

Financing Notes

Temporary 

Unemployment 

Compensation 

Act, 

P.L. 85-441 

6/58 - 7/59 50% of regular 

state duration, up 

to 13 weeks 

Interest-free loans to 

17 participating 

states 

State participation voluntary 

Temporary 

Extended 

Unemployment 

Compensation 

Act 

(TEUC), P.L. 87-

6 

4/61 - 6/62 50% of regular 

state duration, up 

to 13 weeks 

Temporary increases 

in Federal 

Unemployment Tax (.4% in 

1962, .25% in 1963)

Extended 

Unemployment 

Compensation 

Act of 

1970 (EB), P.L. 

91-373, with 

major 

amendments in 

P.L. 96-364, 

P.L. 96-499, 

P.L. 97-35, 

P.L. 102-318 

8/70 to 

present 

50% of regular 

state 

duration, up to 13 

weeks 

One-half from 

Federal 

Unemployment Tax 

revenues paid to 

Extended 

Unemployment 

Compensation 

Account (EUCA); 

one-half from state 

UI reserves 

EB activated in a state by an 

insured unemployment rate (IUR) 

trigger, 8/70 to present; EB could 

be activated in all states by a 

national IUR trigger, 8/70-8/81. 

Effective 1981, EB denied to 

claimants refusing to seek or 

accept suitable work, and to 

claimants who had quit or been 

discharged. State triggers were 

made more restrictive, 8/81. 

Eligibility for EB more restrictive, 

effective 9/82. States permitted to 

adopt a total unemployment rate 

(TUR) trigger, 6/92 

Emergency 

Unemployment 

Compensation 

Act, P.L. 92-224 

and P.L. 92-329 

1/72 - 9/72, 

extended to 

3/73 

50% of regular 

state duration, up 

to 13 weeks 

Extended 

Unemployment 

Compensation 

Account (EUCA) 

State-level triggers (different from 

EB triggers) used to activate 

program 

Federal 

Supplemental 

Benefits (FSB), 

P.L. 93-572, 

P.L. 94-12, 

P.L. 94-45, 

P.L. 95-19 

1/75 - 

12/76, 

extended to 

1/78 

50% of regular 

state duration, up 

to 13 weeks (1/75-

2/75 and 5/77-

1/78); additional 

50% of regular 

state duration, up 

to 13 weeks 

provided 3/75-

4/77 (that is, up to 

26 weeks of FSB 

total) 

Repayable advances 

to EUCA from 

general revenues; 

general revenues 

after 3/77 

EB program was activated in all 

states, so total potential benefit 

duration was 65 weeks for those 

exhausting EB between 3/75 and 

4/77. State-level triggers applied 

starting 1/76. Uniform Federal 

eligibility and disqualification 

standards implemented 4/77 (P.L. 

95-19) 
64 

Table 3.1. (continued) Extended Unemployment Benefit Programs, 1958 to Present 

Program and 

enabling 

legislation 

Effective 

dates and 

extension 

Potential duration of 

extended benefits 

provided Financing Notes 

Federal 

Supplemental 

Compensation 

(FSC), 

P.L. 97-458, 

P.L. 94-424 

P.L. 98-21, 

P.L. 98-135 

9/82 - 3/83 

 extended to 

 9/83 and 

 3/85 

FSC-I (9/82-1/83): 

50% of regular state 

duration, up to 6-10 

weeks. 

 FSC-II (1/83-3/83): 

65% of regular state 

duration, up to 8-16 

weeks. 

 FSC-III (4/83-9/83): 

55% of regular state 

duration, up to 8-14 

weeks. 

 FSC-IV (10/83-3/85): 

Same as FSC-III, 

except entitlement did 

not vary once 

established. 

General revenues Potential duration varied with 

state’s EB status and separate 

FSC triggers. Except in FSC-IV, 

potential duration would vary 

when state’s EB or FSC status 

changed. FSC-I and FSC-II 

exhaustees could collect FSC-III 

benefits, but not FSC-IV 

benefits. EB eligibility criteria 

applied to all phases of FSC. 

Available regular state benefits 

and EB (if activated) had to be 

exhausted to receive FSC 

Emergency 

Unemployment 

Compensation 

Act of 1991 

(EUC), 

P.L. 102-164, 

P.L. 102-182, 

P.L. 102-244, 

P.L. 102-318, 

P.L. 103-6 

P.L. 103-152 

11/91 - 6/92, 

extended to 

7/92, 

3/93, 10/93, 

and 2/94 

EUC-I (11/91-2/92): 

lesser of 100% of 

regular benefits, or 13 

or 20 weeks. EUC-II 

(2/92-7/92): lesser of 

130% of regular 

benefits, or 26 or 33 

weeks. EUC-III (7/92-

3/93): lesser of 100% 

of regular benefits, or 

20 or 26 weeks. EUCIV (3/93-10/93): lesser 

of 60% of regular 

benefits, or 10 or 15 

weeks. 

EUC-V (10/93-2/94): 

lesser of 50% of 

regular benefits, or 7 

or 13 weeks 

EUC-I, EUC-II, and 

EUC-V from Extended 

Unemployment 

Compensation Account 

(EUCA); EUC-III and 

EUC-IV from general 

revenues 

Potential duration determined at 

time of filing for EUC, and 

depended on state’s 

classification as high- or lowunemployment. EUC 

entitlement could be increased if 

state moved from low to high 

status, or if program became 

more generous; EUC entitlement 

could not be decreased. 

Claimants exhausting benefits 

between 3/91 and 11/91 could 

receive benefits under “reachback” provisions (but no 

retroactive benefits paid). Under 

EUC-III and EUC-IV, claimants 

had the option of drawing EUC 

benefits at the start of a new 

benefit year (see text). EB 

eligibility criteria applied to all 

phases of EUC. Once EUC was 

exhausted, a claimant needed to 

regain regular UI eligibility to 

receive additional EUC. 

Temporary 

Extended 

Unemployment 

Compensation 

Act of 2002 

(TEUC), P.L. 

107-147 

3/02-12/02, 

extended to 

8/03 

50% of regular benefit 

duration, up to 13 

weeks; additional 50% 

of regular benefits, up 

to 13 weeks, in high 

unemployment states. 

Extended 

Unemployment 

Compensation Account 

(EUCA) 

Additional (“second tier”) 

extended benefits available in 

states based on the Insured 

Unemployment Rate (IUR) or 

Total Unemployment Tate 

(TUR). 
65 

entirely from state UI trust funds, EB is financed half-and-half from the federal and state 

UI trust funds. 

Originally, EB was activated nationally whenever the 13-week average of the 

national insured unemployment rate (IUR) reached 4 percent. Also, it was activated in a 

given state whenever the state’s 13-week average IUR reached 4 percent and was at least 

20 percent higher than its average in the same period of the previous two years (see Table 

3.2). [See section 3.2 below for further details on the IUR and discussion of the activation 

or “triggering” of EB.] 

States were allowed to adopt EB as early as October 1970 and were required to do 

so no later than January 1972. Even before EB became available in all states, however, 

Congress enacted the third TFB extension under the Emergency Unemployment 

Compensation Act (sometimes called "Temporary Compensation" or "TC"), which 

provided up to 13 weeks of extended benefits to claimants who either exhausted EB or 

exhausted regular benefits in states where EB was not available. Temporary 

Compensation was activated by special triggers that differed from the EB triggers. It was 

financed from Federal Unemployment Tax Act (FUTA) revenues. The program, which 

originally was set to run from January 1972 until September 1972, was extended through 

March 1973. 

During the severe recession of the mid 1970s, the national trigger activated EB in 

all states, permitting workers to receive up to 26 weeks of regular unemployment benefits 

followed by up to 13 weeks of EB. Nevertheless, the recession was so severe that 

Congress enacted the fourth TFB emergency extension in January 1975, Federal 

Supplemental Benefits (FSB), which provided up to 13 additional weeks of benefits to 

those who exhausted regular benefits and EB. In March 1975, the FSB program was 

amended to provide an additional 13 weeks (that is, up to 26 weeks in total). As a result, 

a claimant could receive up to 65 weeks of unemployment benefits for the period March 

1975 through March 1977 — 26 weeks of regular state benefits, 13 weeks of EB, and 26 

weeks of FSB. 

In April 1977, FSB was extended again (through January 1978), but the potential 

duration of FSB benefits was reduced to 13 weeks from May 1977 through the end of the 

program. This extension also added special federal disqualifications for refusal of suitable 
66 

work and for failure to actively seek work, defined suitable work for the FSB program, 

and added special penalty and repayment provisions for fraudulent acts on the part of 

both claimants and employers. This was the first time such disqualifications had been 

imposed as part of a TFB extension. 

In 1980 and 1981, Congress enacted three changes that made it more difficult for 

the EB program to activate (see Table 3.2). First, the trigger that had activated EB 

nationally was eliminated. Second, the IUR needed to activate EB on a state-specific 

basis was increased from 4 percent to 5 percent. Third, the definition of insured 

unemployment was revised so as to omit EB claimants from the calculation, reducing the 

IUR in times when EB was activated. In addition, more stringent eligibility and 

disqualifying conditions were imposed on EB claimants. These changes were part of a 

broader effort by the then-new Reagan administration and Congress to reduce 

expenditures on domestic programs. 

Nevertheless, Congress continued to enact new TFB extensions in response to 

subsequent recessions. In 1982, Congress enacted Federal Supplemental Compensation 

(FSC) as part of the Tax Equity and Fiscal Responsibility Act of 1982. FSC differed from 

previous TFB programs in that the number of weeks payable in each state varied 

according to different criteria at different times. In fact, FSC went through four “phases,” 

each of which provided different potential benefit durations for each state depending on 

the state’s labor market conditions (see Table 3.1, under “potential duration of extended 

benefits provided”). Under phase II of FSC, a UI claimant in a high unemployment state 

could be eligible for up to 55 weeks of benefits: 26 from the regular state program, 13 

from EB (assuming the state had triggered on), and 16 from FSC. Potential durations 

were somewhat shorter under phases III and IV of FSC, but the interstate differences in 

potential benefit durations were retained. 

 Congress made more effort to fine-tune benefits under FSC than under previous 

emergency extensions. First, the potential duration of benefits differed among states. This 

was new for an emergency extension. Second, the various phases of FSC led to frequent 

changes in potential benefit duration. Both of these features of FSC created 

administrative difficulties for the states. These features of FSC also suggest that Congress 
67 

saw itself as playing an active role in benefit extensions and that it did not see the 

automatic nature of the EB program as advantageous. 

The recession of 1990 resulted in passage of another TFB extension of 

unemployment benefits — Emergency Unemployment Compensation (EUC), which was 

enacted in November 1991 after several months of delay by the first Bush administration, 

which vetoed earlier emergency extensions. EUC was the most complicated emergency 

benefit extension to date: it went through five phases, provided different potential 

durations across states at a given time, and had different potential durations within a state 

over time (see Table 3.1 and Storey and Falk (1993)). The potential duration of benefits 

within a state could change either by discretion of Congress (that is, as the program 

moved from one phase to another), or because a state changed its classification between 

high unemployment and low unemployment. By all accounts, EUC was very difficult for 

the states to administer. In Pennsylvania, for example, the potential duration of benefits 

changed nine times between November 1991, when EUC became effective, and February 

1994, when phase V of EUC terminated. Five of these changes resulted from enactment 

of EUC or a movement from one phase to another, and four resulted because 

Pennsylvania was reclassified from a “low unemployment” state to a “high 

unemployment” state or vice versa. At one point, Congress let EUC lapse, but 

subsequently restored it, and during the gap, state administrators and UI claimants were 

left uncertain about the status of the program and their benefits. 

The most recent emergency TFB extension of unemployment benefits, Temporary 

Extended Unemployment Compensation (TEUC), was enacted and became effective in 

March 2002, when it became evident that the labor market would not recover quickly 

following the terrorist attacks of September 11, 2001. In all states, TEUC extended 

exhaustees’ benefits by 50 percent of their regular benefit duration, up to a maximum of 

13 weeks. Also, TEUC provided up to an additional 13 weeks of benefits in states where 

EB had triggered on or the Insured Unemployment Rate (IUR) was at least 4 percent and 

at least 20 percent higher than its average in the same period of the previous two years. A 

total of 12 states paid these additional benefits under TEUC at some point, although by 

December 2002, only three (Alaska, Oregon, and Washington) were continuing to so. 
68 

TEUC was financed entirely from the federal Extended Unemployment Compensation 

Account (EUCA). 

The original TEUC program expired at the end of 2002, but Congress extended it 

in January and then in May of 2003 so that it presently expires at the end of December 

2003. As a result, workers with remaining TEUC balances at the end of 2002 could 

continue to draw emergency extended benefits. Also, new exhaustees of regular benefits 

in 2003 could claim TEUC through the last week of December 2003 and could draw 

TEUC benefits through the end of March 2004. However, neither TEUC extension of 

2003 provided additional benefits to workers who exhausted their TEUC benefits in 

2002. 

Currently, an important question for extended benefit policy is whether the EB 

program will be revived so as to be a significant source of extended benefits. Concerns 

about the EB program arose during the recession of the early 1990s, when EB activated 

in only 10 states and failed to activate in several states that experienced a severe 

recession (including California, New York, and Pennsylvania). During the recession of 

2001-2002, EB activated in only five states — Alaska, Idaho, North Carolina, Oregon, 

and Washington. Accordingly, the next section examines how various alternative 

“triggers” for the EB program would perform. 

3.2. Simulating the Impact of Alternative EB Triggers 

As noted in this chapter’s introduction, the effectiveness of the EB program 

depends on the effectiveness of the mechanism that is used to activate it. This section and 

the next examine how various alternative “triggers” for the EB program would perform. 

We begin with a brief general discussion of the choices that must be made in selecting an 

EB trigger (subsection 3.2.1) and then summarize the triggers that we examine using 

simulation methods (subsection 3.2.2). In subsections 3.2.3 and 3.2.4, we describe the 

outcomes examined and the data used in the simulations. Finally, we examine the impact 

of 21 alternative triggers on 5 outcomes over 5 different time periods (Section 3.3). 
69 

3.2.1. Choice of a trigger 

In general, selecting a trigger for EB entails four choices. First, what economic 

indicator is to be used as a gauge of the health of the labor market and of the need for 

extended benefits? Second, what level of the selected economic indicator is to activate 

the EB program? Third, should EB be activated whenever the selected indicator reaches a 

given level, or should it be necessary (in addition) for the indicator to show that labor 

market conditions have worsened by some specified amount? Finally, should EB be 

activated nationally, regionally, at the state level, or at the sub-state level? We discuss 

these issues in turn. 

When the EB program was enacted in 1970, the only unemployment indicator that 

was available for each state was the IUR, making it the natural indicator of labor market 

health on which to base the EB trigger. The IUR is defined as average insured 

unemployment over the current week plus the preceding 12 weeks, divided by covered 

employment in the the first four of the last six completed quarters. (Covered employment, 

in turn, is the number of jobs covered by State UI laws, which comes from ES 202 

administrative records.) This is an unusual economic indicator because its numerator is a 

count of UI claims (specifically, the average number of weeks of benefits claimed over 

the past 13 weeks), whereas its denominator is a count of the number of jobs for which 

UI payroll taxes were paid in the first four of the last six completed quarters. The 

advantage of the IUR is that it can be calculated from UI administrative data; hence, it is 

both closely tied to the current status of the UI program and readily available. The 

various IUR-based triggers that have been used over the history of the EB program and 

the various emergency extended benefits programs are summarized in Table 3.2. 

In two instances, an “adjusted” IUR has been used to trigger emergency extended 

benefits (see Table 3.2). A problem with the conventional IUR is that its numerator 

includes only continuing UI claims. As a result, the IUR excludes UI exhaustees and can 

actually fall over the course of a long recession as workers exhaust their benefits and are 

unable to establish a subsequent valid claim for UI. This is the opposite of what a 
70 

Table 3.2. Triggers Used to Activate Extended Benefits and Temporary Federal Benefits 

Trigger Description When in effect 

 

4% IUR with 20% increase State Insured Unemployment Rate (IUR) of at least 

4%. Also, state IUR must be at least 20% higher than 

its average in same period of the previous two years. 

Under TEUC, used to trigger emergency extended 

benefits beyond the basic 13 weeks. 

EB, 8/70 to 8/81; 

TEUC, 3/02 to 8/03 

 

5% IUR with 20% increase State IUR of at least 5%; must be at least 20% higher 

than the average in same period of the previous two 

years. 

EB, 8/81 to present 

 

4.5% national IUR National IUR of at least 4.5% (no increase specified) EB, 8/70 to 8/81 

5% IUR State IUR of at least 5% (no increase specified) EB, 1976 to 8/81 

(state option) 

6% IUR State IUR of at least 6% (no increase specified) EB, 8/81 to present 

(state option) 

6.5% TUR with 10% increase State Total Unemployment Rate (TUR) of at least 

6.5%; must also be at least 10% higher than the same 

period in either of previous two years. 

EB, 6/92 to present 

(state option) 

 

6.5% Adjusted IUR State Adjusted IUR of at least 6.5% (no increase 

specified); used to trigger emergency extended 

benefits 

EUC (1/72-3/73) 

 

5% Adjusted IUR State Adjusted IUR of at least 5% (no increase 

specified); used to trigger weeks of emergency 

extended benefits above the basic 13 weeks. 

EUC (11/91-2/94) 

 

9% TUR State Total Unemployment Rate (TUR) of at least 

9% (no increase specified); used to trigger weeks of 

emergency extended benefits above the basic 13 

weeks. 

EUC (11/91-2/94) 

Note: The insured unemployment rate (IUR) is available weekly and is usually thought of as 13-week 

moving average because it is constructed as the average number of UI claims over the preceding 13 weeks 

divided by covered employment (the number of jobs covered by State UI laws). This averaging makes it 

less likely that a state will rapidly cycle on and off EB within a brief period. The IUR is not seasonally 

adjusted. The adjusted IUR adds regular UI exhaustions from the previous three months (or one-quarter of 

the previous year) to the numerator of the IUR. The total unemployment rate (TUR) is available monthly 

and is based on the Current Population Survey definition of the unemployment rate. The TUR-based trigger 

for the EB program uses a 3-month moving average of the seasonally adjusted TUR in determining whether 

to activate EB. The TUR-based trigger for the EUC program used a 6-month moving average of the TUR 

that was not seasonally adjusted as a method of determining high unemployment status. 
71 

reasonable measure of labor market health would do. The “adjusted” IUR handles this 

problem by adding to the numerator of the IUR the number of regular UI exhaustees from 

the previous three months.24 (An alternative is to add the one-quarter of the exhaustees 

from the previous year.) As noted in Table 3.2, an adjusted IUR was used to trigger 

temporary federal benefits in a state during the Emergency Unemployment Compensation 

program of 1972-73, and to trigger a higher number of weeks of temporary federal 

benefits in a state during the EUC program of 1991-1994. 

Another trigger that has been used since 1992 is the so-called Total 

Unemployment Rate (TUR). In 1992, the Bureau of Labor Statistics began publishing 

seasonally adjusted estimates of the unemployment rate for each state. This is simply the 

unemployment rate as conventionally defined in the Current Population Survey (CPS); 

that is, the percentage of the labor force that is without a job but is able, available, 

searching for a job. In the UI literature, the CPS unemployment rate has come to be 

called the Total Unemployment Rate (TUR), a reference to the fact that its numerator 

includes all unemployed workers, not just those who are receiving UI benefits. The TUR 

can be taken directly from the CPS for the largest 11 states because the CPS sample is 

large enough to yield directly reliable estimates of the unemployment rate for these states. 

For the smaller states, regressions are used to combine CPS data are with UI 

administrative and other data to arrive at a monthly estimate of the state unemployment 

rate. The state-level TUR is a measure of each state’s labor market conditions that is less 

closely tied to the UI program than is the IUR. As such, it offers a potentially attractive 

alternative measure of labor market conditions. As noted in Table 3.2, when used as a 

trigger for the EB program, the TUR has been seasonally adjusted. However, under EUC 

(1991-1994), a TUR was used that was not seasonally adjusted. 

At least two other indicators have been suggested as possible bases of triggers 

(Advisory Council on Unemployment Compensation (1994)) — a state’s UI exhaustion 

rate and the deviation from trend employment in a state. However, triggers based on these 

indicators have not been investigated to date, and we do not do so here. 

 

24 For the simulations reported below, we constructed an exhaustion factor for each quarter equal to the 

ratio of exhaustees in a given quarter to covered employment in the same quarter. We then added this to the 

IUR of each quarter with a one-quarter lag. This follows the procedure developed by Corson and 

Rangajaran (1993. p. 10). 
72 

The second choice — the level at which to set the selected trigger — depends 

largely on the level of desired expenditures on EB and the available funding for those 

expenditures. (If the theoretical grounds for extending benefits were firmer, then other 

considerations could come into play — see below.) Nevertheless, a problem that arises in 

selecting a level for triggering EB is that a state may have chronically high 

unemployment, and it is unclear that extending benefits all (or most of) the time in such a 

state would be sound policy. (Alaska and Puerto Rico, for example, have had chronically 

high unemployment in recent years.) EB is intended to alleviate cyclical unemployment, 

so it should in principle trigger only when there is evidence that labor market conditions 

in a state have deteriorated. 

Ensuring that EB triggers only during a cyclical downturn raises the third choice 

— whether to require the trigger to imply some specified deterioration in labor market 

conditions. The state IUR trigger that has existed since 1970 has required that, for EB to 

activate, a state’s 13-week average IUR must be at least 20 percent higher in the current 

week than it was in the same week of the previous two years (averaged). Somewhat 

similarly, the TUR trigger that has been a state option since 1992 has required that a 

state’s TUR must be at least 10 percent higher in the current month than it was in the 

same month during one of previous two years. These “increase” requirements (sometimes 

referred to as thresholds) arguably distinguish between states in which unemployment is 

chronically high and states in which there has been a decline in labor market conditions 

that merits an extension of UI benefits on cyclical grounds. 

The fourth choice pertains to the geographic level at which to trigger EB. The 

original EB program included both national and state triggers. The national trigger was 

dropped in 1981, mainly in response to concerns that it was excessively costly, and since 

then EB has been triggered only on a state-specific basis. However, some have argued 

that EB should be triggered even more locally than the state — that is, at the sub-state 

level — so as to target pockets of cyclical unemployment. The only detailed investigation 

of this issue (Czajka, Long, and Nicholson (1989)) concluded that triggering EB at the 

sub-state level would create substantial administrative costs. Also, there are lingering 

concerns about the validity of estimates of labor market health at the sub-state level 
73 

(Advisory Council on Unemployment Compensation (1994)). Absent clear advantages of 

triggering EB at the sub-state level, there has been little impetus to adopt such a system. 

Ultimately, the choice of a trigger for EB depends on the amount of EB that is 

considered desirable, and on this there is much debate. The theoretical literature on 

optimal unemployment insurance has burgeoned in recent years (see Karni (1999) for a 

review of the literature through the late 1990s). Although the economic models 

developed in this literature provide a clear rationale for unemployment insurance, it is 

equally clear that the literature has yet to produce a consensus on how a socially optimal 

UI program would be structured. The optimal replacement rate and the potential duration 

of benefits implied by various economic models are sensitive to a variety of assumptions 

that have rarely been subjected to detailed examination or justification. Moreover, to our 

knowledge, no one has yet examined whether and how the potential duration of benefits 

should vary over the business cycle. 

If strong theoretical and empirical findings on optimal UI did exist, it might be 

possible to argue for a particular EB trigger by a two-step process. First, one would 

derive an optimal duration of benefits and an optimal replacement rate, either or both of 

which might vary with economic conditions. Then one could choose an EB trigger that 

came close to producing the optimal duration over the cycle. The process would be to 

argue from an optimal potential duration of benefits to a trigger that would be consistent 

with that potential duration. 

In the absence of strong findings on optimal UI, the choice of an EB trigger is 

likely to depend on political and impressionistic judgments of what is a “desirable” level 

of spending on EB. As will be seen below, the EB triggers that have been used in the past 

can be adjusted to yield virtually any level of UI program expenditures. As a result, the 

process becomes one of arguing from a desirable level of program expenditures to an EB 

trigger that is consistent with that level of spending. This raises the possibility that, in 

times of tightly constrained budgets, one could argue that spending on EB should be zero, 

and the EB trigger should be set so that the program never activates. In fact, in the early 

1980s, EB triggers were made more stringent as a cost-cutting expedient, and the 

program has steadily declined since. 
74 

3.2.2. Triggers simulated 

As noted, Table 3.2 summarizes the various “triggers” that have been used to 

activate EB. All are based on one of three labor market indicators — the IUR, the 

adjusted IUR, or the TUR. In the simulations below, we examine the performance of 

various triggers that, similarly, are based on the above three indicators. 

Specifically, we examine eight IUR-based triggers, four of which do not require a 

deterioration of the IUR (that is, they require only an IUR level of 3%, 4%, 5%, and 6%), 

and four of which do require a deterioration of the IUR (1.5% with a 20% increase, 3% 

with a 20% increase, 4% with a 20% increase, and 5% with a 20% increase). We examine 

four adjusted-IUR-based triggers, two of which do not require a deterioration of the 

adjusted-IUR (adjusted IUR levels of 4% and 5%), and two of which do require a 

deterioration of the IUR (5% with a 20% increase and 5% with a 20% increase). Finally, 

we examine nine TUR-based triggers, three of which do not require a deterioration of the 

TUR (TUR levels of 6.5%, 7.5%, and 8.5%), and six of which do require a deterioration 

of the IUR (6.5% with either a 10% or a 20% increase, 7.5% with either a 10% or a 20% 

increase, and 8.5% with either a 10% or a 20% increase). 

3.2.3. Outcomes examined 

 The impacts of the above triggers on five outcomes are of interest. 

1. The percentage of time EB is activated in the 50 states and the District of 

Columbia. This outcome is constructed by calculating, for each state, the number of 

months EB is active during the time period in question, then dividing by the total number 

of months in question. A simple average of the resulting proportions is then calculated for 

the 50 states and the District of Columbia. 

2. The number of states in which EB triggers on at least once during the time 

period in question. This outcome should be self-explanatory. 

3. The percentage of unemployed workers who reside in states where EB is 

activated. For each month, we divide the number of unemployed workers residing in 

states where EB is active by the total number of unemployed workers in all states. An 
75 

average of the resulting monthly proportions, calculated for various time periods of 

interest, gives the desired outcome. 

4. The percentage of regular UI exhaustees who reside in states where EB is 

activated. This outcome is obtained by calculating, for each month, the number of final 

payments made to regular state UI claimants who reside in states where EB is active. We 

then divide by the total number of final payments made to regular state UI claimants in 

all states. An average of the resulting monthly proportions is calculated for various time 

periods of interest. 

5. The benefits paid to UI claimants as a result of EB. These estimates are more 

tenuous than the other outcomes reported because they involve making a series of 

assumptions. Specifically, in a state where EB is activated, EB benefits paid (ebben) are 

the product of three factors: (1) the number of regular UI claimants who exhaust their 

benefits, claim, and receive EB (ebrec), (2) the average EB weekly benefit amount 

(ebwba), and (3) the average duration in weeks of an EB spell (ebdur): 

ebben = ebrec • ebwba • ebdur 

To simulate ebben, assumptions are required about each of the arguments on the 

right-hand-side of this equation. The assumptions we make are intended to yield an 

upper-bound estimate of EB benefits paid. To estimate the number of EB recipients, we 

assume that all regular claimants who receive a final payment during a period when EB is 

activated move onto EB. In addition, we assume that regular claimants who receive a 

final payment during the two months before EB becomes active claim and receive EB. 

This latter assumption is based on the observation that, in states where EB has activated, 

the number of new EB recipients in the first month of the program has equaled roughly 

the sum of final payments during the current month plus the preceding two months. 

The average weekly benefit amount of EB recipients (ebwba) cannot be observed 

during periods when the EB program was not active, so it must be estimated. We do so as 

follows. First, we calculate, for each state, the ratio of observed ebwba to regular WBA 

for each month in which EB was active over the period 1978 to 2002 period. We then 

average these ratios (within state) to obtain a mean ratio of ebwba to regular WBA for 

each state. This constant is used to simulate the ebwba that would obtain in each month 
76 

for that state — the observed regular WBA for month t is multiplied by the state-specific 

mean ratio to obtain a simulated ebwba for month t. 

This simulated ebwba can be used consistently to calculate ebben for every month 

whether or not ebwba is actually observed in that month. We do this in one set of 

simulations reported below. Alternatively, it is possible to substitute the observed ebwba

for the simulated ebwba in months where ebwba is observed. This yields a second set of 

simulations, also reported below (in parentheses in Tables 3.3 and 3.8). 

 Finally, to simulate ebdur, we assume that every EB recipient receives the 

maximum 13 weeks of EB. This is clearly an overestimate of the average duration of EB 

spells — it is not even the case that all EB recipients are eligible for 13 weeks of benefits. 

However, we make this assumption in order to obtain an upper-bound estimate of the cost 

of the various triggers examined. 

3.2.4. Data and approach used in the simulations 

The goal of the simulation is to estimate the impacts of various EB triggers on the 

outcomes described above. Accordingly, the variables used in the simulation are of two 

kinds — those used to construct triggers and those used to measure outcomes. What 

follows is a brief description of the variables used and their sources. 

Monthly data on the number of employed workers and the number of unemployed 

workers in each state from January 1978 through June 2002 were obtained from the 

Bureau of Labor Statistics. These data have been used both to construct the total 

unemployment rate (TUR, one of the triggers examined, which equals unemployment 

divided by the sum of employment and unemployment) and to gauge the impact of 

various triggers on the percentage of unemployment in states where EB had triggered on. 

For the regular UI program, weekly data on the insured unemployment rate (IUR) 

and quarterly data on covered employment in each state from January 1987 through 

October 2002 were obtained from U.S. Department of Labor, Employment and Training 

Administration (ETA) 539 reports (U.S. Department of Labor (2000)). The IUR is the 

basis of one of the triggers examined, and we converted the weekly IUR data to monthly 

observations for comparability with other data used in the simulations. We used the 

covered employment data in computing the adjusted IUR (that is, the IUR adjusted for UI 
77 

exhaustions) by dividing quarterly exhaustions by quarterly covered employment. This 

“exhaustion factor” was then added to the IUR to obtain the adjusted IUR. 

Annual data on the average regular state weekly benefit amount (WBA) and the 

average EB weekly benefit amount (ebwba, for years in which EB was in effect in a 

state) in each state from 1978 through 2002 were obtained from ETA 5159 reports (U.S. 

Department of Labor (2000)). These data have been used in constructing estimates of the 

extended benefits paid (that is, EB program expenditures) under various triggers, as 

described in Section 3.2.2.25 

For the regular UI program, monthly data on the number of final payments from 

February 1974 though September 2002 were obtained from ETA 5159 reports (U.S. 

Department of Labor (2000)). We use final payments (a measure of regular benefit 

exhaustion) to estimate the percentage of exhaustees in states where EB is activated, to 

construct the adjusted IUR (by calculating an exhaustion factor equal to exhaustees 

during the last three months divided by covered employment, as described above), and to 

construct estimates of extended benefits paid under various triggers (exhaustees are used 

to estimate of the number of EB recipients — ebrec — see Section 2.3 above). 

The approach used in the simulations is conceptually straightforward. For each 

state and each month, we compute a zero-one indicator of whether EB would be activated 

in that state and month, based on a selected trigger. These indicators then allow us to 

tabulate the number of states in which EB is active, the percentage of time EB is 

activated over a given period of time, the percentage of unemployed workers in states 

where EB is active, and so on, for each of the outcome of interest. The next section 

describes the results of this exercise. 

3.3. Results of the Simulations 

Table 3.3 summarizes the simulated impacts of alternative EB triggers on the five 

outcomes described above for the entire period for which data on each trigger are 

available. (Note that the period considered for the TUR-based triggers is 1978-2002, 

 

25 We are grateful to Thomas Stengle of OWS for access to machine readable files of the data in the ETA 

539 and ETA 5159 reports. 
78 

Table 3.3. Simulated Impacts of Alternative TUR-based EB Triggers (1978-2000) and Alternative 

IUR- and Adjusted-IUR-based EB Triggers (1987-2002) 

Number of 

states 

triggering on 

at least once 

Percentage 

of time EB is 

activated 

Percentage of 

unemployed in 

states where 

EB 

is activated 

Percentage of 

exhaustees 

in states where 

EB is activated 

Estimated 

benefits paid 

(in millions 

of $) 

TUR-based triggers (1978-2002) [1] [2] [3] [4] [5] 

 6.5% without increase 52,010 49 35.66 44.46 44.89 (45,799) 

 6.5% with 10% increase 26,127 40 15.47 17.65 18.27 (22,700) 

 6.5% with 20% increase 27,710 33 11.17 13.36 14.09 (18,085) 

 7.5% without increase 36,311 23 21.73 27.77 28.17 (31,473) 

 7.5% with 10% increase 22,112 17 11.10 14.17 14.86 (18,891) 

 7.5% with 20% increase 17,660 11 8.25 10.92 11.54 (15,167) 

 8.5% without increase 22,966 8 12.59 16.13 16.29 (19,541) 

 8.5% with 10% increase 16,557 3 7.39 9.78 10.36 (13,776) 

 8.5% with 20% increase 13,552 2 5.69 7.83 8.35 (11,342) 

IUR-based triggers (1987-2002) 

 1.5% with 20% increase 16,306 51 14.06 15.29 16.85 (16,099) 

 3% without increase 30,725 41 19.57 24.09 28.88 (30,325) 

 3% with 20% increase 10,884 35 5.30 7.06 8.47 (10,677) 

 4% without increase 12,256 25 6.46 6.83 8.70 (11,911) 

 4% with 20% increase 5,985 20 1.94 2.92 3.70 (5,807) 

 5% without increase 2,226 15 1.99 0.73 1.17 (2,082) 

 5% with 20% increase 1,231 12 0.50 0.38 0.47 (1,158) 

 6% without increase 552 4 0.90 0.15 0.38 (524) 

Adjusted IUR-based triggers (1987-2002) 

 4% without increase 25,848 35 15.35 19.65 23.98 (25,346) 

 4% with 20% increase 10,764 31 4.96 7.28 8.67 (10,564) 

 5% without increase 12,185 21 6.47 7.21 9.17 (11,818) 

 5% with 20% increase 6,026 19 2.16 3.27 3.92 (5,885) 
79 

whereas for the IUR- and adjusted IUR-based triggers the period is 1987-2002.) The 

simulations suggest three main points. First, and most obviously, more stringent triggers 

result in EB activating in fewer states, activating less often, covering fewer unemployed 

workers and UI exhaustees, and paying fewer benefits. In particular, requiring 10% or 

20% increases in the TUR, IUR, or adjusted IUR dramatically reduces the availability of 

EB. For example, removing the 20% increase requirement from a 3% IUR trigger would 

more than triple the time EB was available during the 1987-2000 period. However, 

similar outcomes can be obtained by raising the TUR or IUR level while reducing the 

increase in the TUR or IUR required to trigger EB. For example, the outcomes resulting 

from TUR triggers of 6.5% with a 20% increase, 7.5% with a 10% increase, and 8.5% 

with no increase are broadly similar. 

Second, all of the triggers examined tend to “target” unemployed workers and 

exhaustees. This can be seen by comparing column [2] with columns [3] and [4]. In every 

case, the percentage of unemployed and exhaustees in states where EB is activated 

exceeds the percentage of time EB is activated. 

Third, the outcomes shown in columns [2], [3], and [4] (percentage of time EB is 

activated, percentage of employment in states where EB is activated, and percentage of 

exhaustees in states where EB is activated) are highly correlated. However, these 

outcomes appear to be more highly correlated under the TUR-based triggers than under 

the IUR- and adjusted IUR-based triggers. In particular, the gap between the percentage 

of unemployed and the percentage of exhaustees in states where EB is activated (columns 

[3] and [4]) is somewhat greater under IUR-based triggers than under TUR-based 

triggers. That is, the IUR-based triggers tend to result in somewhat broader coverage of 

exhaustees relative to unemployed workers than the TUR-based triggers. This suggests 

that, if the goal of EB is to extend the benefits available to workers who have exhausted 

their regular state benefits, the IUR-based triggers are more target-efficient. 

Tables 3.4 through 3.8 each display one of the outcomes of the various triggers 

for specific time periods. Table 3.4 focuses on the number of states that trigger on under 

the various triggers, Table 3.5 focuses on the percentage of time EB is activated, and so 

on. Five time periods are analyzed in each table, although only three (1990-94, 1995-99, 

and 2000-02) are common to all three types of triggers (TUR-based, IUR-based, and 
80 

Table 3.4. Number of States Triggering On at Least Once under Alternative EB Triggers, 

Selected Time Periods 

TUR-based trigger 1980-84 1985-89 1990-94 1995-99 2000-02 

 6.5% without increase 49 35 39 13 7 

 6.5% with 10% increase 49 13 37 3 7 

 6.5% with 20% increase 46 7 34 1 5 

 7.5% without increase 44 26 26 6 1 

 7.5% with 10% increase 44 10 24 3 1 

 7.5% with 20% increase 41 5 21 1 1 

 8.5% without increase 40 20 12 3 0 

 8.5% with 10% increase 40 9 12 3 0 

 8.5% with 20% increase 37 5 12 1 0 

IUR-based trigger 1987-89 1990-94 1995-99 2000-02 

 1.5% with 20% increase 8 47 5 48 

 3% without increase 30 37 21 27 

 3% with 20% increase 1 33 1 25 

 4% without increase 14 21 10 13 

 4% with 20% increase 0 18 0 11 

 5% without increase 6 12 2 4 

 5% with 20% increase 0 9 0 3 

 6% without increase 2 3 1 1 

Adjusted IUR-based trigger 1987-89 1990-94 1995-99 2000-02 

 4% without increase 19 32 18 19 

 4% with 20% increase 2 31 2 19 

 5% without increase 9 19 10 11 

 5% with 20% increase 1 18 1 10 
81 

Table 3.5. Percentage of Time EB Activated under Alternative EB Triggers, Selected Time Periods 

TUR-based triggers 1980-84 1985-89 1990-94 1995-99 2000-02 

 6.5% without increase 70.22 40.92 41.47 8.86 2.88 

 6.5% with 10% increase 31.72 5.03 20.95 0.82 2.16 

 6.5% with 20% increase 24.06 2.12 15.16 0.29 1.31 

 7.5% without increase 52.72 26.60 18.73 4.09 0.33 

 7.5% with 10% increase 27.84 3.82 10.95 0.75 0.33 

 7.5% with 20% increase 21.74 1.63 7.71 0.29 0.33 

 8.5% without increase 36.55 15.52 6.83 1.08 0.00 

 8.5% with 10% increase 22.90 2.91 4.77 0.33 0.00 

 8.5% with 20% increase 18.14 1.28 3.60 0.07 0.00 

IUR-based triggers 1987-89 1990-94 1995-99 2000-02 

 1.5% with 20% increase 1.88 23.86 0.49 31.37 

 3% without increase 16.05 29.77 14.12 13.79 

 3% with 20% increase 0.08 11.08 0.03 8.43 

 4% without increase 4.96 11.21 3.89 3.73 

 4% with 20% increase 0.00 4.58 0.00 2.09 

 5% without increase 1.83 3.07 1.31 1.37 

 5% with 20% increase 0.00 1.14 0.00 0.46 

 6% without increase 0.86 1.34 0.71 0.46 

Adjusted IUR-based triggers 1987-89 1990-94 1995-99 2000-02 

 4% without increase 10.37 25.47 10.26 10.70 

 4% with 20% increase 0.33 10.49 0.23 7.06 

 5% without increase 3.98 11.49 4.00 4.07 

 5% with 20% increase 0.16 4.90 0.20 2.22 
82 

Table 3.6. Percentage of Unemployed in States on EB under Alternative EB Triggers, 

Selected Time Periods 

TUR-based trigger 1980-84 1985-89 1990-94 1995-99 2000-02 

 6.5% without increase 84.16 53.91 59.51 12.58 1.57 

 6.5% with 10% increase 38.65 5.97 32.83 0.28 1.44 

 6.5% with 20% increase 30.12 3.44 25.12 0.14 1.32 

 7.5% without increase 69.15 32.12 32.79 6.32 0.29 

 7.5% with 10% increase 36.56 4.85 21.78 0.24 0.29 

 7.5% with 20% increase 28.72 3.11 16.54 0.14 0.29 

 8.5% without increase 50.62 18.37 15.18 0.22 0.00 

 8.5% with 10% increase 31.30 3.97 10.52 0.08 0.00 

 8.5% with 20% increase 27.71 2.66 8.43 0.03 0.00 

IUR-based trigger 1987-89 1990-94 1995-99 2000-02 

 1.5% with 20% increase 0.93 30.28 0.31 40.83 

 3% without increase 13.69 41.06 20.70 15.90 

 3% with 20% increase 0.01 17.27 0.01 13.19 

 4% without increase 2.77 15.73 3.60 3.06 

 4% with 20% increase 0.00 8.48 0.00 2.79 

 5% without increase 0.49 1.59 0.24 0.63 

 5% with 20% increase 0.00 0.68 0.00 0.48 

 6% without increase 0.14 0.25 0.12 0.07 

Adjusted IUR-based trigger 1987-89 1990-94 1995-9 2000-02 

 4% without increase 7.11 37.28 15.23 15.05 

 4% with 20% increase 0.09 17.56 0.09 13.76 

 5% without increase 1.89 17.31 3.42 3.70 

 5% with 20% increase 0.02 9.33 0.03 3.41 
83 

Table 3.7. Percentage of Exhaustees in States on EB under Alternative EB Triggers, 

Selected Time Periods 

TUR-based trigger 1980-84 1985-89 1990-94 1995-99 2000-02 

 6.5% without increase 86.34 52.27 63.32 14.25 2.43 

 6.5% with 10% increase 41.79 6.54 37.30 0.20 2.20 

 6.5% with 20% increase 33.11 3.83 29.65 0.07 2.00 

 7.5% without increase 70.90 30.11 36.76 7.50 0.48 

 7.5% with 10% increase 39.67 5.71 25.20 0.19 0.48 

 7.5% with 20% increase 31.64 3.57 19.83 0.07 0.48 

 8.5% without increase 52.07 17.36 17.78 0.26 0.00 

 8.5% with 10% increase 34.25 4.90 12.72 0.07 0.00 

 8.5% with 20% increase 27.61 3.17 10.38 0.01 0.00 

IUR-based trigger 1987-89 1990-94 1995-99 2000-02 

 1.5% with 20% increase 1.41 34.63 0.28 49.97 

 3% without increase 15.73 50.04 26.38 22.72 

 3% with 20% increase 0.02 21.94 0.01 19.80 

 4% without increase 3.67 20.55 5.01 6.24 

 4% with 20% increase 0.00 11.36 0.00 5.67 

 5% without increase 0.97 2.49 0.59 1.00 

 5% with 20% increase 0.00 1.03 0.00 0.66 

 6% without increase 0.40 0.60 0.33 0.20 

Adjusted IUR-based trigger 1987-89 1990-94 1995-99 2000-02 

 4% without increase 8.66 46.13 19.62 20.98 

 4% with 20% increase 0.16 22.09 0.06 19.38 

 5% without increase 2.82 22.38 4.96 5.02 

 5% with 20% increase 0.03 12.28 0.01 4.38 
84 

Table 3.8. Estimated Benefits Paid under Alternative EB Triggers, Selected Time Periods 

(in millions of $) 

TUR-based trigger 1980-84 1985-89 1990-94 1995-99 2000-02 

 6.5% without increase 20,788 9,175 15,833 2,629 653 

(16,082) (7,711) (15,630) (2,672) (643) 

 6.5% with 10% increase 10,543 1,000 9,396 42 598 

(8,138) (930) (9,247) (42) (596) 

 6.5% with 20% increase 8,416 547 7,531 10 561 

(6,606) (549) (7,388) (10) (561) 

 7.5% without increase 17,970 5,533 9,633 1,263 188 

(13,976) (4,845) (9,454) (1,263) (188) 

 7.5% with 10% increase 10,188 916 6,715 42 188 

(7,854) (909) (6,547) (42) (188) 

 7.5% with 20% increase 8,201 516 5,379 10 188 

(6,440) (519) (5,242) (10) (188) 

 8.5% without increase 14,105 3,085 4,784 77 0 

(11,038) (2,870) (4,5780 78 (0) 

 8.5% with 10% increase 9,393 833 3,656 27 0 

(7,189) (825) (3,451) (28) (0) 

 8.5% with 20% increase 7,551 505 3,107 5 0 

(5,880) (507) (2,909) (5) (0) 

IUR-based trigger 1987-89 1990-94 1995-99 2000-02 

 1.5% with 20% increase 125 8,498 63 7,619 

(125) (8,292) 63 (7,619) 

 3% without increase 1,851 15,723 7,980 5,170 

(1,931) (15,438) (7,828) (5,128) 

 3% with 20% increase 6 6,579 3 4,297 

(6) (6,372) (3) (4,297) 

 4% without increase 470 7,952 1,940 1,894 

(467) (7,707) (1,884) (1,852) 

 4% with 20% increase 0 4,264 0 1,721 

(0) (4,086) (0) (1,721) 

 5% without increase 137 1,488 231 371 

(132) (1,385) (228) (337) 

 5% with 20% increase 0 554 0 254 

(0) (481) (0) (254) 

 6% without increase 64 276 128 84 

(63) (272) (131) (59) 

Adjusted IUR-based trigger 1987-89 1990-94 1995-99 2000-02 

 4% without increase 1,287 14,249 5,827 4,485 

(1,236) (13,959) (5,709) (4,443) 

 4% with 20% increase 41 6,699 49 3,976 

(41) (6,498) (49) (3,976) 

 5% without increase 420 8,586 1,632 1,546 

(398) (8,356) (1,561) (1,503) 

 5% with 20% increase 4 4,646 0.5 1,376 

(4) (4,505) (0.5) (1,376) 
85 

adjusted IUR-based). The time periods are chosen to show how the triggers perform 

during slack labor markets (1980-84, 1990-94, and 2000-02) and periods of economic 

expansion (1985-89 and 1995-99). 

Four main points are evident in Tables 3.4 through 3.8. First, under most of the 

triggers, EB was less likely to activate in more recent recessions that in earlier recessions. 

In the case of the TUR-based triggers, this reflects the secular improvement in labor 

markets (that is, the decline in the CPS unemployment rate) that has occurred since the 

early 1980s. In the case of the IUR- and adjusted IUR-based triggers, this reflects both 

the secular improvement in labor markets and reductions in insured unemployment that 

have occurred due to falling UI participation (see Charts II-1 and II-2 in Vroman (2002)). 

Second, a corollary of the first point is that, even if Congress had not raised the 

IUR trigger from 4% to 5% (both with a 20% increase requirement) in 1981, EB would 

have activated relatively rarely in the recession of the early 1990s and during the current 

recession. This can be seen by examining the rows for the “4% with 20% increase” IUR 

trigger in Tables 3.4 through 3.8. During the early 1990s, EB would have triggered in 18 

states (Table 3.4) and covered about 11% of exhaustees (Table 3.7) under the old 4% 

trigger; whereas under the actual 5% trigger, EB triggered in 9 states and covered about 

1% of exhaustees. During the current recession, EB would have triggered in 11 states and 

covered about 6% of exhaustees under the old 4% trigger; whereas under the existing 5% 

trigger, EB triggered in only 3 states and covered less than 1% of exhaustees. 

Third, if states had adopted the optional TUR trigger for EB (6.5% with 10% 

increase) EB would have activated in more states during the current recession than under 

the standard IUR trigger (5% with 20% increase) — 7 states versus 3 (Table 3.4). 

However, the percentage of exhaustees covered as a result would not have been much 

larger (2.2% versus 0.7%, Table 3.7). This suggests that the failure of most states to adopt 

the optional TUR trigger has little to do with the declining effectiveness of EB. 

Similarly, adoption of the optional 6% IUR trigger by the states would have had 

little or no impact on the number of states in which EB activated during the current 

recession or on the percentage of exhaustees covered by EB. (To examine this issue 

further, it would be necessary to simulate two or more triggers combined.) 
86 

3.4. Conclusions

The simulation analysis of EB triggers had three principal findings. 1) Most 

obviously, raising EB trigger thresholds reduces the scale of EB programs, i.e., the 

fraction of time EB is active and aggregate EB expenditures. 2) Nearly all of the 21 

triggers examined here effectively targeted EB on the unemployed and UI exhaustees, 

i.e., the percentage shares of unemployed and exhaustees in states where EB was 

activated were usually higher than the percentage of time EB was active. 3) Of the three 

broad classes of EB triggers examined by the simulations (the TUR, the IUR and the 

adjusted IUR), the IUR and the adjusted IUR tended to be more target efficient than the 

TUR. To serve a larger population efficiently in periods when EB is active, use of IUR 

and adjusted IUR triggers seems to be preferable. 

The simulations have yielded insight into the decline of EB since the early 1980s, 

a phenomenon also discussed in Chapters 1 and 2. While raising EB triggers has caused a 

decline in the program, EB would have declined even with unchanged triggers. Two 

other factors - a general reduction in unemployment since the early 1980s and a decrease 

in the recipiency rate in the regular UI program - have also operated to reduce the scope 

of EB during the past two decades. Widespread adoption of optional TUR-based triggers 

would have increased the scope of EB only modestly. 

More simulation analysis of the type undertaken here would be useful. In 

particular, extending the analysis of the IUR and adjusted IUR triggers to earlier years 

(back to 1978) would permit a more extensive comparison of EB performance under 

these triggers with performance under TUR-based triggers. 
87 

Chapter 4. Aggregate Employment Service Activities 

This project devoted major time and resources in assembling state-level series for 

various activities of the Federal-State Employment Service (ES). The data assembly 

efforts pursued hard copy publications as well as electronic sources. While considerable 

success was obtained, the data to be described and examined in this chapter and in 

Chapter 5 still are seriously incomplete. 

Two types of data on ES activities were assembled. 1) Data on the primary areas 

of ES service provision were assembled. These data included applications for ES 

services, receipt of some service, counseling and testing as well as placements and other 

services related to securing employment. 2) Information on the demographic 

characteristics of persons served by the ES was assembled. Important dimensions 

included gender, age, veteran status and ethnicity. For both types of data, the objective 

was to assemble annual time series for individual states for as many years as possible. 

Appendix B provides details of these data assembly activities. It is possible there will be 

additional work on data assembly at a future date. 

For the present project, data assembly occupied a large share of total project 

activities. This chapter summarizes data on key ES activities. For the present report, no 

analysis of the demographic characteristics of ES clients was undertaken. The strategy of 

these two chapters is to provide some description of national and regional data in the 

present chapter and conduct some analysis but to reserve for Chapter 5 the main 

statistical analysis of state-level outcomes. 

4.1. ES National Aggregates 

Table 4.1 summaries important aspects of ES activities for the 35 years between 

1967 and 2001. Readers are cautioned to note that 34 of the 35 “years” spanned by these 

data refer to twelve month intervals, but the reference periods for the years changed twice 

between 1967 and 2001. The changes in the reference periods involved a change in the 

dating of fiscal years in 1977 and, starting in the fall of 1983, a changeover to program 

years for reporting ES activities. Details of the reference period for each year are 
Table 4.1. Aggregate Measures of ES Activities, 1967 to 2001

Labor Unem- Un. Rate, ES App- Some Coun- Tested Placed Obtained Entered

Year Force ployment TUR % lications Service seled Emp. Emp.

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

1967 76,540 2,926 3.8 10,563 NA 2,372 2,249 6,093 NA NA

1968 78,035 2,899 3.7 10,493 NA 2,576 2,084 5,699 NA NA

1969 79,822 2,826 3.5 9,778 NA 1,132 NA 5,460 NA NA

1970 81,991 3,462 4.2 9,811 NA 1,067 NA 4,567 NA NA

1971 83,903 4,554 5.4 9,628 NA 1,052 NA 3,556 NA NA

1972 85,904 4,950 5.8 14,225 NA 1,081 NA 1,999 NA NA

1973 88,305 4,625 5.2 17,384 NA 1,137 NA 2,811 NA NA

1974 90,766 4,760 5.2 13,118 7,518 974 849 3,275 NA NA

1975 92,952 6,543 7.0 14,824 7,643 876 711 3,094 NA NA

1976 94,996 7,668 8.1 14,815 8,137 867 676 3,312 NA NA

1977 98,319 7,095 7.2 15,550 9,404 946 735 4,052 NA NA

1978 101,184 6,375 6.3 15,245 10,056 1,037 761 4,543 NA NA

1979 104,396 6,028 5.8 15,315 10,158 1,066 825 4,469 NA NA

1980 106,481 7,220 6.8 16,632 10,268 1,108 828 4,017 NA NA

1981 108,275 8,039 7.4 21,082 NA NA NA 3,677 NA NA

1982 109,987 10,031 9.1 19,225 NA 691 534 2,967 29 2,996

1983 111,382 11,241 10.1 19,787 NA 644 547 3,176 281 3,458

1984 112,649 8,998 8.0 22,599 NA 636 589 3,167 378 3,545

1985 114,767 8,367 7.3 19,825 9,590 612 647 3,482 417 3,878

1986 116,733 8,290 7.1 19,679 8,261 625 NA 3,404 426 3,829

1987 118,945 7,938 6.7 18,989 6,982 593 NA 3,217 439 3,655

1988 120,788 6,975 5.8 18,207 6,546 549 NA 3,198 553 3,751

1989 122,869 6,531 5.3 17,845 6,704 564 NA 3,197 565 3,763

1990 125,011 6,686 5.3 18,176 7,205 591 NA 3,097 602 3,699

1991 126,122 7,917 6.3 18,960 10,339 654 NA 2,683 509 3,192

1992 127,232 9,219 7.2 20,213 10,904 675 NA 2,562 516 3,078

1993 128,660 9,345 7.3 21,110 11,790 661 517 2,669 592 3,237

1994 130,156 8,539 6.6 19,958 11,739 620 449 2,711 644 3,283

1995 131,694 7,518 5.7 18,557 11,891 665 458 2,656 762 3,330

1996 133,233 7,409 5.6 18,057 11,737 647 391 2,325 943 3,161

1997 135,293 6,994 5.2 18,118 11,922 614 345 2,177 1,158 3,221

1998 137,145 6,435 4.7 17,600 11,596 612 309 2,068 1,358 3,270

1999 138,505 6,056 4.4 17,000 10,783 556 281 1,859 1,552 3,236

2000 140,127 5,701 4.1 16,496 10,875 540 260 1,748 2,028 3,577

2001 141,342 5,955 4.2 16,415 11,034 481 246 1,370 2,665 3,867

Source: Based mainly on data from ETA 9002 reports and data from early issues of the Employment and

 Training Report of the President. Data in thousands. Reference years for all data refer to the final month

 of the individual fiscal year and program year accounting periods. NA - Data not available.

88
89 

provided in Tables B.1 and B.2 of Appendix B. To ensure consistency, all series 

including the labor force and unemployment series in Table 4.1 have the identical 

reference periods for each individual year. The same is true for the electronic files 

assembled by the project. 

Applications for ES services span a broad range of activities related to job 

matching, counseling, testing and other assessments. In many instances, ES applicants are 

fulfilling a requirement to register with the ES as a condition of eligibility for UI benefits. 

Thus many applicants are simply complying with a legal requirement rather than seeking 

specific services from the ES that would enhance skills and/or employability. 

Between 1967 and 2001 the volume of applications at the ES nationwide varied 

between 9.6 million (1971) and 22.6 million (1984). While applications show an upward 

trend over these 35 years, they grew more slowly than the labor force. The slow growth 

of applications is especially apparent after 1972-1973 with total applications averaging 

15.06 million during 1975-1977 compared to 16.64 million during 1999-2001, the final 

three years in Table 4.1. 

Chart 4.1 gives a visual summary of applications showing the annual application 

rate, i.e., applications as a proportion of the labor force (the ratio column [4] to column 

[1] in Table 4.1, also appearing in the final column in Table 4.2 below). Following a 

spike in 1973, there is a tendency for the application rate to decline during periods of 

economic expansion, particularly between 1985 and 1990 and again between 1994 and 

2001. Regression analyses with aggregate data and with pooled state-year data show a 

strong positive relationship between the ES application rate and the unemployment rate.26

Years of high unemployment are years when the ES application rate is also high. 

Column [5] of Table 4.1 summarizes provision of “some service” by ES 

programs. Across the 24 years of available data, persons who received some service 

varied between a low of 6.55 million and a high of 11.92 million. Unlike the pattern of 

ES applications, however, there is no clear cyclical pattern in the provision of “some 

service.” For the years where data are present in Table 4.1 there were three sustained 

economic expansions. Note that “some service” increased during the late 1970s, 

 

26 This is discussed in more detail below and in Chapter 5. 
Chart 4.1. ES Application Rates, 1967 to 

2001

0.2100.1900.1700.1500.1300.1100.090

1967

1972

1977

1982

1987

1992

1997

2001

Application Rate
91 

decreased during the late 1980s and was quite stable during the late 1990s. The absence 

of a clear cyclical pattern for “some service” stands in marked contrast with the 

application rate time series shown in Chart 4.1. 

Columns [6] and [7] in Table 4.1 show time series for numbers counseled and 

tested, with clear downtrends in both services. The number counseled in 2000-2001 was 

about one fifth of the number in 1967-1968 while an even steeper decline is apparent in 

the number tested. Both series decline sharply between 1968 and 1969 and again between 

1980 and 1982. The number tested decreased more or less continuously after 1993. While 

the number counseled also decreased after 1993, the falloff is less sharp. Since 1997, the 

combined number counseled and tested has been less than one million per year, and the 

total in 2001 was only 0.73 million. These traditional ES activities now touch about one 

in every 200 members of the labor force compared to 12 in every 200 in 1967. 

Placing people in jobs is central to the operations of the ES. Columns [8]-[10] of 

Table 4.1 display time series of these activities. Compared to the late 1960s when the ES 

placed some 5.5-6.0 million persons annually, the recent totals have been much more 

modest, in the neighborhood of 3.3-3.9 million. 

Note the change in the data from 1982. Starting in that year, the ETA 9002 

reporting system distinguishes two routes for securing employment. It continues to record 

placements as in earlier years.27 However there is a strong upward trend in Obtained 

Employment (column [9]). In most situations these could be termed self-placements. 

Individual persons registered with the ES utilize job contacts (including electronic 

listings) and other ES services in securing a new job.28 Typically, a placement involves a 

job order made by an employer with the ES whereas obtained employment does not 

involve a job order. 

 

27 The instructions for the ETA 9002 reports defines a placement as hiring an applicant after referral to a 

job by the ES or by other co-located staff working with the ES agency with verification from a reliable 

source. 

28 The instructions for the ETA 9002 reports identify six situations, all of which involve services wholly or 

partially funded by the ES. These are 1) participation in job search activities, 2) accepting a job resulting 

from use of a Job Service Sponsored automated labor exchange, 3) after receiving employment counseling 

or testing or development of an employability plan, 4) after receiving bonding assistance, 5) after 

termination from a skills training program to which an ES applicant was referred by the ES agency and 6) 

before expiration of a tax credit voucher. The job is to be secured within 90 days after receiving one or 

more of these services and verification of the job is to be made by a reliable source, e.g., the employer. 
92 

Entered employment is the sum of placements and obtained employment (after 

removing double counting of persons who were both placed and entered employment in 

the same year). Entered employment ranged between 3.16 million and 3.88 million in the 

years from 1983 to 2001. While less than the annual volume of placements in the late 

1960s, this inflow into new jobs represents between 10 and 15 percent of the new jobs 

secured during these years. Entered employment is sufficiently large to have an effect on 

aggregate unemployment and other macro indicators from the labor market. 

Chart 4.2 summarizes national developments in placement rates and entered 

employment rates. It documents the rapid decrease in placements between 1967 and 1972 

and again between 1978 and 1982. Since 1982 the entered employment rate has shown 

only a small downtrend as increases in obtained employment have largely offset 

decreases in placements. 

While the mix between placements and obtained employment has been evolving 

since the early 1980s, the rate of change was especially rapid between 1994 and 2001. 

During these eight years, the obtained employment share of the total increased from 0.20 

to 0.69. In 2001, the volume of obtained employment was more than twice the volume of 

placements for the first time. 

4.2. ES Activities in the Regions 

The importance of ES activities varies by states and regions. This variation is 

explored here with data from the ten DOL regions. Table 4.2 focuses on application rates 

for ES services during the 1967-2001 period. The table displays annual application rates 

for each region along with the national application rate. The bottom rows show summary 

measures of applications for the 35 years, displaying averages (means), standard 

deviations and coefficients of variation. Also highlighted are the highest and lowest 

regional application rates for each individual year. 

Table 4.2 shows there are large and systematic differences in application rates by 

region. While the national average was 0.15 for this period, note that the averages for five 

regions were 0.18 or higher while three averages were 0.12 or lower. Across all regions, 

Region 8 stands out as having consistently high applications for ES services. For 24 of 
Chart 4.2. Placement Rates and Entered 

Employment Rates, 1967 to 2001

0.0900.0800.0700.0600.0500.0400.0300.0200.0100.000

1967

1972

1977

1982

1987

1992

1997

2001

Placement Rate Ent. Employment Rate
Table 4.2. Application Rates for ES Services, National and DOL Regional Data, 1967 to 2001

Year Reg. 1 Reg. 2 Reg. 3 Reg. 4 Reg. 5 Reg. 6 Reg. 7 Reg. 8 Reg. 9 Reg. 10 U.S.

1967 0.1357 0.1175 0.1209 0.1343 0.1177 0.1720 0.1135 0.1659 0.1969 0.1627 0.1380

1968 0.1313 0.1139 0.1216 0.1297 0.1211 0.1679 0.1149 0.1695 0.1732 0.1531 0.1345

1969 0.1125 0.1042 0.1171 0.1205 0.1073 0.1524 0.1055 0.1561 0.1546 0.1487 0.1225

1970 0.1238 0.1064 0.1129 0.1202 0.1093 0.1518 0.1061 0.1624 0.1224 0.1395 0.1197

1971 0.1304 0.1013 0.1084 0.1165 0.1116 0.1440 0.1015 0.1652 0.0947 0.1358 0.1148

1972 0.1988 0.1177 0.1595 0.1526 0.1636 0.2108 0.1516 0.2357 0.1603 0.2282 0.1656

1973 0.2125 0.1602 0.1724 0.1931 0.1881 0.2325 0.1817 0.2707 0.2181 0.2430 0.1969

1974 0.1485 0.1157 0.1192 0.1457 0.1252 0.1826 0.1494 0.2178 0.1577 0.2143 0.1445

1975 0.1648 0.0937 0.1302 0.1769 0.1470 0.2080 0.1671 0.2312 0.1652 0.2325 0.1595

1976 0.1556 0.0870 0.1367 0.1643 0.1429 0.2118 0.1699 0.2327 0.1609 0.2224 0.1560

1977 0.1389 0.1038 0.1384 0.1650 0.1516 0.2020 0.1701 0.2331 0.1596 0.2192 0.1582

1978 0.1242 0.0970 0.1304 0.1659 0.1536 0.1887 0.1667 0.2150 0.1338 0.2061 0.1507

1979 0.1153 0.0861 0.1288 0.1684 0.1480 0.1897 0.1750 0.2042 0.1226 0.1990 0.1467

1980 0.1245 0.0897 0.1309 0.1789 0.1585 0.1959 0.1920 0.2096 0.1433 0.1953 0.1562

1981 0.1741 0.1362 0.1358 0.2246 0.2042 0.2295 0.2357 0.2487 0.1779 0.2324 0.1947

1982 0.1558 0.1236 0.1230 0.1989 0.1847 0.2108 0.2225 0.2274 0.1567 0.1793 0.1748

1983 0.1445 0.1321 0.1458 0.1954 0.1857 0.2189 0.2267 0.2081 0.1515 0.1968 0.1777

1984 0.1452 0.1757 0.1602 0.2036 0.2221 0.2431 0.2604 0.2349 0.1629 0.2345 0.2006

1985 0.1267 0.1328 0.1481 0.1902 0.1880 0.2089 0.2342 0.2120 0.1200 0.2259 0.1727

1986 0.1177 0.1349 0.1474 0.1905 0.1742 0.2167 0.2283 0.2307 0.1055 0.2143 0.1686

1987 0.0973 0.1094 0.1401 0.1852 0.1754 0.2186 0.2073 0.2307 0.0891 0.2021 0.1596

1988 0.0884 0.0910 0.1219 0.1718 0.1683 0.2105 0.1952 0.2297 0.0963 0.1980 0.1507

1989 0.0969 0.0867 0.1153 0.1782 0.1402 0.2162 0.1877 0.2245 0.0944 0.1903 0.1452

1990 0.1165 0.0888 0.1180 0.1837 0.1373 0.2067 0.1927 0.2294 0.0892 0.1848 0.1454

1991 0.1361 0.0942 0.1278 0.1956 0.1393 0.2000 0.1929 0.2249 0.0895 0.1987 0.1503

1992 0.1411 0.1178 0.1359 0.2092 0.1450 0.2060 0.1919 0.2272 0.0942 0.1982 0.1589

1993 0.1300 0.1327 0.1428 0.2143 0.1465 0.2024 0.1903 0.2237 0.1113 0.2067 0.1641

1994 0.1165 0.1024 0.1336 0.2047 0.1464 0.1937 0.1881 0.2086 0.0906 0.2029 0.1533

1995 0.1048 0.0918 0.1260 0.1958 0.1203 0.1801 0.1894 0.1980 0.0795 0.1940 0.1409

1996 0.0958 0.1049 0.1065 0.1860 0.1174 0.1695 0.1779 0.1940 0.0785 0.1940 0.1355

1997 0.0851 0.1047 0.1211 0.1874 0.1094 0.1621 0.1670 0.1862 0.0803 0.1955 0.1339

1998 0.0727 0.0979 0.1179 0.1828 0.1022 0.1516 0.1621 0.1732 0.0700 0.2326 0.1283

1999 0.0705 0.0886 0.1053 0.1772 0.1032 0.1461 0.1528 0.1664 0.0639 0.2253 0.1227

2000 0.0635 0.0845 0.0920 0.1586 0.1044 0.1474 0.1475 0.1653 0.0676 0.2227 0.1177

2001 0.0641 0.0483 0.0745 0.1777 0.1021 0.1502 0.1557 0.1543 0.0663 0.2307 0.1161

Average 0.12 0.11 0.13 0.18 0.14 0.19 0.18 0.21 0.12 0.20 0.15

Std. Dev. 0.03 0.02 0.02 0.03 0.03 0.03 0.04 0.03 0.04 0.03 0.02

Coef. Var. 0.28 0.22 0.15 0.15 0.22 0.15 0.22 0.14 0.34 0.14 0.15

Source: Based mainly on data from ETA 9002 reports and data from early issues of the Employment and Training

 Report of the President. Application rates measure applications as a proportion of the labor force. Reference 

 years for all data refer to the final month of the individual fiscal year and program year accounting periods.

94
95 

the 35 years its application rate was highest. At the opposite extreme, Region 2 had the 

lowest average application rate and the lowest rate in 16 of 35 individual years. 

Note that application rates display wide year-to-year variation in Table 4.2. For 

five regions the coefficient of variation (CV) exceeds 0.20. This wide annual variability 

undoubtedly has several determinants, but one appears to be regional unemployment. 

Years of high unemployment have above-average application rates. Regression analysis 

(to be reported later) confirms that high unemployment is linked to high application rates. 

Wide variation is also observed in the entered employment rates for individual 

regions. Table 4.3 displays annual time series for the ten DOL regions as well as the 

national average for the 1967-2001 period. Nationwide, the average entered employment 

rate was 0.035 over these 35 years. Note in Table 4.3 that each of the regional averages 

deviated by at least 0.06 from this national average. Typically each region’s entered 

employment rate was either substantially above or substantially below the national 

average. Low entered employment rates were consistently present in Regions 1, 2, 3, 5 

and 9 while above-average rates were characteristic of the other five regions. 

Table 4.3 also identifies the regions with the highest and lowest entered 

employment rates in each individual year. Regions 2 and 8 dominate the extremes. 

Region 2’s entered employment rate is the lowest in 19 of the 35 years. Region 8 

consistently dominates the highest entered employment rates, having the highest rate in 

30 of the 35 years. Its 35 year average of 0.063 is 80 percent above the national average. 

No other region comes close to Region 8 in its high entered employment rate. 

Placing people in jobs and providing other support for job finding depends upon 

several factors with the strength of labor demand being paramount. One indicator of 

variable success in finding jobs is the coefficient of variation of the entered employment 

rate. In Table 4.3 these measures exceed 0.20 in all DOL regions, and they exceed 0.30 in 

six regions. Entered employment rates are highly varied from one year to the next. 

4.3. Analysis of ES Activities 

 Chapter 5 and this chapter report the results of quantitative analyses of ES 

activities. The remainder of this chapter is concerned with developments in ES 

application rates and entered employment rates in national data and across the ten DOL 
Table 4.3. Entered Employment Rates, National and DOL Regional Data, 1967 to 2001

Year Reg. 1 Reg. 2 Reg. 3 Reg. 4 Reg. 5 Reg. 6 Reg. 7 Reg. 8 Reg. 9 Reg. 10 U.S.

1967 0.063 0.091 0.064 0.079 0.056 0.132 0.069 0.114 0.089 0.093 0.080

1968 0.057 0.085 0.059 0.071 0.051 0.124 0.066 0.109 0.077 0.084 0.073

1969 0.051 0.076 0.057 0.069 0.051 0.113 0.063 0.106 0.068 0.084 0.068

1970 0.043 0.065 0.047 0.058 0.040 0.087 0.052 0.095 0.056 0.055 0.056

1971 0.031 0.048 0.036 0.046 0.026 0.075 0.042 0.077 0.041 0.046 0.042

1972 0.020 0.017 0.021 0.029 0.014 0.038 0.026 0.046 0.023 0.027 0.023

1973 0.023 0.020 0.030 0.039 0.022 0.047 0.038 0.056 0.035 0.039 0.032

1974 0.028 0.023 0.031 0.039 0.025 0.052 0.048 0.064 0.042 0.059 0.036

1975 0.028 0.021 0.028 0.035 0.022 0.047 0.042 0.062 0.039 0.066 0.033

1976 0.028 0.021 0.028 0.041 0.022 0.052 0.047 0.065 0.037 0.064 0.035

1977 0.034 0.026 0.034 0.046 0.032 0.055 0.056 0.072 0.042 0.067 0.041

1978 0.038 0.029 0.037 0.051 0.037 0.056 0.059 0.081 0.043 0.070 0.045

1979 0.035 0.027 0.034 0.049 0.036 0.054 0.062 0.079 0.038 0.065 0.043

1980 0.033 0.027 0.028 0.046 0.029 0.050 0.053 0.068 0.032 0.055 0.038

1981 0.028 0.025 0.024 0.042 0.024 0.048 0.048 0.062 0.028 0.048 0.034

1982 0.022 0.020 0.018 0.034 0.019 0.040 0.040 0.051 0.023 0.039 0.027

1983 0.027 0.020 0.021 0.040 0.025 0.040 0.043 0.052 0.025 0.047 0.031

1984 0.026 0.021 0.019 0.041 0.025 0.043 0.042 0.057 0.025 0.046 0.031

1985 0.029 0.021 0.025 0.043 0.032 0.043 0.050 0.057 0.021 0.052 0.034

1986 0.026 0.023 0.025 0.040 0.031 0.040 0.046 0.057 0.021 0.052 0.033

1987 0.022 0.020 0.024 0.039 0.027 0.037 0.042 0.054 0.021 0.053 0.031

1988 0.019 0.018 0.024 0.038 0.026 0.047 0.043 0.058 0.021 0.051 0.031

1989 0.019 0.016 0.022 0.039 0.025 0.048 0.042 0.060 0.020 0.050 0.031

1990 0.018 0.013 0.021 0.040 0.023 0.048 0.042 0.062 0.018 0.046 0.030

1991 0.016 0.011 0.018 0.034 0.020 0.039 0.038 0.057 0.015 0.040 0.025

1992 0.014 0.010 0.016 0.034 0.020 0.037 0.036 0.053 0.014 0.036 0.024

1993 0.015 0.011 0.018 0.038 0.019 0.035 0.039 0.050 0.015 0.036 0.025

1994 0.015 0.009 0.018 0.038 0.019 0.037 0.039 0.051 0.014 0.035 0.025

1995 0.014 0.010 0.018 0.038 0.020 0.037 0.039 0.054 0.013 0.033 0.025

1996 0.011 0.013 0.015 0.036 0.017 0.032 0.040 0.052 0.012 0.037 0.024

1997 0.009 0.014 0.017 0.036 0.018 0.032 0.038 0.051 0.011 0.040 0.024

1998 0.009 0.013 0.018 0.037 0.020 0.032 0.035 0.047 0.009 0.041 0.024

1999 0.009 0.011 0.019 0.039 0.022 0.029 0.030 0.045 0.004 0.041 0.023

2000 0.009 0.010 0.022 0.039 0.024 0.040 0.032 0.053 0.004 0.040 0.026

2001 0.008 0.008 0.017 0.036 0.022 0.040 0.025 0.039 0.033 0.041 0.027

Average 0.0251 0.0256 0.0272 0.0428 0.0268 0.0516 0.0444 0.0633 0.0294 0.0509 0.0352

Std. Dev. 0.013 0.021 0.012 0.011 0.010 0.025 0.011 0.018 0.019 0.015 0.014

Coef. Var. 0.53 0.83 0.46 0.25 0.37 0.48 0.24 0.29 0.66 0.30 0.40

Source: Based mainly on data from ETA 9002 reports and data from early issues of the Employment and Training

 Report of the President. Entered employment rates measured as a proportion of the labor force. Reference 

 years for all data refer to the final month of the individual fiscal year and program year accounting periods.

96
97 

regions. Chapter 5 reports results of pooled analyses of state-level data. Since the data 

files are new, these analyses should be considered preliminary. 

 Table 4.4 displays regressions for the 1967-2001 period that explain 

developments in application rates for the DOL regions. A common specification is used 

with the regional unemployment rate and a linear trend as the explanatory variables. The 

coefficient on the unemployment rate (TUR) shows the marginal response of application 

rates (applicants as a proportion of the labor force) to changes in unemployment while the 

coefficient for the trend is intended to show the direction of change for longer run 

developments in applications. 

 Concentrating first on the unemployment coefficients, note they are consistently 

positive and all but one are statistically significant.29 Six of the regional coefficients and 

the national coefficient have t ratios that exceed 5.0. There is a strong and consistent 

connection between regional unemployment and ES applications. The range of the point 

estimates is generally from 0.58 to 2.25 with the slope in the national data being 1.085. 

Applications for ES services respond strongly to changes in the unemployment rate. 

 While most of the trend coefficients in Table 4.4 are negative, note the positive 

and significant trends for Regions 4, 7 and 10. After controlling for unemployment, there 

were increases in application rates in these regions between 1967 and 2001. 

The presence of positive trends in three regions helps explain why the trend in 

national data, while negative, is not significant. The divergent trends in individual regions 

were to a large extent offsetting, yielding only a small downtrend in aggregate data. ES 

applications were highly responsive to changes in unemployment between 1967 and 

2001, but wide regional diversity in the basic trend of application rates was observed. 

Table 4.5 shows regressions explaining the entered employment rates in the 

regions and nationwide for the same 35 years. All eleven unemployment rate coefficients 

are negative and ten have t ratios of 2.4 or larger. Higher unemployment rates reduce 

entered employment rates in all regions. The range of point estimates is generally 

between -0.14 and -0.54 with a coefficient of -0.35 in the national equation appearing at 

the bottom of the table. 

 

29 The coefficient for Region 2 has a t ratio of 1.5 whereas a t ratio of 2.0 is required for statistical 

significance at the 0.05 level. 
Table 4.4. Regression Analysis of ES Application Rates by Region, 1967 to 2001.

DOL Constant Unemp. Trend Adj. R2 Standard Durbin Average

Region Rate, 1967 = 1 Error Watson Applic.

TUR Rate

Region 1 0.1046 1.020 -0.00195 0.729 0.0180 1.25 0.125

[9.0] [6.1] [6.4]

Region 2 0.0998 0.336 -0.00072 0.102 0.0225 0.96 0.108

[6.2] [1.5] [1.9]

Region 3 0.1030 0.635 -0.00068 0.394 0.0148 1.23 0.128

[10.3] [4.2] [2.7]

Region 4 0.0921 0.943 0.00157 0.673 0.0155 1.58 0.176

[8.5] [5.8] [6.0]

Region 5 0.0824 1.170 -0.00056 0.682 0.0181 1.74 0.145

[7.7] [8.4] [1.8]

Region 6 0.1189 1.496 -0.00099 0.545 0.0189 1.33 0.191

[8.5] [6.4] [3.0]

Region 7 0.0592 2.251 0.00081 0.804 0.0172 1.68 0.176

[5.7] [10.8] [2.8]

Region 8 0.1200 1.807 -0.00010 0.433 0.0228 1.10 0.208

[6.2] [5.2] [0.3]

Region 9 0.1397 0.589 -0.00320 0.697 0.0229 1.28 0.123

[6.4] [2.1] [8.3]

Region 10 0.1370 0.579 0.00129 0.229 0.0242 1.10 0.202

[6.4] [2.3] [3.1]

U.S. 0.0928 1.085 -0.00042 0.555 0.0150 1.73 0.151

[8.3] [6.5] [1.7]

 Source: Regressions explaining application rates shown in Table 4.2 using unemployment rates

 for the the DOL regions and a linear trend starting in 1967. Beneath each coefficient is

 the absolute value of its t ratio.

98
Table 4.5. Regression Analysis of Entered Employment Rates by Region, 1967 to 2001.

Constant Unemp. Trend Adj. R2 Standard Durbin Average

DOL Rate, 1967 = 1 Error Watson Ent. Emp.

Region TUR Rate

Region 1 0.0573 -0.200 -0.00119 0.808 0.0059 0.38 0.0251

[15.0] [3.7] [11.9]

Region 2 0.0869 -0.538 -0.00154 0.729 0.0111 0.39 0.0255

[11.0] [4.9] [8.3]

Region 3 0.0608 -0.290 -0.00093 0.751 0.0062 0.52 0.0272

[14.5] [4.5] [9.0]

Region 4 0.0675 -0.226 -0.00064 0.455 0.0080 0.41 0.0428

[12.1] [2.7] [4.7]

Region 5 0.0461 -0.137 -0.00060 0.438 0.0074 0.41 0.0269

[10.5] [2.4] [4.8]

Region 6 0.1105 -0.512 -0.00155 0.574 0.0164 0.30 0.0516

[9.1] [2.5] [5.4]

Region 7 0.0584 -0.040 -0.00068 0.419 0.0081 0.60 0.0443

[12.1] [0.4] [5.0]

Region 8 0.1150 -0.541 -0.00139 0.646 0.0109 0.51 0.0633

[12.4] [3.3] [7.6]

Region 9 0.0863 -0.387 -0.00167 0.757 0.0097 0.67 0.0294

[9.4] [3.3] [10.2]

Region 10 0.0957 -0.340 -0.00114 0.549 0.0104 0.53 0.0508

[10.5] [3.2] [6.4]

U.S. 0.0744 -0.352 -0.00100 0.675 0.0080 0.39 0.0351

[12.4] [3.9] [7.4]

 Source: Regressions explaining entered employment rates shown in Table 4.3 using 

 unemployment rates for the the DOL regions and a linear trend starting in 1967.

 Beneath each coefficient is the absolute value of its t ratio.

99
100 

The trend coefficients in Table 4.5 are also uniformly negative and significant. 

Over this period, the entered employment rate was trending down in all regions. The 

range of the trend coefficients was quite wide, from -0.00167 to -0.00064. In the national 

equation, this coefficient was -0.00100, suggesting a decrease in the entered employment 

rate of 0.01 per decade. 

Note in Table 4.5 that all the Durbin Watson statistics are very low, ranging from 

0.38 to 0.67, suggesting the presence of positive serial correlation in the residuals.30 To 

test for sensitivity of findings to this potential problem, the regressions were fitted with 

data measured as first differences, e.g., as annual changes rather than annual levels. 

Under the first difference specification, the trend drops out and the change in the entered 

employment rate is regressed on the change in the unemployment rate. 

The unemployment coefficients continued to be negative and significant in the 

first difference equations. All eleven were negative and nine of eleven had t ratios of 2.0 

or larger.31 Thus the depressing effect of high unemployment on entered employment 

rates was consistently present in data measured both in levels and in first differences. 

An alternative specification was also tested where the linear trend was replaced 

with each region’s civilian labor force. In explaining both the application rate and the 

entered employment rate, the results were very similar to those shown in Tables 4.4 and 

4.5. Higher unemployment raised the application rate but reduced the entered 

employment rate. The fits of the regressions in terms of adjusted R2

s, standard errors and 

the size, sign and significance of the slope coefficients were very similar to those 

appearing in these two tables. 

Considering the results presented in Tables 4.4 and 4.5, significant effects of 

unemployment were found both for ES application rates and entered employment rates in 

the regional data. Higher unemployment rates increase application rates but reduce 

entered employment rates. Chapter 5 reports additional findings using state-level data. 

ES activities typically serve low wage clients. Since regions have quite different 

wage levels, the disparities in application rates and entered employment rates shown in 

 

30 In the presence of positive serial correlation t ratios are inflated, making explanatory variables appear to 

be more significant than warranted. 

31 The unemployment change coefficients had t ratios below 2.0 only in Regions 6 and 9. 
101 

Tables 4.2 and 4.3 could be related to differences in job search patterns and labor market 

institutions in the regions. 

One obvious institutional factor could be a differing prevalence of private sector 

job matching services across states and regions. Certainly there are wide differences in 

average wages across regions. In 2001, for instance, the average weekly wage for UI 

taxable covered employers ranged from a high of $919 in Region 2 to a low of $584 in 

Region 7, or from 1.32 times the national average to 0.84 of the national average of $698. 

Since average wages are unequal across regions, the differing ES application rates 

and entered employment rates documented in Tables 4.2 and 4.3 could partly relate to 

differing wage levels. This was explored on a preliminary basis using regional data. A 

regression was fitted to note the association between the application rate averages shown 

at the bottom of Table 4.2 and the average weekly wage in the regions during 2001. A 

highly significant negative association was found. Across the ten DOL regions the 

correlation between the application rate and the average weekly wage was -0.79. Some of 

the differences in ES application rates may reflect a greater presence of private job 

matching intermediaries in high wage regions compared to low wage regions. 

To pursue this idea further, an analysis across states was undertaken. The average 

ES application rate for the ten years 1992 to 2001 was regressed on the average weekly 

wage in the states in 2001. A highly significant slope coefficient was obtained (t ratio of 

4.3) and the regression “explained” 26 percent of the interstate variation in the average 

application rate for the ten year period. 

While the preceding results using regional and state data are not offered as in any 

way definitive, they are suggestive of one additional factor that may explain the differing 

importance of ES application rates across the states and regions. Applications for ES 

services may always be systematically below-average in states and regions where wages 

are above-average because private job placement providers may play a larger role in 

matching workers with jobs. Using the data assembled in the present project, this avenue 

of analysis could be pursued more thoroughly in a subsequent project. 
102 

4.4. Summary

This chapter presented key time series relating to ES activities spanning the years 

1967 to 2001. Over these 35 years, the volume of all ES activities examined here 

(applications, provision of some services, counseling and testing as well as placements 

and entered employment) grew more slowly than the overall U.S. labor force. The one 

area of especially rapid growth was in obtained employment. But even in the area of 

securing jobs for ES applicants, the sum of the placements and obtained employment was 

no higher during 2000-2001 than two decades earlier. 

Wide and persistent differentials across the 10 DOL regions were documented for 

both ES application rates and entered employment rates. Region 8 (mainly plains states) 

ranked consistently high while Region 2 (New York and New Jersey) ranked consistently 

low. The regional analysis clearly demonstrated that the importance of the ES in the labor 

market varies widely and systematically across broad geographic areas. 

Regression analysis established that ES application rates and entered employment 

rates are closely linked to the demand for labor as proxied by the unemployment rate. 

Higher unemployment rates raise ES application rates while at the same time lowering 

entered employment rates. During recessions the ES experiences a growth in its client 

base but its ability to successfully secure jobs for clients decreases. These same labor 

market flows are the subject of the next chapter as well. 

Finally, at both the regional level and across individual states a strong negative 

association between average wages and ES application rates was documented. This 

finding may suggest that job matching institutions differ between high wage and low 

wage geographic areas. More research on this question seems warranted. 
103 

Chapter 5. Trends and Cycles in Employment Service Delivery 

 Established in 1933, the Employment Service (ES) was the first federal agency to 

focus on improving the performance of the labor market. Throughout its history, the ES 

has served as a free public labor exchange, registering job seekers, taking job orders from 

employers, and matching workers with job vacancies. Since the establishment of 

Unemployment Insurance (UI) in 1935, the ES has also administered the UI work test, 

which attempts to ensure that UI recipients are able to work, available for work, and 

seeking work. 

 Matching workers to jobs through placement and other reemployment services 

and administering the UI work test have been consistent functions of the ES over the 

years. However, as discussed in Chapter 4, the services provided by the ES vary over the 

business cycle and have changed over time. For example, starting in the early 1960s, a 

series of changes in federal legislation (summarized in Section 5.1 below) pushed the ES 

to emphasize a changing set of activities and services. 

 The main goal of this chapter is to offer some preliminary answers to the 

following questions: How do ES activities respond to changing economic conditions? To 

what extent have changes in federal legislation resulted in different mixes of ES 

activities? To our knowledge, these questions have not been addressed in previous 

research, primarily because the data needed to address them have not been available. 

 The state-year panel data on ES services (described in detail in Appendix B) are 

used in this chapter to extend the analysis that was started in Chapter 4. After briefly 

summarizing the evolution of the ES in Section 5.1, this chapter describes two models of 

ES activities (Section 5.2) and then presents estimates from those models using the newly 

developed data (Section 5.3). The main goal, again, is to begin to understand how ES 

activities respond to changes over the business cycle and to longer-run changes. The 

answers given in this chapter are preliminary. The data used have been available only for 

a short time, and the estimates raise several questions about model specification and 

estimation. It may well be that additional data (and/or more complicated estimating 

techniques) will be needed in order to yield convincing answers about how ES activities 
104 

respond to various outside influences. Accordingly, this chapter also attempts to point 

toward the issues that will need to be resolved in order to obtain improved answers. 

5.1. The Changing Role of the ES 

 The evolution of the ES's role is summarized in Table 5.1, which lists major 

federal employment and training legislation and notes the implications of each piece of 

legislation for the ES and reemployment policy. 

 Until the 1960s, reemployment policy in the United States emphasized job 

placement and assumed that unemployed workers were job-ready and merely needed to 

be matched to an employer. During the 1960s, however, the Manpower Development and 

Training Act and the Economic Opportunity Act shifted emphasis away from job 

placement and toward "second-chance" training for workers who either were poorly 

served by the conventional system of public education or who were dislocated as a result 

of structural economic change. The role of the ES in this shift was at first substantial, but 

that role dwindled with the adoption of the Comprehensive Employment and Training 

Act (CETA) in 1973. Under CETA, training services were administered locally with the 

result, in the view of many, that reemployment services became fragmented. The 

diminished role of the ES continued through the 1980s and into the 1990s following 

adoption of the Job Training Partnership Act (JTPA) in 1982. This diminished role is 

reflected in the downward trends in ES activities that were seen in Chapter 4 and that will 

be seen again below. 

 During the 1980s there was much dissatisfaction with the ES, and questions were 

raised about its role and importance. Also during the 1980s, however, convincing 

research became available showing that existing government training programs fell short 

of their hoped-for results (LaLonde 1995). Moreover, a series of demonstrations using 

randomized trials suggested the effectiveness of relatively inexpensive reemployment 

services — job search workshops, interview and resume preparation classes, and other 

assistance — in helping unemployed workers (Meyer 1995). As a result, the former 

optimism about second-chance training was replaced by an emphasis on placing workers 
105 

Table 5.1. Employment and Training Legislation and the Changing Role of the 

Employment Service 

Legislation Implications for ES and reemployment policy 

Wagner-Peyser Act (1933) Creation of U.S. Employment Service; emphasis on 

public labor exchange / placement services. 

Social Security Act, Title III 

(1935) 

 Creation of the Unemployment Insurance (UI) 

system; ES to administer the UI work test. 

Area Redevelopment Act 

(1961) 

 ES established training programs in depressed areas; 

increased collection of labor market information. 

Manpower Development and 

Training Act (1962) 

 Further involvement of ES in training programs; 

reduced emphasis on traditional placement services. 

Economic Opportunity Act 

(1964) 

 ES provides outreach, screening, referral for 

disadvantaged worker programs. 

Comprehensive Employment 

and Training Act (1973) 

 Local provision of reemployment services as well as 

by ES; fragmentation of reemployment services. 

Job Training Partnership Act 

(1982) 

 Continued local control of delivery of 

reemployment services. 

Worker Profiling and 

Reemployment Services (1993) 

 ES administers reemployment services under UI 

profiling; return of emphasis on public labor 

exchange / placement services. 

Workforce Investment Act 

(1998) 

 ES becomes locus of One-Stop Centers. 

Sources: Haber and Murray (1966); Bendick (1989); Balducchi, Johnson, and Gritz (1995); 

Fagnoni (2000). 
106 

in jobs. In short, the sentiment in favor of "training first" was replaced by a growing 

belief in emphasizing rapid reemployment. 

 The new emphasis on rapid reemployment was embodied in amendments to the 

Social Security Act that established the Worker Profiling and Reemployment Services 

initiative in 1993. Under profiling, UI claimants who are likely to exhaust their UI 

benefits are required to attend job search assistance workshops conducted by the ES or 

risk losing their UI benefits (Corson and Decker 2000). 

 Emphasis on rapid reemployment is also present in the Workforce Investment Act 

of 1998, which requires that states provide most federally funded employment and 

training services through a system of One-Stop Centers. This change has had important 

implications for the ES, which is now the location from which nearly all reemployment 

services (or information about and referral to such services) are provided. (The Adult and 

Dislocated Worker programs are also to provide these services, but their role will be less 

important.) The intent of One-Stop Centers is to offer an appealing, logically organized 

office that directs any job seeker to information, assistance, or programs needed to gain 

employment. Also, One-Stop Centers encourage coordination of services by collecting 

the operations of various reemployment programs under a single manager. 

 It may be too early to detect the impact of the changes brought about by WIA on 

ES activities — the available data run only through July 2001. However, additional data 

used with variants of the model developed below should be able to detect what, if any, 

impact WIA has had on ES activities. 

5.2. A Model of Employment Service Delivery 

 The traditional role of the ES — that of a free public employment agency — has 

involved provision of five main services: job referral, counseling and assessment 

(including aptitude and interest testing), job development, other job search assistance 

services, and referral to training. Because none of these services can be provided unless 

workers apply, examining the determinants of applications to the ES is also important. 

 The database developed for this project includes data for each state in most years 

between 1967 and 2001 on applications and the five main ES activities except job 
107 

development. (As discussed in Appendix B, the number of years of data varies among the 

different activities.) In this chapter, we focus on the number of applications and three of 

the above ES activities — number of individuals counseled, number of individuals 

referred to a job, and number of workers placed in a job. We have chosen these outcomes 

for preliminary analysis because of their importance and because they are the outcomes 

for which data are most complete (although even for these, there are gaps — see below 

and Appendix B). 

 The discussion to this point has suggested two main questions about changes in 

the activities of the ES: 

(1) How do recessions influence the activities and services provided by the ES? 

(2) How have ES activities responded over time to other influences, especially 

changes in federal reemployment policy? Is it possible to detect clear trends (as 

opposed to cyclical labor force influences) in ES activities? 

Addressing these questions requires an empirical model that includes variables capturing 

(1) business cycle changes and (2) secular or long-run changes. In addition, we would 

like to control for as many other influences on ES activities as possible. For example, 

growth of the labor force is likely to increase ES activities because a larger labor force 

implies a larger number of new job seekers, reentrants, and laid-off workers, all of whom 

are engaged in job-seeking activities. This suggests that the model should include a 

measure of the size of the labor force. Also, the extent of union membership could 

influence ES activity: If a benefit of union membership is assistance in job finding, then a 

declining union sector would imply greater demand for other forms of assistance in job 

finding, including the ES. Accordingly, including a measure of the extent of union 

membership may also be appropriate. 

 Other influences on ES activity are less easy to measure. For example, states 

differ from each other in ways that are difficult to quantify but that may be extremely 

important to the volume and rate of ES activities: industry and occupational mix, ethnic 

composition of the labor force, and state-level policies, to name just three. If these 

interstate differences are relatively constant over time, it is possible to capture them either 

by first-differencing the data or by including a set of state-specific dummy variables in 
108 

the model. Either of these methods controls for individual state-specific effects (see 

below or Chapter 10 in Wooldridge (2002)). 

 Finally, we want to capture influences on ES activities that occur over time and 

that affect all states similarly. These include federal policy changes and long-term 

changes such as changes in technology. We model such influences in two ways. The 

preferred approach is to include a set of year-specific dummy variables in the model. This 

allows changes over time to differ from year to year; no structure, linear or otherwise, is 

imposed on the relationship between time and the variables. The alternative is to include 

a time trend in the model. The advantage of this approach is that it allows us to make 

statements about long-run or average trends affecting ES services. The drawback is that 

we assume a linear (or log-linear) trend. 

 These considerations can be summarized in the following model, which allows 

estimation of the extent to which the factors mentioned above influence the extent of ES 

activity y in state s and year t: 

(1) log yst = β 0 + β1 log lfst + β 2 logunemst + β 3 log unionst + as + dt + ust 

In (1), subscript s denotes the state, and subscript t denotes the year. Accordingly, log yst

denotes the log of the level of ES activity y in state s, year t. This implies that equation 

(1) is written to represent four models, one in which the log of applicants is the dependent 

variable, a second in which the log of the number of workers counseled is the dependent 

variable, a third for referrals, and a fourth for placements. 

 Three of the independent variables in (1) vary both across states and over time: 

log lf (the log of the size of the labor force), log unem (the log of the number of 

unemployed workers), and log union (the log of union membership32). The state fixedeffects mentioned above are represented by as. These are factors that vary across the 

states in the sample but not over time. Year-specific factors that affect all states equally 

are represented by dt . These could be cyclical factors, trends, or random shocks that are 

specific to just one year. In most of the estimates discussed in section 5.3 below, we 

 

32 Unionization estimates are from Hirsch, Macpherson and Vroman (2001). 
109 

control for these factors by including a set of dummy variables, one for each year. 

Finally, ust is an idiosyncratic or time-varying error term. 

 Equation (1) can be estimated in either of two ways. The simplest approach is to 

start with equation (1) and take first-differences of observations t and t-1 for all t. This 

yields: 

(2) ∆log yst = β 0 + β1∆log lfst + β 2∆logunemst + β 3∆log unionst + ∆dt + ∆ust

where ∆ represents the first-difference operator, and ∆yt represents a set of year dummy 

variables. The state fixed effects, as, have been eliminated from (2) by the first 

differencing. Note that the coefficients in equation (1) and (2) have identical 

interpretations. The only change is that we lose a year of observations in the process of 

taking first differences. 

 An alternative to first-differencing, which is more common now that most 

statistical software makes it easy to implement, is to include in the estimating equation a 

dummy variable for each state s. This yields a “fixed-effects” model because it controls 

explicitly for each state-level fixed effect. (Statistical software does this by “timedemeaning” the data on each variable in the model. Because there are only 51 state 

effects that need to be controlled for, we simply include a set of state-specific dummy 

variables. Time demeaning and including a set of state dummies yield identical results.) 

As written, the model specified by equation (1) is a fixed-effects model because it 

includes the state fixed-effects. 

 With a correctly specified model, the first-difference and fixed-effects estimators 

should give results that differ only by sampling error. Results that differ significantly 

suggest some type of specification error (for example, omitted variables or endogenous 

regressors — see, for example, section 10.6 in Wooldridge (2002)). As will be seen, the 

first-difference and fixed-effects estimates discussed below do differ from each other 

significantly, and we discuss possible sources of and solutions to the specification error 

that appears to exist. 

 Chapter 4 presented and estimated regression models where the dependent 

variable was the rate at which some ES activity occurred, and the independent variables 
110 

were rates such as the unemployment rate. By analogy to the equations (1) and (2), we 

write these rate of activity models as: 

(3) yst = β 0 + β1lfprst + β2unemrtst + β 3unionrtst + as + dt + ust

As in equations (1) and (2), subscript s denotes the state, and subscript t denotes the year, 

so that yst represents the rate at which one of the four ES activities occurred in state s, 

year t. Also, lfpr denotes the labor force participation rate, unemrt denotes the 

unemployment rate, and unionrt denotes the proportion of the labor force that belongs to 

a union. 

 Equation (3) can be estimated as a fixed-effects model or by taking first 

differences. In first-differences, this model can be written: 

(4) ∆yst = β 0 + β1∆lfprst + β2∆unemrtst + β 3∆unionrtst + dt + ust

 Equations (3) and (4), although different in their interpretation from the equations 

(1) and (2), can serve as a complement to those models and provide further checks on the 

appropriateness of the specification. 

 Besides allowing one to address the two main questions listed at the beginning of 

this section, the empirical models developed here allow one to address the following: 

(3) How do changes in the size of the labor force or labor force participation 

affect ES activity? 

(4) To what extent does unionization influence ES activity? 

(5) Other things equal, how much do states differ from each other in their ES 

activities? 

5.3. Results of the Estimation 

 The results of estimating the basic first-difference models (represented by 

equation 2) are displayed in Table 5.2. The first column gives estimates how the labor 

force, unemployment, unionization, and unspecified annual effects influence the number 
111 

Table 5.2. First-difference Loglinear Models of ES Activities 

 [1] [2] [3] [4] 

Dependent variables: log(Applicants) log(Counseled) log(Referrals) log(Placed)

 

Independent variables 

log(Labor force) 0.423 0.076 -0.689 0.431 

 (2.33)* (0.16) (0.93) (1.28) 

log(Unemployed) 0.168 0.154 0.042 -0.149 

 (5.04)** (2.33)* (0.39) (3.18)** 

log(Unionized) -0.005 -0.135 -0.129 -0.082 

 (0.10) (1.18) (0.66) (1.05) 

1967 na na na na 

 

1968 0.048 0.070 na na 

 (2.91)** (1.41) 

1969 -0.019 -0.791 na na 

 (1.22) (16.49)** 

1970 0.037 -0.080 na na 

 (1.88) (1.63) 

1971 -0.006 -0.063 na na 

 (0.28) (1.18) 

1972 0.435 0.020 na na 

 (18.15)** (0.35) 

1973 0.237 0.114 na na 

 (9.71)** (2.07)* 

1974 -0.215 -0.130 na na 

 (11.03)** (2.59)* 

1975 0.122 -0.120 na 0.058 

 (5.11)** (1.97) (2.04)* 

1976 0.017 -0.023 na 0.127 

 (0.86) (0.35) (6.63)** 

1977 0.077 0.120 na 0.225 

 (3.99)** (2.04)* (9.91)** 

1978 0.018 0.121 na 0.130 

 (1.18) (2.60)* (7.61)** 

1979 0.053 0.023 na 0.024 

 (4.14)** (0.47) (1.19) 

1980 0.075 0.003 na -0.030 

 (4.70)** (0.06) (1.35) 

1981 0.239 na na na 

 (11.29)** 

1982 -0.092 na na na 

 (4.28)** 

1983 0.011 na na na 

 (0.49) 

1984 -0.101 na na na 

 (7.33)** 

1985 0.255 na na na 

 (13.57)** 

1986 0.029 -0.030 na 0.025 

 (1.67) (0.68) (1.26) 
112 

Table 5.2. (continued) First-difference Loglinear Models of ES Activities 

 [1] [2] [3] [4] 

Dependent variables: log(Applicants) log(Counseled) log(Referrals) log(Placed)

 

1987 -0.014 -0.043 -0.079 -0.043 

 (0.65) (0.66) (3.73)** (1.85) 

1988 0.020 -0.061 0.006 0.010 

 (0.96) (1.09) (0.34) (0.46) 

1989 0.051 -0.012 0.037 0.018 

 (3.38)** (0.21) (2.04)* (0.95) 

1990 0.075 -0.036 0.023 0.002 

 (5.21)** (0.68) (1.04) (0.09) 

1991 0.059 0.016 -0.060 -0.081 

 (3.16)** (0.21) (1.70) (3.49)** 

1992 0.070 -0.080 -0.090 -0.007 

 (4.91)** (1.14) (1.53) (0.24) 

1993 0.059 0.294 0.110 0.086 

 (3.42)** (4.58)** (1.27) (4.56)** 

1994 -0.003 -0.143 0.005 0.045 

 (0.15) (2.59)* (0.24) (2.39)* 

1996 0.004 -0.105 -0.081 -0.117 

 (0.25) (1.68) (3.95)** (4.53)** 

1997 0.040 -0.136 -0.031 -0.042 

 (2.19)* (1.69) (0.92) (1.15) 

1998 0.015 -0.081 -0.054 -0.016 

 (0.83) (1.20) (1.68) (0.44) 

1999 -0.001 -0.117 -0.152 -0.135 

 (0.07) (1.54) (2.82)** (1.94) 

2000 -0.003 -0.044 -0.060 -0.004 

 (0.13) (0.60) (3.15)** (0.16) 

2001 -0.009 -0.167 -0.215 -0.234 

 (0.32) (1.65) (3.24)** (4.09)** 

Constant -0.045 0.003 0.023 -0.049 

 (3.53)** (0.06) (1.13) (3.23)** 

 

N 1662 1464 765 1122 

R-squared 0.54 0.24 0.07 0.23 

Notes: Models are estimated using available data on the 50 states and DC from 1967 through 2001. (The 

unit of observation is the state-year.) Coefficient estimates should be interpreted as elasticities. N varies 

among the four models because observations are missing in different years for different activities, as 

described in the text. In addition to the independent variables shown, all models include a dummy variable 

for each state (not reported). 

Robust t-statistics in parentheses 

*significant at 5% level; **significant at 1% level 
113 

of job applicants processed by the ES. The second column gives estimates of how the 

same variables influence the number of workers counseled by the ES. And so on. 

 Consider first the impact of changes in the size of the labor force on ES activities. 

Because the model is in logarithms, the coefficient estimates are interpreted as 

elasticities. Accordingly, they suggest that a doubling of the labor force results in a 53 

percent increase in the number of ES applicants [exp(0.423) = 1.53], but essentially no 

change in the number of workers counseled, referred to jobs, or placed in jobs. (Even 

though the estimated coefficients on referrals and counseling are large, the t-ratios of 

those coefficients are all well below 1.65, which is the cutoff for significance at the 10-

percent level. If we take the point estimates at face value, they suggest that increases in 

the labor force have been associated with declines in referrals and increases in 

placements.) We will have more to say about these estimates below, when we discuss the 

fixed-effects models (Table 5.3.). 

 Consider next the impact of changes in unemployment on ES activities. The 

estimates suggest that the number of applicants and number of workers counseled both 

vary countercyclically, rising when unemployment rises and falling when unemployment 

falls. The elasticities of applications and counseling with respect to the number of 

unemployed workers are about 0.16 to 0.17. So when the labor market goes slack, more 

workers go to the ES for services, and the ES increases its counseling services. In 

contrast, ES referrals to jobs do not vary over the cycle, and the number of job 

placements varies procyclically, falling when unemployment rises. This suggests that, 

even though the number of ES applicants rises during recessions, the ES does not 

mechanically increase the number of job referrals it makes when the stock of applicants 

grows. Doing so would presumably be an exercise in futility because the number of job 

vacancies falls during recession. Clearly, the dwindling number of job vacancies during 

recession accounts for the drop in placements during recessions. 

 The extent of union membership appears to be unrelated to any ES activities. Our 

hypothesis was that unions provide services to members that substitute for services of the 

ES, but the findings from the first difference model do not support this. 

 Table 5.2 also includes estimates of year-specific effects on ES activities, with 

1995 as the reference year. The estimates suggest both a general downtrend in ES 
114 

applications (the estimated coefficients tend to be higher in the 1970s than later) and an 

increase in applications in years of labor market slack (for example, the early 1980s). 

However, neither pattern is striking. The downward trend of counseling and referrals is 

clearer in Table 5.2, as is the cyclical variation in placements. Although we do not 

display the results, we have also estimated models that include a time trend rather than 

year-specific dummies. The results suggest clear downtrends in all ES activities. It might 

be useful to include both a time trend and year-specific dummies in the models, but we 

have not yet done so. In any case, we take the fact that the unemployment variable is able 

to pick up evidence of variation in applications, counseling, and placements, even after 

controlling for year-specific effects, as strong evidence that cyclical impacts do exist. 

 Table 5.3 displays the results of estimating the models of ES activities by fixed 

effects. These results are consistent with the first-difference results in one important way 

— they suggest again that ES applications and counseling services both rise in recessions 

(that is, when unemployment rises). However, they are inconsistent with the firstdifference results in three ways. First, they do not reconfirm that placements fall in 

recessions, which strikes us as implausible. Second, they suggest that the impact of labor 

force growth on ES activities is either unrealistically large or opposite that found in the 

first-difference specification. For example, the results suggest that elasticity of applicants 

with respect to number of workers in the labor force exceeds 1 [exp(0.958) = is 2.61, so 

the elasticity is 2.61 – 1 = 1.61], and that referrals and placements increase dramatically 

in response to increases in the labor force (rather than remaining roughly constant). 

Third, they suggest that increased union membership significantly reduces ES 

applications, referrals, and placements (all consistent with our hypothesis) and increases 

counseling (inconsistent with our hypothesis). 

 These differences between the first-difference and fixed-effects estimates suggest 

that the underlying model we are estimating is misspecified — in particular, that it omits 

a variable that should be included. An obvious possibility is the federal allocation to the 

ES, which is state-specific and time-varying. Data on this allocation, which has trended 

downward over the years we are considering, would allow us to control for the resources 

available to the ES for assisting and delivering services to workers. However, if we had 

to choose between the first-difference models (Table 5.2) and the fixed-effects models 
115 

Table 5.3. Fixed-effects Loglinear Models of ES Activities 

 

 [1] [2] [3] [4] 

Dependent variables: log(Applicants) log(Counseled) log(Referrals) log(Placed)

 

Independent variables 

 log(Labor force) 0.958 0.033 2.481 1.779 

 (15.09)** (0.14) (8.56)** (10.99)** 

 log(Unemployed) 0.194 0.396 -0.035 0.012 

 (7.08)** (3.89)** (0.51) (0.22) 

 log(Unionized) -0.390 0.765 -1.186 -1.096 

 (8.19)** (4.21)** (7.37)** (10.10)** 

 Constant 1.739 -9.526 -2.085 1.442 

 (4.01)** (6.04)** (1.00) (1.37) 

 

N 1737 1566 816 1224 

R-squared 0.96 0.69 0.90 0.90 

Notes: Models are estimated using available data on the 50 states and DC from 1967 through 2001. (The 

unit of observation is the state-year.) Coefficient estimates should be interpreted as elasticities. N varies 

among the four models because observations are missing in different years for different activities, as 

described in the text. All models include a dummy variable for each year (not reported) and a dummy 

variable for each state (reported in Table 5.4). 

Absolute value of t-statistics in parentheses 

*significant at 5% level; **significant at 1% level 
116 

(Table 5.3), we would choose the first-difference models because they tend to be less 

sensitive to specification error of the kind that concerns us (Wooldridge (2002), section 

10.6). 

 An advantage to the fixed-effects approach, however, is that is allows one to 

retrieve the state-specific fixed effects, which are estimated as the coefficients on the 

state dummy variables. These are displayed in Table 5.4 and come from the same models 

whose basic results are shown in Table 5.3. In each case, Florida is chosen as the 

reference state because preliminary analysis suggested that, among the large states, its ES 

activities were closest to the median. The results suggest that applications tend to be 

lower than median in Regions I and III, and tend to be above median in Regions V, VI, 

VIII, and X. Counseling tends to be low in Region V and tends to be high in Regions VI 

and VIII. Referrals and placements both tend to be high in Regions III, V, VII, VIII, and 

X. These findings conflict in some cases with the findings reported in Chapter 4. There 

are three possible reasons for the differences. First, the estimates reported in Table 5.4 

control for other variables, such as labor force size and unemployment. Second, if the 

models in Table 5.4 do suffer from omitted variables as we suggested above, then these 

estimates would be inconsistent. Third, from the mid-1980s, the placement variable 

utilized here differs from that in Chapter 4 in the omission of “obtained employment” 

which became increasingly important during the 1990s. 

 An alternative to the logarithmic specifications discussed to this point is the 

activity rate specification represented by equations (3) and (4). Estimates of the firstdifference version of this model (equation 4) are displayed in Table 5.5. These results are 

similar to those in Table 5.2 in two main respects. First, they suggest again that ES 

applications rise in recessions (in this case, when the unemployment rate rises), that 

referrals do not vary over the cycle, and that placements fall in recessions. (Contrary to 

the findings in Table 5.2, however, the results suggest that counseling does not vary over 

the business cycle.) Second, Table 5.5 tends to confirm that ES activities are insensitive 

to changes in the extent of union membership. 

 However, Table 5.5’s findings about the relationship between the labor force 

participation rate (LFPR) and ES activities are generally inconsistent with Table 5.2. 

Table 5.5 suggests that increases in the LFPR decrease all four measures of ES activity 
117 

Table 5.4. Proportional Deviations of States’ ES Activities from Reference State 

(Florida); Estimates from Fixed-effects Loglinear Models 

 [1] [2] [3] [4] 

Dependent variables: log(Applicants) log(Counselled) log(Referrals) log(Placed)

 

Regions/States 

Region I 

CT 0.030 -0.244 0.554 -0.430 

 (0.40) (0.90) (1.52) (2.34)* 

ME -0.168 -0.468 1.508 0.007 

 (1.55) (1.19) (2.61)** (0.03) 

MA -0.316 -0.139 0.006 -0.169 

 (5.22)** (0.62) (0.02) (1.22) 

NH -0.582 0.907 -0.026 -1.057 

 (5.09)** (2.19)* (0.05) (3.73)** 

RI -0.310 0.684 0.584 -0.516 

 (2.70)** (1.65) (0.92) (1.72) 

VT -0.168 1.141 1.353 -0.339 

 (1.21) (2.28)* (1.84) (0.96) 

 

Region II 

NJ 0.016 -0.372 0.044 -0.047 

 (0.24) (1.48) (0.18) (0.32) 

NY 0.242 -0.438 0.416 0.717 

 (3.05)** (1.46) (1.71) (4.18)** 

 

Region III 

DE -0.658 0.222 0.502 -0.935 

 (5.01)** (0.47) (0.72) (2.77)** 

DC 0.153 2.062 1.667 0.612 

 (1.20) (4.50)** (2.23)* (1.78) 

MD -0.322 0.896 0.234 -0.223 

 (5.03)** (3.80)** (0.87) (1.49) 

PA 0.202 -1.385 0.573 0.743 

 (3.02)** (5.50)** (3.06)** (5.32)** 

VA -0.171 -0.837 -0.433 -0.564 

 (3.11)** (4.12)** (2.17)* (4.71)** 

WV 0.187 0.376 1.802 0.598 

 (1.92) (1.06) (3.40)** (2.34)* 

 

Region IV 

AL 0.338 -0.706 1.344 0.785 

 (5.07)** (2.88)** (4.30)** (4.83)** 

FL ref ref ref ref 

GA -0.057 1.217 0.208 -0.079 

 (1.07) (6.13)** (1.11) (0.68) 
118 

Table 5.4. (Cont.) Proportional Deviations of States’ ES Activities from Reference State 

 [1] [2] [3] [4] 

Dependent variables: log(Applicants) log(Counselled) log(Referrals) log(Placed)

KY 0.205 0.900 1.287 0.688 

 (2.95)** (3.52)** (3.82)** (4.02)** 

MS 0.228 1.368 0.928 0.357 

 (2.79)** (4.59)** (2.24)* (1.76) 

NC -0.015 0.896 0.137 -0.169 

 (0.26) (4.11)** (0.69) (1.34) 

SC -0.221 0.332 0.185 -0.571 

 (2.78)** (1.13) (0.54) (3.09)** 

TN 0.018 -1.207 0.615 0.203 

 (0.30) (5.44)** (2.40)* (1.45) 

 

Region V 

IL 0.225 -1.614 0.469 0.643 

 (3.35)** (6.48)** (2.44)* (4.61)** 

IN 0.283 -1.148 0.799 0.394 

 (4.16)** (4.59)** (3.04)** (2.58)** 

MI 0.486 -0.784 -0.004 0.363 

 (6.86)** (2.92)** (0.02) (2.33)* 

MN 0.094 -0.865 1.064 0.617 

 (1.32) (3.30)** (3.49)** (3.69)** 

OH 0.320 -1.838 0.507 0.463 

 (4.76)** (7.34)** (2.59)** (3.30)** 

WI 0.207 -0.622 1.112 0.390 

 (2.99)** (2.44)* (3.91)** (2.43)* 

 

Region VI 

AR 0.186 -0.252 1.013 0.330 

 (2.23)* (0.82) (2.38)* (1.58) 

LA -0.055 -0.332 0.312 -0.145 

 (0.85) (1.39) (1.02) (0.93) 

OK 0.145 0.606 0.706 0.153 

 (1.99)* (2.26)* (1.96) (0.85) 

NM 0.020 0.897 0.592 -0.062 

 (0.19) (2.37)* (1.13) (0.24) 

TX 0.281 0.521 -0.219 0.122 

 (5.54)** (2.76)** (1.59) (1.18) 

 

Region VII 

IA 0.170 -0.053 1.446 0.825 

 (2.23)* (0.19) (3.81)** (4.37)** 

KS -0.155 0.649 0.684 -0.059 

 (1.94) (2.23)* (1.71) (0.30) 

MO 0.460 -0.077 1.201 0.604 

 (7.43)** (0.33) (4.59)** (4.16)** 

NE -0.251 0.925 0.986 0.128 

 (2.60)** (2.63)** (1.97)* (0.53) 
119 

Table 5.4 (Continued) Proportional Deviations of States’ ES Activities from Reference State; 

 [1] [2] [3] [4] 

Dependent variables: log(Applicants) log(Counselled) log(Referrals) log(Placed)

Region VIII 

 

CO -0.062 0.319 0.525 -0.064 

 (0.88) (1.23) (1.66) (0.39) 

MT 0.269 1.268 2.211 0.843 

 (2.19)* (2.85)** (3.32)** (2.65)** 

ND 0.075 1.361 2.132 0.602 

 (0.56) (2.83)** (2.96)** (1.76) 

SD -0.021 1.664 1.715 0.449 

 (0.16) (3.50)** (2.47)* (1.35) 

UT 0.227 1.641 1.552 0.620 

 (2.28)* (4.57)** (3.20)** (2.53)* 

WY -0.009 1.508 2.185 0.545 

 (0.06) (2.83)** (2.78)** (1.45) 

Region IX 

AZ -0.042 -0.035 0.148 -0.369 

 (0.55) (0.13) (0.48) (2.15)* 

CA 0.164 -2.078 -0.551 0.311 

 (2.09)* (7.01)** (2.08)* (1.83) 

HI 0.005 -0.245 1.797 0.141 

 (0.04) (0.57) (2.86)** (0.46) 

NV 0.015 0.177 1.558 0.263 

 (0.13) (0.43) (2.83)** (0.93) 

 

Region X 

AK 0.326 0.630 2.625 1.173 

 (2.22)* (1.19) (3.43)** (3.13)** 

ID 0.157 0.528 1.740 0.484 

 (1.37) (1.27) (2.92)** (1.67) 

OR 0.377 0.385 1.833 0.946 

 (4.71)** (1.25) (4.77)** (4.75)** 

WA 0.314 -0.447 1.367 0.955 

 (4.27)** (1.63) (4.61)** (5.50)** 

Constant 1.419 -7.688 -2.591 0.980 

 (3.45)** (5.17)** (1.23) (0.95) 

 

Observations 1737 1566 816 1224 

R-squared 0.96 0.69 0.90 0.90 

Notes: Estimates from fixed-effects models reported in Table 5.3. Coefficient estimates represent the 

average proportional deviation of ES activity in each state from the average level of ES activity in Florida, 

controlling for the size of the labor force, the number of unemployed workers, the number of unionized 

workers, and year. 

Absolute value of t-statistics in parentheses 

*significant at 5% level; **significant at 1% level 
120 

Table 5.5. First-difference Models of ES Activity Rates 

 [1] [2] [3] [4] 

Dependent variables: Applicant Rate Counseling Rate Referral Rate Placement 

Rate

 

Independent variables 

Labor force participation -0.198 -0.030 -0.156 -0.047 

rate (3.05)** (2.18)* (3.58)** (3.64)** 

Total unemployment rate 0.003 0.000 -0.000 -0.001 

 (2.89)** (1.79) (0.80) (4.70)** 

Union coverage rate 0.001 -0.000 -0.000 0.000 

 (1.43) (0.93) (0.60) (0.53) 

Constant -0.009 0.000 -0.000 -0.001 

 (4.08)** (0.88) (0.51) (2.84)** 

 

N 1662 1479 765 1122 

R-squared 0.56 0.41 0.17 0.31 

Notes: Models are estimated using available data on the 50 states and DC from 1967 through 2001. (The 

unit of observation is the state-year.) N varies among the four models because observations are missing in 

different years for different activities, as described in the text. In addition to the independent variables 

shown, all models include a dummy variable for each year (not reported). 

Robust t-statistics in parentheses 

*significant at 5% level; **significant at 1% level 
121 

that we are examining. This apparent inconsistency may occur because the relationships 

being estimated here (that is, between the LFPR and activity rates) are different from 

those being estimated in Table 5.2 (where the relationships are between the size of the 

labor force and the number of applicants and services delivered). Table 5.5’s results may 

suggest indirectly that the influx of women into the labor force — which is mainly 

responsible for the increase in the LFPR — has been partially responsible for reduced ES 

activity. Alternatively (or in addition), the results could suggest that the sectors of the 

labor market that are growing (and where new labor force entrants are employed) may be 

less well served by the ES than are traditional sectors of the labor market. These are 

topics on which research would be useful. 

 Estimates of the fixed-effects version of the activity rate model (equation 3) are 

displayed in Table 5.6. These results are generally in accord with the results in Table 5.2. 

First, they suggest again that ES applications and counseling rise in recessions, and that 

placements fall in recession, although by a very small amount. (Unlike the findings in 

Table 5.2, however, they suggest that referrals fall in recessions.) Second, they suggest 

that increases in the LFPR increase the applicant rate, but have little impact on other ES 

activities. Although in accord with Table 5.2’s results (which we have been relying on as 

the most convincing of those we have obtained so far), the fixed-effects results on the 

LFPR and ES activity in Table 5.6 differ significantly from the first-difference results on 

the LFPR and ES activity in Table 5.5. This suggests again that some relevant variable 

has been omitted. Third, Table 5.5 tends to confirm that ES activities are insensitive to 

changes in the extent of union membership, although they do suggest that increases in 

union coverage tend to reduce referrals (consistent with our hypotheses about union 

membership and ES activity). 

5.4. Conclusions 

 The estimates presented in this chapter must be viewed as preliminary because the 

evidence suggests that some important variable (or variables) determining ES activities 

has been omitted from the models. A likely culprit is the omission of the annual federal 

ES allocation that funds each state’s program, although other (and additional) 
122 

Table 5.6. Fixed-effects Models of ES Activity Rates 

 [1] [2] [3] [4] 

Dependent variables: Applicant Rate Counseling Rate Referral Rate Placement Rate

 

Independent variables 

Labor force participation 0.269 -0.011 0.024 -0.016 

rate (4.55)** (0.70) (0.57) (0.93) 

Total unemployment rate 0.005 0.001 -0.001 -0.000 

 (6.60)** (2.43)* (1.99)* (2.18)* 

Union coverage rate 0.000 0.000 -0.002 -0.000 

 (0.19) (1.67) (3.20)** (0.41) 

Constant -0.036 0.012 0.099 0.043 

 (0.85) (1.02) (3.05)** (3.44)** 

 

N 1737 1581 816 1224 

R-squared 0.41 0.39 0.23 0.73 

Notes: Models are estimated using available data on the 50 states and DC from 1967 through 2001. (The 

unit of observation is the state-year.) All models include a dummy variable for each year (not reported) and 

a dummy variable for each state (not reported). 

Absolute value of t-statistics in parentheses 

*significant at 5% level; **significant at 1% level 
123 

possibilities exist as well. The main indication that the model may be misspecified is that 

the first-difference and fixed-effects approaches give substantially different answers to 

the same questions posed, particularly about the relationship between labor force growth 

(or labor force participation) and ES activities. 

 Despite the evidence of specification error, the evidence regarding the way in 

which ES activities vary over the business cycle is generally consistent. The firstdifference and fixed-effects estimates of both the logarithmic and activity rate models 

suggest that applications and applicant rates rise when the labor market goes slack; job 

placements and placement rates fall in a slack labor market; and counseling and referrals 

(surprisingly, perhaps) appear not to vary much over the cycle. Although these findings 

could change when and if it is possible to estimate models that are more completely 

specified, the fact that they are consistent in the first-difference and fixed-effects models 

suggests that they are quite robust. 

 Clearly, there is room for further work with these data. The first line of attack 

should be to add variables to the dataset and check whether omitted variables are indeed 

the source of the specification error that we believe now plagues the models. A second 

line of attack, if it is impossible to add appropriate data, would be to look for econometric 

modeling solutions to the specification problem. For example, even in the absence of 

additional variables, it may be possible that use of appropriate lags of the existing 

variables could result in consistent estimates of the relationships that are of interest. 
124 

Chapter 6. Conclusions and Further Research 

 This project undertook two kinds of activities. 1) It assembled time series data on 

UI benefit payments and ES activities. 2) It examined UI and ES data using descriptive 

tabulations, simulation analysis and regression analysis. The analysis of all five preceding 

chapters emphasized the effects of the business cycle on the UI and ES programs. 

 The strategy of the data assembly activities was to develop annual files with 

information for the individual states. This underlying data structure would thus support 

analysis at three levels: national aggregates, regions and states. Different parts of 

Chapters 1-5 reported summary information and analytic findings for all three levels of 

geographic detail. 

Because the project wanted to trace effects of the business cycle on the UI and ES 

programs, it also examined unemployment rates in the states and regions. As noted in 

Chapter 2, unemployment data by state are available from the CPS for years starting in 

1967. Unemployment levels and unemployment rates figured prominently in the analysis 

of UI and ES program activities. 

The data assembled for the project are incomplete. While the UI data for the 

regular UI program and the EB program are complete, the data on temporary federal 

benefits (TFB) for individual states extend only from 1975. Earlier TFB data are 

available only for national aggregates. This means that one cannot examine TFB 

participants and benefits in individual states and regions for the pre-1975 programs with 

the acronyms TUC, TEUC and TC. 

The ES data were collected for years starting in 1967. These data have numerous 

breaks as described in Appendix B and as shown in Table 4.1. Data assembly focused on 

ES activities and services as well as the demographic characteristics of ES applicants. 

The data on services extend back to 1967 while demographic data on ES applicants 

mainly extend from 1980. For many series, data were missing for the five year period 

from 1980 to 1984. As documented in Appendix B, however, several ES data series were 

also missing for many other individual years. 

Chapters 1-5 report results of various analyses of the UI and ES programs. 

Chapters 1-3 focused on the UI program while Chapters 4 and 5 examine ES activities. 
125 

The analysis of these chapters was not exhaustive, but rather exploratory. For both 

programs, strong and consistent linkages with unemployment were demonstrated. 

Chapters 1 and 2 both traced the change in relative importance of EB and TFB 

after 1980. In the recessions following the double dip recession of 1980-1983, the role of 

EB declined and that of TFB increased. Support for the long term unemployed who 

exhaust regular UI benefits during recessions now comes almost exclusively from TFB 

programs. While this change is certainly linked to the revision of EB triggers of the early 

1980s, the simulation analysis of Chapter 3 demonstrated that the declining role for EB 

was partly attributable to both lower unemployment and lower recipiency of regular UI 

benefits in the years since the mid-1980s. 

The analysis of ES activities of Chapters 4 and 5 found strong and positive effects 

of unemployment on ES applications. This finding was present in national and regional 

data (Chapter 4) and in state data (Chapter 5) using regression analysis based on four 

different methods of data measurement. Placement rates and entered employment rates 

were negatively associated with unemployment rates. Recessions both increase the 

number of ES applicants and reduce the volume of ES placements. While these findings 

are hardly surprising to those familiar with the ES program, they should reassure readers 

that the ES data assembled by the project yield sensible results. 

The findings regarding entered employment rates have relevance for the ES 

performance measures which became effective in July 2001.33 The entered employment 

rate is a key performance measure applied to job seekers. Since entered employment rates 

show strong sensitivity to the unemployment rate, it would seem that this sensitivity 

could be incorporated into this performance measure, permitting a lower entered 

employment rate in years of above-average unemployment. 

The project did sufficient analysis of regional data to highlight strong and 

persistent differences in regional outcomes for both the UI and the ES programs. Chapter 

2 documented the consistently high regular UI recipiency rates in Regions 1, 2 and 10 

and low recipiency rates in Regions 4, 6 and 8. Chapter 4 showed that ES application 

rates were particularly high in Region 8 and consistently above-average in Regions 4, 6, 7 

and 10. Consistently low application rates were found in Regions 1, 2, 3, and 9. Wide 

 

33 The performance measures are listed in the federal register of May 31, 2001, pp. 29647-29653. 
126

regional contrasts in entered employment rates were also documented. The diversity 

demonstrated in this report for the DOL regions (and Census divisions) could be 

examined in greater depth with additional analysis of state-level data.

Several important evolutionary developments were documented by this project. 

Three seem particularly noteworthy. 1) Recessions have been less frequent and less 

severe in the past 20 years compared to recessions in earlier decades. The contrast in 

recessionary patterns is clear in Table 1.1 of Chapter 1. 2) Unemployment duration has 

been lengthening and the rate of change accelerated after 1980. Among other things, this 

suggests the regular UI programs in future years will experience a continuing pattern of 

high, and, perhaps, increasing exhaustion rates. 3) The route whereby ES applicants 

secure new jobs has been changing with the rate of change being most rapid since 1994. 

ES placements are becoming much less important while the volume of obtained 

employment related to ES support activities has been growing. The use of job orders 

from employers as the route to reemployment seems destined to continue declining while 

ES support of self service and other reemployment support services seems destined to 

continue growing. 

Readers will observe that the present report is by no means exhaustive. As noted 

above, data collection was a primary purpose of the project. Additional analysis of the 

data assembled in the project, at both the state and the regional levels, is to be anticipated. 

Among potential topics for further research, four can be highlighted as priority 

research areas. 1) Further research into the changing patterns of unemployment 

occurrences and unemployment duration should be pursued. Among the factors that may 

be driving the trend towards increased unemployment duration, three can be readily 

identified for additional research: the ageing of the U.S. labor force, changes in worker 

skill requirements and an increased underlying rate of worker dislocations. Each may be 

contributing to the lengthening of unemployment duration documented in Chapter 1. Data 

on the pace of unemployment occurrences examined in Chapter 1 yielded different 

estimates as to the annual rate of unemployment occurrences. A comparative analysis of 

monthly data and work experience data from the CPS is needed.

2) More analysis of EB triggers is warranted. The simulations of Chapter 3 

utilized IUR-based triggers only from 1987. It would be appropriate to extend the
127

analysis of IUR-based triggers back to 1980 so that the comparisons of outcomes with 

IUR-based and TUR-based triggers would be more complete. Using data from identical 

historical periods would strengthen the findings regarding the relative targeting efficiency 

of IUR versus TUR triggers. As noted in Chapter 3, the effects of other trigger 

mechanisms could also be examined, e.g., using information on exhaustion rates. 

3) The present project did not explore the linkages between the resources devoted 

to ES administration in individual states and the labor market outcomes linked to ES 

activities. This analysis would require information not only on the Wagner-Peyser ES 

allocations to the states but also the amount of state supplementation of federal ES 

administrative monies. 

4) Finally, while the report documented changes in entered employment rates and 

changes in the mix of placement rates versus obtained employment rates, no attempt was 

made to tie these changes to the evolution of ES administrative structures and/or the 

contrasts in the one-stop operations across the states. Examining this linkage will be of 

continuing interest as ES programs strive to provide effective reemployment support for 

workers who experience new onsets of unemployment.

The data assembled in the present project will facilitate new research on all four 

of these topics.
128 

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 Employment and Training Administration, 1994). 

Czajka, John L., Sharon L. Long, and Walter Nicholson, “An Evaluation of the 

Feasibility of a Substate Area Extended Benefit Program,” Unemployment 

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Employment and Training Administration, 1989) 

Fagnoni, C. M., “Workforce Investment Act: Implementation Status and the Integration 

of TANF Services,” Washington, DC: U.S. General Accounting Office, GAO/THEHS-00-145, (June 29, 2000). 

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Economy, (Homewood IL: Richard D. Irwin, 1966). 

Hirsch, Barry, Devid Macpherson and Wayne Vroman, “ State-Level Estimates of Union 

Density, 1964 to Present,” Monthly Labor Review, Vol. 124, (July 2001), pp. 51-

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129 

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LaLonde, Robert, “The Promise of Public Sector-Sponsored Training Programs,” Journal 

of Economic Perspectives, Vol. 9 (Spring 1995), pp. 149-168. 

McConnell, Margaret, and Gabriel Perez-Quieros, “Output Fluctuations in the United 

States: What Has Changed Since the Early 1980s?” American Economic Review, 

(December 2000), Vol. 90, No. 5, pp. 1464-1476. 

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of Economic Literature, Vol. 33 (March 1995), pp. 91-131. 

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Unemployment Compensation (EUC) Program,” CRS Report to Congress 93-367 

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Service, (March 25, 1993). 

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Insurance Financial Data,” ET Handbook 394, (Washington, D.C.: U.S. 

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Workforce Security. Unemployment Insurance Reports Handbook 401, third 

edition, (May 2000). Available at <http://ows.doleta.gov/dmstree/>. 

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Unemployment Compensation Act of 1974,” (Washington, D.C.: U.S. 

Government Printing Office, 1977). 

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Office of Workforce Security Occasional Paper 2002-2, (Washington, DC: U.S. 

Department of Labor, Employment and Training Administration, 2002). 

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and U.S. Department of Labor Programs,” Final report to the U.S. Department of 

Labor for Contract No. 99-9-0421-75-051-01, (December 1992). 

Woodbury, Stephen A. and Murray A. Rubin, “The Duration of Benefits,” In 

Unemployment Insurance in the United States: Analysis of Policy Issues, edited 

by C. J. O'Leary and S. A. Wandner, (Kalamazoo, MI: W. E. Upjohn Institute for 

Employment Research, 1997), pp. 211-283. 
130 

Woodbury, Stephen A, “New Directions in Reemployment Policy,” Employment 

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(Cambridge, MA: The MIT Press, 2002). 
131 

Appendix A. UI Benefits by State and Year 

 The perspective of the project was to study annual calendar year data on UI 

benefit payments by state and year. Using states as the basic building blocks allows one 

to aggregate to regions (both DOL regions and Census regions) and to the nation as a 

whole. For two of the three tiers of UI, historic data were readily available for as long as 

desired, e.g., back to World War II for the regular UI program and back to 1971 for the 

Federal-State Extended Benefits (EB) program. Financial data (total benefits, state share 

and federal share) and claims data (first payments, weeks compensated, exhaustions 

weekly benefits and average duration) were all available. Additionally, there are regular 

UI data for potential duration and actual duration among benefit exhaustees. The regular 

UI data were also fully available for reimbursable employment which commenced in 

1971 and expanded substantially in 1978. 

 As noted in Chapter 1, some form of temporary federal benefits (TFB) program 

has been enacted in every recession since 1958. For the TFB programs starting with 

Federal Supplemental Compensation (FSC) of 1982-1985, data again are fully available. 

As with EB, these data cover total benefits paid, first payments, weeks compensated, 

exhaustions and the average weekly benefit. Interested researchers and others can simply 

access electronic data bases maintained by OWS and obtain the desired data for the FSC 

program of 1982-1985, the Extended Unemployment Compensation (EUC) program of 

1991-1994 and the recent Temporary Extended Unemployment Compensation (TEUC) 

program which started in March 2002. These data have been utilized along with the 

Regular UI and EB data displayed in Table 1.2 of Chapter 1. 

 Assembling data by state and year for the earlier TFB programs presents 

important challenges. For all the earlier TFB programs national data on total benefit 

payments are readily from the National Income and Product Accounts (NIPA). The NIPA 

data, for example, were used in Table 1.2 for the TFB programs of 1958-1959 (TUC), 

1961-1962 (TEUC) and 1972-1973 (TC). All three programs were comparatively short 

and they usually represented less than 10 percent of total UI benefits for years when they 
132 

were active.34 For these three TFB programs, no information was found for claims, 

exhaustions and the level of weekly benefits. Because no state detail was found for these 

earlier TFB programs, they entered the analysis of the current report only at the level of 

national aggregates. 

 The program of 1975-1978, Federal Supplemental Benefits (FSB), was 

considerably larger with cumulative benefit payments exceeding $6.0 billion and 

representing from 11 to 19 percent of total benefits in the years 1975, 1976 and 1977. The 

FSB program also lasted for a longer period than its three TFB predecessors with the last 

benefit payments occurring in the spring of 1978. 

The project developed annual state-level estimates for the TFB program during 

the three years 1975, 1976 and 1977. The estimates were developed using three sources 

of information. 1) OWS was able to supply annual national totals for total benefit 

payments, first payments, weeks claimed, weeks compensated, final payments and 

weekly benefits for each of the three years. The totals referred to the 50 states plus the 

District of Columbia and Puerto Rico. 2) For 1975, state-level data appeared in 

congressional testimony about the FSB program.35 The data pertained to three FSB 

variables: total benefits, first payments and final payments (exhaustions). 3) Because 

potential FSB entitlements were linked to state unemployment rates (IURs), there were 

data on claims activity during the period when FSB was active. These data were available 

in so called trigger reports from the states with the data reported on a weekly basis. For 

one week in each quarter data were gathered from these trigger reports with weeks 

selected that had seasonal factors close to unity, i.e., the ratio of raw data on weeks 

claimed to seasonally adjusted data for the regular UI was close to unity. 

In deriving the estimates of weekly FSB benefits during 1975, we noted the ratio 

of the EB weekly benefit in each state to the national average for EB and multiplied this 

ratio by the national WBA for FSB. Total FSB payments divided by this estimate of FSB 

weekly benefits was used to derive estimates of FSB weeks compensated. These 

estimates could be compared to data on weeks claimed to check on their 

“reasonableness.” Thus for 1975 there were three state-level variables taken directly from 

 

34 The important exception is TEUC benefit payments in 1961 which represented 15 percent of total 

benefits for that year. See column [9] in Table 1.2. 

35 See page 14 of U.S. Senate, Committee on Finance (1977). 
133 

the congressional document (total benefits, first payments and exhaustions) and two 

derived variables (the weekly benefit amount or WBA and weeks compensated). By 

construction, the product of weeks compensated and the WBA equaled total FSB benefits 

for each state in 1975. 

Since much less data were available for 1976 and 1977, the data construction task 

was more difficult. After some experimentation it was again decided to estimate the 

WBA using the ratio of the state’s WBA for EB to the national WBA for EB. This state 

ratio was then multiplied by the national WBA for the FSB program to yield estimates of 

the WBA for FSB in each state. To estimate FSB weeks compensated by state, we relied 

heavily on the ratio of weeks compensated to weeks claimed in each state during 1975. 

The initial estimates for 1976 and 1977 were then adjusted to agree with the national 

aggregate for weeks compensated. Since there were no state level estimates of annual 

FSB benefit payments for these two years, the statewide totals were initially estimated as 

the product of weeks compensated times the WBA. In a second iteration, the state 

estimates of weeks compensated were adjusted to agree with the national totals supplied 

by OWS. Because the benchmarks provided by actual data on total state FSB benefit 

payments were not available for 1976 and 1977, the state estimates for these years are 

less reliable than for 1975. 

Note also that no attempt was made to estimate FSB first payments and final 

payments during 1976 and 1977. Finally, we note that FSB benefit payments during 1978 

were very modest ($15 million). No attempt was made to derive state-level estimates. 
134 

Appendix B. Employment Service Activities by State and Year 

 Assembling data on Employment Service (ES) activities presented a number of 

challenges and this appendix provides details of project activities. As will be apparent 

shortly, there remain significant gaps in the files that have been assembled. However, for 

the researcher interested in tracing the evolution of ES activities for the past 35 years, a 

set of usable data files now exists. 

 The aim of the project was to assemble annual data by state. The first issue to be 

noted is that the reference periods for individual years differ. The left hand columns in 

Table B.1 show details of the time periods and the annual designations of the years. The 

table spans the period from fiscal year (FY) 1967 (July 1966 to June 1967) to program 

year (PY) 2000 (July 2000 to June 2001). Note that the start dates and end dates for the 

FY data changed from July-to-June in FY1976 to October-to-September in FY1977. 

Three months of ES activities (July-September 1976) are not captured by these data. Note 

also that the first year of program year data (PY1983) spans just nine months from 

October 1983 to June 1984. An analysis of activities for this period should “annualize” 

these data to make them comparable with data from other years. 

Finally, observe that FY data have year designations for the final month of each 

fiscal year while PY data use the first month of the year in PY dating. Thus there are two 

1983s in the left hand column of Table B.1. For purposes of consistency, each annual 

period referred to in the data was assigned its year designation on the basis of the final 

month in the accounting period. Thus PY2000 data are dated 2001 because the final 

month is June 2001. By following this convention, there is no duplication of 1983 in the 

transition from FY to PY data. 

The reporting systems that summarize ES activities have undergone important 

changes over the 1967-2001 period. Also, in moving towards the present, electronic files 

become more available. Thus there are horizontal lines in Table B.1 that break the 35 

years into six subgroups of years. For the two earliest periods (FY1967 to FY1973 and 

FY1974 to FY1980), the data were derived exclusively from hard copy reports, e.g., 

various issues of the “Employment and Training Report of the President.” For the periods 

between FY1981 and PY1991, data were obtained from both hard copy sources and 
Table B.1. Summary of ES Activities and Services in Data File, State-by-Year Information, 1967 to 2001

Fiscal Yr. Dura Last Refer- Appli- Some Assess. Inter- Coun- Tested Referred Placed Regist. Job Placed Placed Placed Obtained Entered

Program tion Month ence cations Service Services viewed seled to Train- in Train- Job Referrals Total Non-Ag Perm. Employ- EmployYear Year Total ing ing Open. Jobs ment ment

FY1967 12 6 1967 X X X X XFY1968 12 6 1968 X X X X X XFY1969 12 6 1969 X X X X XFY1970 12 6 1970 X X X XFY1971 12 6 1971 X X X XFY1972 12 6 1972 X X XFY1973 12 6 1973 X X XFY1974 12 6 1974 X X X X X XFY1975 12 6 1975 X X X X X XFY1976 12 6 1976 X X X X X XFY1977 12 9 1977 X X X X X XFY1978 12 9 1978 X X X X X XFY1979 12 9 1979 X X X X X XFY1980 12 9 1980 X X X X X XFY1981 12 9 1981 X-25-R X-R X-R

FY1982 12 9 1982 X-41-R X-R X-R X-R X-R X-R X-R X-RFY1983 12 9 1983 X-41-R X-R X-R X-R X-R X-R X-R X-R

PY1983 9 6 1984 X-41-R X-R X-R X-R X-R X-R X-R X-RPY1984 12 6 1985 X X X X-R X-R X-R X X XPY1985 12 6 1986 X X X X X X X X X X XPY1986 12 6 1987 X X X X X X X X X X XPY1987 12 6 1988 X X X X X X X X X X XPY1988 12 6 1989 X X X X X X X X X X XPY1989 12 6 1990 X X X X X X X X X X XPY1990 12 6 1991 X X X X X X X X XPY1991 12 6 1992 X X X X X X XPY1992 12 6 1993 XXXXXXXX XXX XXX

PY1993 12 6 1994 XXXXXXXX XXX XXXPY1994 12 6 1995 XXXXXXXX XXX XXXPY1995 12 6 1996 XXXXXXXX XXX XXXPY1996 12 6 1997 XXXXXXXX XXX XXXPY1997 12 6 1998 XXXXXXXX XXX XXXPY1998 12 6 1999 XXXXXXXX XXX XXXPY1999 12 6 2000 XXXXXXXX XXX XXXPY2000 12 6 2001 XXXXXXXX XX XXX

Source: Data assembled from various OWS sources. Spreadsheets have been assembled with annual state and/or regional detail as indicated.
136 

electronic sources. Electronic sources were used exclusively for the final years spanning 

PY1992 to PY2000. 

Two kinds of data were assembled. Major ES activities are the focus of Table B.1 

while Table B.2, to be introduced shortly, focuses on the demographic breakdown of 

individuals seeking ES services. The convention followed in both tables is to indicate the 

full availability of state data with an X. Where state data exist they can be aggregated to 

regions (both Census regions and DOL regions) and to national totals. Blanks indicate 

that state data are not available. 

For the five year period from FY1981 to PY1984 there were especially large gaps 

in data availability. Generally, there were data from an electronic file on the personal 

characteristics of applicants for 41 states (counting the District of Columbia as a state) 

and Puerto Rico. The ten missing states were those in DOL Region 5 (Illinois, Indiana, 

Michigan, Minnesota, Ohio and Wisconsin) and Region 9 (Arizona, California, Hawaii 

and Nevada). However, there was a second electronic file that had regional data. Hence 

the entries for these five years have symbols that follow the X’s. The numeric entries 

indicate the number of states for which state data were obtained, and the capital R’s 

signify the availability of data for the ten DOL regions. Within these five years, the data 

are most deficient for FY1981 and most complete for PY1984. 

For the same five year period, there was an additional source for several data 

fields. An earlier project assembled electronic files that spanned the FY1981-PY1984 

period. In assembling these data and checking them for accuracy, a series of hard copy 

printouts were made. These printouts were reviewed. They showed two kinds of hard 

copy data related to ES activities: several fields spanning the years 1967 to 1989 for four 

states (California, Maine, Michigan and Texas) and several fields for all states in three 

separate years (FY1978, FY1982 and PY1986). Thus data for California and Michigan 

(DOL Regions 9 and 5 respectively) could be obtained for the five years of interest. Other 

data could be obtained for all states for FY1982. 

The geographic scope of the ES data was quite consistent throughout the entire 35 

years. Data for Puerto Rico extend back to FY1967 with just one missing year (FY1980). 

Data for Guam and the Virgin Islands were first available in PY1985 and PY1986 but 

have gaps in many subsequent years. National totals present in summary spreadsheets 
137 

were generated for aggregations of 51, 52, 53 and 54 programs with the order of 

inclusion being the District of Columbia in 51 “state” totals and the successive addition 

for the other three being Puerto Rico (52), the Virgin Islands (53) and finally Guam (54). 

Since Puerto Rico has a relatively large labor force and ES program, the regional total for 

DOL Region II is shown both excluding and including Puerto Rico. With the availability 

of CPS labor force survey data for Puerto Rico starting in FY1979, the main ES summary 

variables, i.e., the application rate and the entered employment rate, can be shown for this 

“state” program as well as the other 51 “states.” The tables in Chapter 4 summarize ES 

activities for the 51 “states.” 

Table B1 has entries for fifteen activities/outcomes: eight relating to services and 

seven linked to job matching/placement activities. Only three of the fifteen series can be 

described as complete: job service applications, persons counseled and placements. Some 

of the incomplete series were available for the earliest years. Thus the series for persons 

tested and for registered job openings permit comparisons between the very earliest and 

very latest years within the 1967-2001 period. For other series, the earliest available years 

are 1974, 1981, 1986 or 1993, permitting only shorter comparisons. 

The final observation about Table B.1 concerns program years 1990 and 1991. 

Data for both years were obtained exclusively from hard copy publications.36 Certain 

employment-related fields were not available for these two years because the hard copy 

documents did not include these variables. As noted in Chapter 4, obtained employment 

rates increased rapidly in the 1990s changing the mix of placements versus obtained 

employment within the combined total of entered employment. At the state level, this 

evolution cannot be fully described for 1992 because of the data on obtained employment 

were not available. Since there was just one year of missing data, however, estimates 

were derived for 1992 based on the ratio of entered employment to placements from 

adjacent years. The average ratio for 1991 and 1993 in each state was multiplied by the 

level of placements in 1992 to derive the estimates of entered employment. 

Table B.2 summarizes available detail on the demographic and economic 

characteristics of persons who apply for services from the ES. Compared to Table B.1, 

 

36 The sources were the “Employment and Training Report of the Secretary of Labor” and annual 

Employment Service “Performance Data” for these two years. 
Table B.2. Characteristics of Applicants for ES Services, 1967 to 2001

Fiscal Yr. Dura- Last Refer- Total Women Under 22 Minority Black Hispanic Econ. Welfare Veterans Vietnam Handi- UI

Program tion Month ence Disad- Total Veterans capped Claimant

Year Year vantaged

FY1967 12 6 1967 XFY1968 12 6 1968 XFY1969 12 6 1969 X XFY1970 12 6 1970 X XFY1971 12 6 1971 X XFY1972 12 6 1972 X XFY1973 12 6 1973 X XFY1974 12 6 1974 XFY1975 12 6 1975 XFY1976 12 6 1976 XFY1977 12 9 1977 XFY1978 12 9 1978 XFY1979 12 9 1979 XFY1980 12 9 1980 XFY1981 12 9 1981 X-25-R X-25-R X-41-R X-41-R X-41-R X-41-R X-41 X-41-R X-41-R X-41-R X-41-RFY1982 12 9 1982 X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41 X-R X-41-R X-41-R X-41-R X-41-RFY1983 12 9 1983 X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-R X-41-R X-41-R X-41-R X-41-RPY1983 9 6 1984 X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-RPY1984 12 6 1985 X X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-R X-41-RPY1985 12 6 1986 X X X XPY1986 12 6 1987 X X X XPY1987 12 6 1988 X X X XPY1988 12 6 1989 X X X XPY1989 12 6 1990 X X X XPY1990 12 6 1991 X X X XPY1991 12 6 1992 X X X X XPY1992 12 6 1993 X X X X X XPY1993 12 6 1994 X X X X X XPY1994 12 6 1995 X X X X X XPY1995 12 6 1996 X X X X X XPY1996 12 6 1997 X X X X X XPY1997 12 6 1998 X X X X X XPY1998 12 6 1999 X X X X X XPY1999 12 6 2000 X X X X X XPY2000 12 6 2001 X X X X X XSource: Data assembled from various OWS sources.
139 

the picture presented here is much simpler. The series for all applicants, shown 

previously in Table B1, is repeated in Table B.2 for reference purposes. It can be traced 

back to FY1967 with state detail. Again, there are missing data for the FY1981-PY1983 

period, but at least detail for the DOL regions are available for these years. 

The only other demographic detail for the period through FY1980 is for the 

economically disadvantaged. A review of the “Employment and Training Report of the 

President” for these years shows demographic detail by state for those placed by the ES 

but not for applicants. The state demographic detail for placements extends from FY1974 

to FY1980. There is demographic detail for both applicants and placements for the 

FY1981-PY1984 period but state data are incomplete as shown in Table B.2. 

Starting in PY1985 state data on ES applicants are available by gender and 

veteran status. Table B.2 also shows that detail by age and welfare status are available 

from the early 1990s. 

The presentation of information in Tables B.1 and B.2 makes a sharp distinction 

between ES activities (Table B.1) and demographic characteristics (Table B.2). In fact, 

the ES data reporting system dating from the early 1980s has been much more extensive 

than suggested by these two tables. Unfortunately the electronic records from this 

reporting system have not been retained. 

From data assembled in the present project and a project from the early 1990s,37

summaries of electronic data reporting on ES activities can described for three distinct 

periods. All were based on state-generated reports submitted to the national ES office. All 

were part of the ETA 9002 reporting system. 

The first electronic reports spanned the five year period from FY1981 to PY1984. 

Demographic detail was divided into the following eleven categories; 1) total, 2) gender, 

3) age (under 22, 45-54, and 55+ with 22-44 derivable as a residual) 4) race 

(nonminority, minority, black non-hispanic, Hispanic, American Indian/Alaskan and 

Asian/ Pacific Islander), 5) handicapped, 6) dislocated worker, 7) migrant and seasonal 

farm workers, 8) veterans (total, Vietnam, disabled, special disabled, other eligible), 9) 

employment status (employed, unemployed-non-claimant, and claimant), 10) education 

 

37 See Vroman, Worden and Acs(1992). 
140 

(in-school student, less than high school diploma, high school diploma and postsecondary degree) and 11) economically disadvantaged (total and welfare). 

Crossed with the demographic fields were fields for services to individuals: 1) 

total, 2) received assessment services (total, interviewed, counseled and tested), 3) 

referred to other service-areas ( total, skills training [JTPA, other], educational and 

supportive) 4) job search activities, 5) referred to employment, 6) entered employment 

(total, placed and obtained employment) and 7) received some reportable service; and 

service transactions: 1) reactivations, 2) assessment services (interviewed, counseled and 

tested), 3) job referrals, 4) job placements and 5) obtained jobs. The full crossclassification of the preceding fields has about 700 cells (29 columns for characteristics 

and 24 rows for detailed services). This cross-classification was to be filled out by each 

state. State and regional (for the 10 DOL regions) detail was to be submitted. This whole 

array of information can be termed Part A of the early ETA 9002 reporting system (as it 

is in the current reporting system). 

Part B focused on job orders (openings) received and filled, each cross-classified 

by DOT (dictionary of occupational titles) and SIC (standard industrial classification). 

The report had 11 detailed industries and 13 detailed occupations for two kinds of 

transactions: job openings received and job openings filled. Part C was a crossclassification of client counts and average wages (six fields) by 13 detailed occupations. 

Part C had three groups of transactions: job orders received, job openings received and 

job openings filled. The total number of cells was 168 for Part B and 252 for Part C. Note 

that there were no demogaphics for Parts B and C of the ETA 9002 data. 

The full ETA 9002 report (Parts A, B and C) for the ten DOL regions for the 

FY1981-PY1984 years has been present at the Urban Institute since the early 1990s when 

the data were used in an earlier project. Unfortunately the state level detail from this data 

base has not been found. 

The second electronic file for these five years is a small extract with 13 fields that 

pertain to the characteristics of ES applicants by state. The individual fields are 1) total, 

2) women, 3) economically disadvantaged, 4) minority, 5) black-non-Hispanic, 6) 

Hispanic, 7) handicapped, 8) veteran, 9) Vietnam veteran, 10) disabled veteran, 11) youth 
141 

(under 22 years), 12) an unknown field38 and 13) UI claimants. This file refers just to 

applicants and not to any other ES services. Also, as discussed previously and shown in 

Table B.1, data for 10 states are consistently absent from this tape and even more state 

data are missing for total applicants and women applicants in FY1981. 

For PY1984 some additional state detail was found in the “Employment and 

Training Report of the Secretary of Labor 1985.” Sections of this report compare certain 

services to veterans with overall ES service provision so that some fields appear for all 52 

jurisdictions (the 50 states plus the District of Columbia and Puerto Rico). Note in Table 

B.1 that four fields are shown as complete for PY1984: applications, counseled, some 

service and placed. 

A third electronic file covers the five years PY1985 to PY1989. This has twenty 

fields for all states plus the District of Columbia, Puerto Rico, Guam and the Virgin 

Islands. The twenty fields are: 1) total applicants, 2) male applicants, 3) female 

applicants, 4) economically disadvantaged, 5) unknown (posdisq), 6) reportable service, 

7) counseled, 8) referred to training, 9) placed in training, 10) referred to a job, 11) 

referred to a federal contractor job, 12) placement transactions, 13) obtained employment, 

14) placed, 15) placed in a permanent job (150+ days), 16) federal contractor job 

obtained employment (fcjllob), 17) placed in a federal contractor job (fedcon), 18) job 

openings received, 19) federal contractor job openings received (fcjlop) and 20) 

expenditures. It can be seen from this listing that the file has five fields of personal 

characteristics, fourteen fields of services and placement activities and a single field 

related to spending. 

We have also seen a master list of fields from a much larger electronic file. The 

full file had 89 fields arranged into eight main groupings with up to twenty entries per 

group. The eight main groupings and their respective numbers of data fields are as 

follows: 1) totals - 20, 2) total veterans - 15, 3) Vietnam veterans - 15, 4) disabled 

veterans - 13, 5) special disabled veterans - 15, 6) UI claimants - 4, 7) migrant and 

seasonal farm workers - 4, and 8) interstate activities - 3. Note that the largest number of 

fields pertains to the first group, the totals. In fact, these 20 fields are the ones previously 

identified in the electronic file for the PY1985-PY1989 period. For the other seven main 

 

38 This field is identified as posdisq on a printout of the PY1985-PY1989 tape to be discussed below. 
142 

groupings, numbered 2 through 8 in the preceding list, note that there are fewer than 20 

fields. For each grouping, the fields listed represent a subset of the twenty identified in 

the previous paragraph. 

Thus it can be seen that this third electronic file represents a subset of a larger file 

with 89 fields. Our electronic file is the first section of this larger file. To date, we have 

not found a tape with the full set of 89 fields identified on the master list of fields. What 

is missing from our smaller file is mainly information on services to veterans. Across 

major groups 2 through 8, the fields summarizing services to veterans account for 58 of 

the 69 fields with information. Outside the veterans fields, the other missing fields with 

large numbers of ES clients are the four fields devoted to UI claimants (applicants, 

placement transactions, obtained employment and placed). 

The fourth electronic file used in the data assembly was obtained from the current 

reporting system. We have annual summaries for the period PY1992 to PY2000. This 

electronic file represents just a subset of information submitted by the states in ETA 9002 

reports. 

The states report ETA 9002 data on a quarterly basis. The report is divided into 

three sections.39 Part A summarizes ES activities and demographic detail of persons 

served. The format of Part A is a matrix with 50 activities (client services and placement 

activities) in the rows and 38 demographic breakdowns of clients in the columns. Since 

full documentation for the present reporting system is widely available, only a few 

comments will be offered here. As with the previous electronic file, the activity fields in 

the current file also have some demographic details (veterans, gender, age, economically 

disadvantaged and welfare clients). The fields provide counts of persons and counts of 

transactions. The electronic file utilized in the present project has the full set of 50 

“activity” fields but only the column A entries (total applicants). As indicated in Tables 

B.1 and B.2, the state-year fields are complete for these nine years, i.e., PY1992 to 

PY2000. 

Part B of the ETA 9002 report summarizes job openings received and job 

openings filled by industry and occupation. The layout for both activities is 13 industries 

 

39 Detailed reporting instructions, definitions and explanations are given in U.S. Department of Labor, 

Employment and Training Administratin (1993). 
143 

cross-classified by 14 detailed occupations. Part C focuses on job orders received, job 

openings received and job openings filled. For openings received and filled there are six 

fields (total, non-ag. temporary, non-ag. permanent, average wages, ag. temporary and 

ag. permanent) These are all cross-classified with 14 occupations. This project has not 

tried to obtain the Part B and Part C data. Thus our electronic file for PY1992-PY2000 is 

a small subset of the full range of ETA 9002 data, i.e., column A from Part A or fifty 

fields per state per year. 

Finally, note that the basic structure of the ETA 9002 reporting system has been 

quite stable over the period from FY1981 to the present. While the number of detailed 

data fields has increased, the basic structure of the reports with Parts A, B and C has not 

changed much. Unfortunately, because the electronic files were incomplete or missing, 

considerable project resources had to be devoted to data assembly activities. 

The final files prepared that summarize ES activities now exist as a set of Excel 

spreadsheets. One set has data for individual years grouped into five files. Respectively 

the five span the following periods: FY1967 to FY1973, FY1974 to FY1980, FY1981 to 

PY1984, PY1985 to PY1991 and PY1992 to PY2000. The individual years in each of 

these spreadsheets is a separate leaf. Each leaf has state data at the top for up to 54 

jurisdictions and regional summary data at the bottom for the 10 DOL regions. Where 

state detail is present, the regional data for Region II are summarized both excluding and 

including Puerto Rico. Finally there is a pooled state-year file that spans the full period 

from FY1967 to PY2000. This file has the fields displayed in Table B.1 along with labor 

force and unemployment data for the same reference periods as the ES data. 
144 

Appendix C. States, Regions and Census Division Summary Data 

 The report undertakes analysis at both the level of states and regions. Tables in 

Chapters 2 and 4 display summary data for the ten DOL regions. This appendix provides 

information on the aggregation of states to regions and briefly examines summary data 

for the nine Census Divisions. 

 Table C.1 shows a listing of states arranged by DOL regions and alphabetically 

within each region. Columns [1] and [2] display the states and their FIPs codes 

(alphabetic codes). The current and former DOL regions of each state is shown in 

columns [3] and [4]. Columns [5] and [6] show respectively the numeric codes and the 

Census Divisions for each state. With the numeric keys in columns [2], [3], [4] and [5] it 

is possible to arrange the states alphabetically or by DOL region or by Census Division. 

 Columns [7] shows average unemployment rates for the states averaged for the 36 

years between 1967 and 2002. These have been grouped into high (1), medium(2) and 

low(3) for the analysis of Chapter 2. Column [8] shows unemployment rate group for 

each state. Column [9] shows the average recipiency rate in the regular UI program for 

each state over the 1967-2002 period. Finally, column [10] shows the recipiency rate 

group to which each state was assigned for the analysis of Chapter 2. Note the groupings 

refer to the full 36 years 1967 to 2002. For the analysis of EB and TFB of Chapter 2, 

groupings were assigned based on shorter time periods for the unemployment rates. 

 Table C.2 displays time series of relative unemployment rates for the Census 

Divisions. Note that the lowest unemployment rates (in brackets) are found in only three 

Divisions, and for 33 of the 36 years in just two divisions (New England and West North 

Central). The highest unemployment rates (with shaded backgrounds), in contrast, are 

found in six different divisions during these years. The Pacific division has had the 

persistently highest unemployment. This is apparent from the large number of years with 

the highest divisional unemployment rate (19 or more than half the 36 years) and the 

highest average relative unemployment rate (1.20). As with the data for the DOL regions, 

the highest unemployment rates have been more widely experienced by the divisions than 

the lowest unemployment rates. Finally, note in Table C.2 that New England has had the 
Table C.1. Average Unemployment Rates and UI Recipiency Rates for States by DOL Region and Census Division 

State FIPS Current Former Census Census Avg. Un. Avg. Un. Regular UI Regular UI

Code DOL DOL Division Division Rate Rate Recipiency Recipiency

Number Region Region Number 1967-2002 Group 1967-2002 Group

[1] [2] [3] [4] [5] [6] [7] [8] [9] [10]

CONNECTICUT 9 1 1 1 New England 5.33 3 0.465 1

MAINE 23 1 1 1 New England 5.89 2 0.379 1

MASSACHUSETTS 25 1 1 1 New England 5.53 2 0.471 1

NEW HAMPSHIRE 33 1 1 1 New England 4.14 3 0.253 3

RHODE ISLAND 44 1 1 1 New England 6.06 2 0.521 1

VERMONT 50 1 1 1 New England 4.99 3 0.429 1

NEW JERSEY 34 1 2 2 Middle Atlantic 6.04 2 0.470 1

NEW YORK 36 1 2 2 Middle Atlantic 6.42 1 0.403 1

DELAWARE 10 2 3 5 South Atlantic 5.53 2 0.368 1

DIST OF COL 11 2 3 5 South Atlantic 7.16 1 0.376 1

MARYLAND 24 2 3 5 South Atlantic 5.04 3 0.279 2

PENNSYLVANIA 42 2 3 2 Middle Atlantic 6.24 1 0.434 1

VIRGINIA 51 2 3 5 South Atlantic 4.50 3 0.172 3

WEST VIRGINIA 54 2 3 5 South Atlantic 8.73 1 0.267 2

ALABAMA 1 3 4 6 E South Central 6.89 1 0.255 3

FLORIDA 12 3 4 5 South Atlantic 5.91 2 0.170 3

GEORGIA 13 3 4 5 South Atlantic 5.34 2 0.226 3

KENTUCKY 21 3 4 6 E South Central 6.30 1 0.279 2

MISSISSIPPI 28 3 4 6 E South Central 6.99 1 0.210 3

NORTH CAROLINA 37 3 4 5 South Atlantic 5.05 3 0.269 2

SOUTH CAROLINA 45 3 4 5 South Atlantic 5.93 2 0.247 3

TENNESSEE 47 3 4 6 E South Central 5.91 2 0.300 2

ILLINOIS 17 5 5 3 E North Central 6.19 2 0.336 2

INDIANA 18 5 5 3 E North Central 5.76 2 0.232 3

MICHIGAN 26 5 5 3 E North Central 7.63 1 0.332 2

MINNESOTA 27 5 5 4 W North Central 4.58 3 0.344 2

OHIO 39 5 5 3 E North Central 6.32 1 0.260 2

WISCONSIN 55 5 5 3 E North Central 5.16 3 0.397 1

ARKANSAS 5 4 6 7 W South Central 6.68 1 0.283 2

LOUISIANA 22 4 6 7 W South Central 7.67 1 0.235 3

NEW MEXICO 35 4 6 8 Mountain 6.85 1 0.209 3

OKLAHOMA 40 4 6 7 W South Central 5.11 3 0.214 3

TEXAS 48 4 6 7 W South Central 5.64 2 0.175 3

IOWA 19 5 7 4 W North Central 4.23 3 0.328 2

KANSAS 20 5 7 4 W North Central 4.16 3 0.312 2

MISSOURI 29 5 7 4 W North Central 5.36 2 0.318 2

NEBRASKA 31 5 7 4 W North Central 3.44 3 0.278 2

COLORADO 8 4 8 8 Mountain 4.98 3 0.184 3

MONTANA 30 4 8 8 Mountain 6.20 2 0.286 2

NORTH DAKOTA 38 4 8 4 W North Central 4.26 3 0.310 2

SOUTH DAKOTA 46 4 8 4 W North Central 3.55 3 0.174 3

UTAH 49 4 8 8 Mountain 5.26 3 0.255 3

WYOMING 56 4 8 8 Mountain 5.01 3 0.240 3

ARIZONA 4 6 9 8 Mountain 5.93 2 0.209 3

CALIFORNIA 6 6 9 9 Pacific 7.12 1 0.366 1

HAWAII 15 6 9 9 Pacific 5.47 2 0.366 1

NEVADA 32 6 9 8 Mountain 6.26 1 0.377 1

ALASKA 2 6 10 9 Pacific 8.88 1 0.565 1

IDAHO 16 6 10 8 Mountain 6.23 2 0.307 2

OREGON 41 6 10 9 Pacific 7.00 1 0.369 1

WASHINGTON 53 6 10 9 Pacific 7.34 1 0.385 1

Source: Based on data from the Office of Workforce Security (OWS) and the Bureau of Labor Statistics (BLS).

 Current DOL Region 1 also includes Puerto Rico and the Virgin Islands. Current DOL Region 6 also includes Guam.

145
Table C.2. Relative Unemployment Rates by Census Division, 1967 to 2002 

New Middle E. North W. North South E. South W. South Mountain Pacific

England Atlantic Central Central Atlantic Central Central

1967 0.70 0.96 0.92 0.63 1.02 1.03 1.06 1.11 1.44

1968 0.76 0.91 0.92 0.65 1.02 1.09 1.14 1.12 1.39

1969 0.79 0.92 0.93 0.67 0.96 1.02 1.13 1.14 1.44

1970 0.99 0.91 1.00 0.69 0.85 0.98 0.99 1.02 1.50

1971 1.16 1.02 1.02 0.71 0.78 0.85 0.90 0.91 1.49

1972 1.23 1.10 0.97 0.66 0.81 0.82 0.91 0.93 1.40

1973 1.25 1.07 0.92 0.71 0.83 0.81 0.89 1.04 1.44

1974 1.17 1.07 0.93 0.68 0.96 0.89 0.88 0.99 1.31

1975 1.19 1.09 1.05 0.65 1.01 0.92 0.76 0.91 1.16

1976 1.19 1.25 0.95 0.65 0.96 0.81 0.78 0.94 1.19

1977 1.10 1.25 0.93 0.68 0.97 0.90 0.81 0.95 1.17

1978 0.95 1.22 0.98 0.67 0.95 1.00 0.86 0.89 1.17

1979 0.94 1.21 1.05 0.69 0.95 1.05 0.81 0.86 1.10

1980 0.83 1.06 1.30 0.81 0.89 1.11 0.79 0.90 0.99

1981 0.83 1.02 1.28 0.79 0.92 1.21 0.78 0.83 1.03

1982 0.81 0.97 1.29 0.80 0.90 1.24 0.78 0.90 1.06

1983 0.71 0.98 1.25 0.82 0.88 1.28 0.93 0.90 1.03

1984 0.65 1.01 1.25 0.83 0.86 1.30 0.93 0.83 1.07

1985 0.61 0.95 1.23 0.86 0.85 1.25 1.09 0.95 1.03

1986 0.56 0.88 1.14 0.83 0.82 1.35 1.35 1.06 1.00

1987 0.54 0.80 1.16 0.89 0.83 1.29 1.42 1.16 0.97

1988 0.57 0.80 1.14 0.85 0.87 1.29 1.42 1.13 0.99

1989 0.73 0.89 1.09 0.85 0.91 1.20 1.29 1.04 0.99

1990 1.02 0.94 1.08 0.84 0.94 1.11 1.13 0.95 1.00

1991 1.18 1.03 1.04 0.75 0.94 1.08 1.00 0.84 1.07

1992 1.07 1.10 0.98 0.65 0.96 0.95 1.00 0.87 1.17

1993 0.98 1.09 0.95 0.72 0.91 0.93 1.01 0.86 1.27

1994 0.97 1.09 0.90 0.69 0.93 0.91 1.07 0.87 1.31

1995 0.96 1.11 0.87 0.70 0.91 1.01 1.05 0.87 1.31

1996 0.89 1.10 0.87 0.75 0.92 1.00 1.03 0.95 1.30

1997 0.89 1.16 0.86 0.71 0.92 1.08 1.08 0.87 1.23

1998 0.78 1.13 0.88 0.72 0.90 0.99 1.10 0.97 1.27

1999 0.78 1.14 0.91 0.70 0.89 1.06 1.08 0.99 1.23

2000 0.69 1.06 0.96 0.80 0.89 1.10 1.07 0.95 1.25

2001 0.77 0.98 1.02 0.82 0.95 1.06 1.03 0.95 1.18

2002 0.84 1.02 1.02 0.80 0.92 0.98 1.04 1.00 1.17

Average 0.89 1.04 1.03 0.74 0.91 1.05 1.01 0.96 1.20

Std. Dev. 0.20 0.11 0.13 0.07 0.06 0.15 0.17 0.09 0.16

Coeff. Var. 0.23 0.11 0.13 0.10 0.06 0.14 0.17 0.10 0.13

 Source: Based on data in U.S. Department of Labor, Bureau of Labor Statistics, "Geographic Profile of 

 Employment and Unemployment," various issues. Divisional unemployment rates measured as

 a ratio to the national unemployment rate.

146
147 

largest variability in its relative unemployment rate. This is indicated by the coefficient of 

variation of 0.23 at the bottom of the table which is larger than for all other divisions. 

 Table C.3 displays summary data on unemployment, recipiency rates in the 

regular UI program and costs of regular program benefits per unemployed person. All 

data are averages for the 36 years 1967 to 2002. Note that six of nine divisions had 

relative unemployment rates (column [2]) within 0.05 of the national average for these 

years. Recipiency rates were considerably above-average in three divisions (New 

England, Middle Atlantic and Pacific) but below average for four divisions (the three 

from the South and the Mountain division). These seven divisions deviated from the 

national average of 0.31 by 0.05 or more. Across the nine divisions, relative recipiency 

and relative costs in the regular UI program (columns [6] and [9]) were closely 

associated. The correlation across regions was 0.95. 

 Thus when the data for the regular UI program were examined for the nine 

Census Divisions, the patterns closely resemble those for the DOL regions as reported in 

the text of Chapter 2. 
Table C.3. Regular UI Benefit Payments for Census Divisions, 1967 to 2002.

Unemploy- Relative Unem- Weekly UI Reci- Relative Regular Benefits Relative

Census ment Rate, TUR ployment UI Bene- piency UI Reci- UI per Unem- BenefitsDivision TUR % ficiaries Rate piency Benefits ployed per Unem.

= [1]/6.05 = [4]/[3] = [5]/0.31 = [7]/[3] = [8]/2165

[1] [2] [3] [4] [5] [6] [7] [8] [9]

New England 5.42 0.90 342 148 0.43 1.37 1100 3211 1.48Middle Atlantic 6.28 1.04 1093 456 0.42 1.33 3260 2982 1.38E North Central 6.35 1.05 1282 393 0.31 0.98 2918 2275 1.05W North Central 4.52 0.75 395 124 0.31 1.00 848 2145 0.99South Atlantic 5.50 0.91 1051 242 0.23 0.73 1609 1531 0.71E South Central 6.43 1.06 435 114 0.26 0.84 620 1426 0.66W South Central 6.01 0.99 717 149 0.21 0.66 1052 1467 0.68Mountain 5.72 0.95 344 83 0.24 0.77 579 1681 0.78Pacific 7.11 1.18 1188 439 0.37 1.18 2845 2395 1.11U.S. 6.05 1.00 6848 2148 0.31 1.00 14829 2165 1.00 Source: Data from the Bureau of Labor Statistics and the Office of Workforce Security. Unemployment and weekly UI beneficiaries in thousands. UI benefits in millions. Data are averages for 1967 to 2002.