Obama’s budget deal to deny unemployment benefits to 1.3 million Americans

The bipartisan budget deal that US president Obama signed on 26 December to ease spending cuts on the government against a roll-back of welfare programmes of the Democrat government, will deny jobless benefits to more than 1 million Americans.

This would mean a sudden halt to an average monthly stipend of $1,166 per person in "emergency unemployment compensation" to registered jobless Americans after Christmas, which could be a big jolt to US economic recovery.

While there is a possibility of the unemployment rate declining in the medium term, for families dependent on cash assistance, the end of the monthly cash assistance by the federal government would mean difficult belt-tightening.

In the interim, however, the economy would face a decline in consumer spending on everything from food to cars and houses.

Having let the "emergency" program expire as part of a budget deal, it's unclear if Congress has the appetite to start it anew.

It is estimated that an estimated 1.3 million people will lose federally funded unemployment benefits from Saturday. Another 1.9 million people across the US are expected to exhaust their state benefits before the end of June.

In California alone, some 214,000 jobless persons will lose their payments and the figure could touch half a million by June next year, according to labour department statistics.

Californians are estimated to have spent $4.5 billion they received in federal jobless benefits, helping to generate demand for goods and services into the local economy in the past 12 months alone.

The two-year budget agreement that Obama signed is a breakthrough and it is still not known whether the Congress will revive jobless benefits for those unemployed more than six months.

The unemployment benefit programme, started under President George W Bush, has helped millions of US citizens overcome the difficulties but the recession years have denied the jobless a chance to find new jobs.

The programme has cost the exchequer more than $225 billion since 2008.