A surge in federal layoffs could overwhelm the Unemployment Compensation for Federal Employees (UCFE) program, creating significant challenges for state unemployment agencies managed by the Department of Labor. As of February 15, approximately 7,400 individuals were receiving federal unemployment benefits, marking a 12% increase from the previous year. The UCFE program, described as "rarely utilized and creaky" by The Century Foundation, may struggle to process a drastically greater volume of claims as federal job cuts continue.
The UCFE program, used by most federal workers to claim unemployment benefits, is less streamlined compared to the automated systems of the private sector. The requirement for manual inputs in the federal system can significantly slow down the processing of claims, especially during periods of high volume. Employment records are necessary to determine eligibility and weekly payments, adding another layer of complexity to an already strained system.
The Trump administration's reduction of federal staff is expected to inundate the UCFE program with claims. This situation echoes the challenges faced during the pandemic, albeit on a smaller scale. The Century Foundation's report notes the "sudden surge of claims due to federal layoffs has some worrisome similarities to the pandemic, despite its much smaller scale."
"We're already hearing it's taking a long time for people to get their benefits," said Andrew Stettner, director of economy and jobs at The Century Foundation. "And it will probably only get worse."
With states tasked with managing this increased workload, delays in aid for jobless workers are anticipated. The UCFE program has not previously dealt with such high claim volumes. Despite a federal judge blocking an order to terminate roughly 200,000 probationary employees, further cuts are expected.
"It appears the administration wants to cut even more workers," according to Challenger, Gray & Christmas.
The Department of Labor oversees the UCFE program, and it will need to address these challenges promptly. The private sector's more automated systems contrast sharply with the manual processes required for federal unemployment benefits, compounding the potential for delays.
Elizabeth Renter, a senior economist at NerdWallet, commented, "Unfortunately, this labor market will not be conducive to a quick rebound — hiring rates are relatively low and uncertainty across the economy is likely to make businesses cautious about labor investments."
As the number of federal workers collecting unemployment benefits continues to rise due to job cuts, timely payments may become increasingly difficult. The existing infrastructure of the UCFE program may not support the rapid processing needed during this surge.
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