In this morning’s Cashin’s Comments, Art Cashin points to some disturbing research regarding the recent bump in disability benefit applications:
I’m Sick Of Being Unemployed – A couple of strange and rather disquieting reports circulated among the Friends of Fermentation yesterday. The topic was unemployment or, more specifically, where do those people go who have stopped looking for work. Their absence is credited with distorting the unemployment rate and making it lower than most expect or believe.
The reports I allude to, contended that many went on disability. In fact, they projected that nearly 25% of those not actively seeking a job had applied for, and been accepted, by disability – mostly Social Security.
One of the reports came from a site called SoberLook.com (a perfectly logical place for the Friends of Fermentation to be browsing). The Sober report quoted extensively from a report by JPMorgan. I was unable to locate the original JPM report but we’ll assume that Sober quoted from it correctly. Anyway, here’s a bit from SoberLook:
But how does one survive after losing the unemployment benefits? Clearly people struggle. One way to pay the bills however is to file for and receive the federal disability benefits – assuming of course one has a disability. Interestingly enough, the Great Recession and the slow recovery somehow generated many more disability recipients.
JPMorgan: As of January over 8.5 million individuals were receiving federal disability payments (an additional 2 million spouses and children of disabled workers also received disability payments). Since the onset of the recession and the subsequent slow recovery, this figure has accelerated and grown faster than the overall size of the potential labour force— currently 5.3% of the population aged 25-64 is on federal disability, up from 4.5% when the recession began.
The Sober report then goes on to look at the makeup and maladies of those going on disability:
JPMorgan points out that increases in the number of disability benefits recipients account for about a quarter of the decline in employment participation. Furthermore during recessions the number of new disability claims actually increases, even though the number of jobs with higher injury incidence (such as construction) generally declines. Try explaining that one…
Half of the benefit recipients suffer from “mental disorders” and “musculoskeletal disorders” (such as back pain). “Mood disorders” alone account for over 10% of this group. And once someone starts receiving these benefits, it’s almost impossible to take the off the program. In 2011 only 1% of the recipients lost their benefits because they were no longer deemed disabled. So how much is this program costing the US taxpayer? Apparently quite a bit.
JPMorgan: The cost to the federal budget of these programs has escalated along with the number of claimants, and now runs around $200 billion per year—more than the budgets of the Departments of Commerce, Energy, Homeland Security, Interior, Justice, and State combined.
Thus a quarter of people who drop out of the workforce and come off the unemployment benefits, simply move to receiving disability payments. And most stay there until they roll into the social security program when they retire – from their disability. The same source, a different program.
Cashin also refers to a piece by Robert Samuelson, who references the research MIT’s David Autor, which confirms the unusual relationship between unemployment rates and disability applications.
So, are these people acting out of desperation? Or are they just crooks? Or are that many people actually disabled?
Anyway, Cashin signs off with a little bit of sarcasm
So, when your unemployment benefits are running out and no potential jobs are visible, it’s almost natural to look in the mirror and wonder why you aren’t feeling good…..er…..make that well (sorry, Sister).