As jobless claims rise, unemployment benefits aren't keeping up with inflation. Here's what to know.

Andrew Keshner

'It's going to lead to more and more pinching the budget as the real value fades'

Job seekers at a Florida job fair earlier this year. It's a tough labor market and unemployment benefit amounts may not make it easier for job hunters.

Newly unemployed workers are facing higher inflation without a corresponding increase in jobless benefits to match.

Data released Thursday showed a pop in initial jobless claims for September, bringing them to their highest level since 2021. But as jobless claims jumped, the size of weekly unemployment benefits barely moved higher - while inflation data showed the cost of living rising again in August.

The sets of numbers highlight a dual challenge for out-of-work job seekers: The jobless benefits a recipient gets may be skimpy - even as costs keep creeping up. The data may also help explain why so many people are doing what they can to cling to their current job as the labor market weakens.

In August, state labor departments paid an average $462.68 weekly benefit to recipients, according to a Labor Department database. That's a 2.6% increase from the same time a year earlier.

Meanwhile, consumer prices ticked up by 2.9% in August year over year, inflation data released Thursday showed.

People are eligible for unemployment insurance when they are laid off through no fault of their own. When they file for unemployment, the benefit amount and duration hinge on their state's rules for calculating payments.

For example, in Texas the average August benefit was just over $500, according to Labor Department data expressed as a 12-month average.

The Thursday report showed surging claims in Texas. The state received federal approval to extend a deadline for people seeking jobless benefits after July flooding.

But in California, weekly benefits in August averaged just over $373. The Golden State's unemployment insurance formula has capped weekly payouts at $450 since 2005.

Weekly earnings averaged nearly $1,250 in August, the latest jobs report showed. But jobless benefits are not meant to completely replace someone's income, said Andrew Stettner, director of economy and jobs at the Century Foundation, a progressive think tank.

The benefits were "designed basically to be enough so you can meet your basic expenses and keep your life in place during a temporary period of unemployment," he said.

However, the inflation-adjusted spending power of those benefits has faded, he added. "That's become the real problem we are facing in this system."

Some states, like North Dakota, New Jersey and Massachusetts, automatically adjust unemployment benefits to the rate of inflation. Benefits in those states are generally higher than in states that do not index unemployment insurance to inflation, like California and Maryland, according to Stettner's research.

Though there are exceptions, states have generally become more restrictive with benefits and eligibility rules in recent years, he said. In fact, jobless benefits in most states are not keeping pace with inflation, said Luke Shafer, a public policy professor at the University of Michigan.

"It's going to lead to more and more pinching the budget as the real value fades," Shafer said.

The $2.2 trillion, pandemic-era CARES Act, which had the federal government temporarily kicking in extra money for unemployment recipients, was an implicit admission by lawmakers that laid-off workers weren't getting large enough benefits with the provision, said Shafer.

"That was them saying, 'We hear you; we see you; we know it's too hard to live on that,'" he said.

Those supplemental benefits concluded in 2021. Results were mixed on whether the extra money discouraged people from looking for work. Unemployment insurance kept 429,000 people out of poverty last year, according to Census Bureau data.

Generally, academic research suggests more generous benefits can lengthen unemployment spells by up to roughly two weeks, Shafer said. But larger benefit sums may give someone slightly more leeway to pick a good job offer instead of jumping at the first chance, he noted.

Many states end their benefits after 26 weeks, though some have shorter time spans, Stettner said. In this job market, however, it's taking longer for people to find work.

Over 1.9 million people were unemployed for at least half a year, the August jobs report showed. That's up from last year, when over 1.5 million people spent at least half a year looking for work.

-Andrew Keshner

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09-13-25 1053ET