A job seeker waits to talk to a recruiter at a job fair Aug. 28, 2025, in Sunrise, Fla.
Marta Lavandier | AP
The U.S. unemployment insurance system is not prepared for a recession, experts say — with benefits in many states falling far short of workers’ wages.
Currently, most states offer maximum benefits far below the bipartisan recommendation that the top payments cover at least two-thirds of workers’ prior average weekly wages, according to an analysis exclusively provided to CNBC by Michele Evermore, a senior fellow at the National Academy of Social Insurance, a nonprofit that focuses on the country’s safety net.
“The big takeaway here is that with stagnant maximum weekly amounts, UI is not going to be able to act as a stabilizer in 2026, even as well as it did in 2008,” Evermore told CNBC.
The maximum weekly benefit in Alabama is $275, while a two-thirds replacement of the state’s average weekly wage would be roughly $615, Evermore found. In California, the top weekly benefit is $450, compared to the recommended amount of around $918. New Hampshire’s maximum weekly payout is $427, but the suggested top benefit exceeds $1,008.
There are some states — including California and Florida — that haven’t raised their maximum weekly benefit in decades, Evermore said, even as the cost of living has sharply risen.
Benefits may not cover basic expenses
The findings come at a time when the job market has weakened, and many Americans have been struggling with rising costs for everyday expenses.
“When benefits are so badly mismatched with wages, the unemployed are not going to be able to pay their rent, food, health care and other basic expenses,” said Rebecca Dixon, president and chief executive officer at the National Employment Law Project, a nonprofit advocacy organization.
The safety net of UI would be especially stressed if the economy tips into a recession or unemployment rises significantly with artificial intelligence-fueled layoffs.
“AI presents a serious risk to jobs, and we are not prepared,” Dixon said.
The unemployment rate edged higher to 4.4% in February, up from 4.3% in January, as jobs declined across key areas. Economists are also warning that a prolonged war with Iran could drag the global economy into a recession.
Inadequate benefits can spread economic pain
The Federal-State Unemployment Compensation Program was signed into law as part of the Social Security Act on Aug. 14, 1935 (at which point Italy, Poland and Great Britain had already established their own unemployment insurance systems). At that time, during the Great Depression, between 11 million and 15 million Americans were out of work, according to the U.S. Department of Labor.
The aim of the insurance program was to protect the economy during downturns, allowing unemployed people to keep paying their bills and to get the time they needed to find another appropriate job.
But the current benefits may fail to achieve those goals, Evermore said.
Nearly all states don’t meet the recommendation of a maximum benefit set to two-thirds the average weekly wage, she found in the analysis.
Even that suggested formula may be outdated: Congressional Democrats recommended a 75% replacement rate last year.
“Our bill would make long-overdue improvements to our unemployment system that will help families and the broader economy more easily weather a future economic shock,” Rep. Don Beyer, D-Va., said in a statement at the time.
Dixon also said that the two-thirds replacement rate for maximum benefits is a “conservative recommendation.”
“Recent research shows workers spend more of their money on the basics, and we’ve called for higher wage replacement,” Dixon said.
Republican lawmakers in some states and conservative think tanks have said that higher unemployment benefits may discourage people from rejoining the labor force. Proponents of boosting payments say they give people the breathing room to find a new job that aligns with their skills and experience.
AI presents a serious risk to jobs and we are not prepared.
Rebecca Dixon
resident and chief executive officer at the National Employment Law Project
But inadequate unemployment benefits risk worsening an economic downturn, said Mark Zandi, a chief economist at Moody’s.
“UI benefits are the bedrock of the financial support for workers and the economy during tough economic times,” Zandi said.
“That support is eroding due to stricter eligibility rules, lower real benefits and antiquated UI systems,” he added. “This almost surely means the next recession will be longer and deeper.”
Short benefits are ‘not a meaningful support’
UI benefits are also falling short in duration, Dixon said. Changes from AI can make finding new work especially difficult, she added.
Nearly 1 in 4 jobless workers were considered “long-term” unemployed in February 2026, meaning they’d been out of work for 27 weeks or more, according to the U.S. Bureau of Labor Statistics. The average unemployed person took roughly 25 weeks to find a new job.
While most states offer 26 weeks of benefits, some states offer much less support. For example, the insurance payments expire after just 12 weeks in Florida and Arkansas.
“When benefits are that short, they are not a meaningful support to workers who have permanently lost their jobs,” Dixon said.
