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Government shutdown 101: How will it affect unemployment insurance?

Unemployment insurance is distributed by states but funded by both states and the federal government. It has enough money to survive a short shutdown without interrupting benefits, say members of Congress.

Sally Tan attends a job fair in Boston, April 7. A government shutdown would have to last for months before it disrupted the distribution of unemployment benefits, according to the Labor Department and the House Ways and Means Committee.

Steven Senne / AP

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Few groups of Americans lean as hard on federal assistance as the unemployed. Will their jobless benefits keep flowing if the federal government shuts down?

The short answer is yes, at least as long as political gridlock doesn't put federal funding on hold for months.

Unemployment insurance (UI) is distributed at the state level, but with money that comes from both state and federal payroll taxes.

"UI benefits will continue to be paid" during a shutdown, according to a Labor Department memorandum issued Thursday.

Each federal agency is determining what activities are essential to preserve, even during a so-called shutdown (a situation in which congressional funding authority expires). The Labor Department memo implies that loans will keep flowing to states for UI benefits. The memo calls for keeping some staff on the job "should there be issues ... with trust fund borrowing" related to jobless benefits.

That's good news for states, since 32 of them have depleted their own unemployment funds and are borrowing federal dollars.

The possible shutdown, which would occur if no House-Senate deal is reached by midnight Friday, comes at a time when the economy is much weaker than in 1995, the last time such a shutdown occurred. Back then, the nation's official unemployment rate was 5.6 percent. Today it's 8.8 percent.

In the most recent week, 382,000 Americans filed for new unemployment insurance claims, while 8.4 million were already drawing unemployment benefits, designed to tide them through a period of finding a new job or career.

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