There have been numerous studies linking increases in unemployment benefits to increases in unemployment. One, from the San Francisco Fed, estimates that absent the extended UI benefits in 2009, the unemployment rate would have peaked at 9.6% rather than 10%.
Calafia Beach Pundit Scott Granis gives his take:
The chart above shows how different this recession has been from other recent recessions: at the peak, the percentage of the labor force receiving unemployment compensation was 67% more than at the peak of the 1981-82 recession. This goes a long way to explaining why this recovery has been so tepid. It’s been the weakest recovery ever, in part because we’ve never paid so many people for so long not to work. And the main cause of that huge increase was Congress’ decision in July 2008 to create a program called “Emergency Claims,” which went on to double the number of people receiving benefits by early 2010. Congress’ “compassion” for the unemployed had the unintended consequence of slowing and drawing out the recovery for everyone.