The unemployment paradox: Fewer layoffs, greater financial risk — and the implications for credit unions
Layoffs are low, but long-term unemployment is rising. For credit unions, that could create a different kind of risk for members and consumer loan portfolios.
Employers laid off 1.64 million workers in August, the fewest since March 2025, while initial unemployment claims have remained relatively low.1,2
That sounds like good news. But for workers who do lose their jobs, the picture looks different. In August, 27% of unemployed Americans had been out of work for 27 weeks or longer, with the average duration of unemployment reaching 26.3 weeks.3
In other words, fewer people may be losing their jobs, but those who do could have a harder time finding the next one.
The risk may show up later
For credit unions, that distinction matters.
Most state unemployment programs provide up to 26 weeks of benefits, with some offering less.4 At the same time, only 47% of households say they have enough savings to cover a $1,000 emergency.5
Consider a member who loses a job but continues making loan payments with unemployment benefits and savings. Financial strain may not immediately show up as delinquency. It could emerge months later, after benefits expire and savings are depleted.
That makes duration, not simply the frequency of job losses, an important risk to watch.
And borrowers are already carrying significant financial obligations. Household debt reached $18.8 trillion in the second quarter, with 4.7% of balances in some stage of delinquency.6
What does this mean for payment protection?
For Securian Financial, the takeaway is clear: payment protection needs to keep pace with the risks borrowers face. Our debt protection and credit insurance solutions can include protection for involuntary unemployment, helping borrowers manage loan obligations during covered disruptions.
When unemployment lasts longer, benefit duration matters. Credit unions should consider whether their programs are designed to provide meaningful support through a prolonged income disruption.
Because fewer layoffs don’t always mean less risk. Sometimes the bigger risk is how long the financial impact lasts.
