by Timothy McQuiston, Vermont Business Magazine Weekly unemployment claims continue to fall as the economy slowly reopens and with it the unemployment trust fund has added nearly $2 million since last week. After a steep decline as the economy began to reopen in April, initial unemployment claims for the last several weeks flattened, rose slightly and now are falling consistently.
Claims hit their peak in early April. At that point, Governor Scott's "Stay Home" order resulted in the closing of schools, restaurants, construction and more, while many other industries cut back operations.
Meanwhile, the state unemployment rate, which was the lowest in the nation before the pandemic, is now in the middle of the pack but is now back below the US average.
For the week ending August 1, 2020, the Labor Department processed 1,260 Initial Claims, down 259 from the previous week and 964 more than the same time last year.
Total new and continuing claims, which had been falling during the reopening period in the spring, again fell but more steeply, for a total of 37,107 claims with a decrease of 2,209 from the previous week, but 33,696 more than the same time last year. They had peaked at just over 90,000.
However, the additional $600 in weekly benefits from the federal government for all unemployment programs ended July 25. The PUA program, which is full funded by the federal government and is intended for non-regular UI workers, will last until the end of the year. They will receive regular benefits.
Congress, mired in political bickering, is considering another emergency assistance plan, but Governor Scott said he doubts it will provide as much as $600 per week. He also said the state does not have the resources to pick up that extra benefit.
"That $600 is concerning. I know a lot of families are counting on that to cover a lot of their expenses," Scott said.
Nationally, economists are concerned that the loss of that extra $600 could send the national economy back into a tailspin, as it will affect everything from consumer spending to the ability to pay for housing. That federal benefit is set to expire July 31. Over $500 million of federal money has been added to Vermont unemployment checks so far.
Since March 1, upwards of 100,000 new claims have been filed in Vermont when including PUA.
The official Vermont March unemployment rate was only 3.1 percent, but the April rate was 15.6 percent. The US April rate was 14.7 percent, the highest rate since its was first calculated in 1948 and the highest unofficially since the Great Depression of about 25 percent.
Vermont's unemployment rate fell to 9.4 percent for June, as it continues to edge lower since it spiked in April. The US rate fell in May to 13.3 percent and fell again in June to 11.1 percent. The Vermont unemployment rate in May fell to 12.7 percent (16.5 percent in April).
Nationwide, according to the US Labor Department for the week ending August 1, initial claims for state unemployment benefits were 1.2 million, which fell from 1.43. Claims had risen for two weeks until this decline: 1.4 million, up from 1.3 million. Claims had been falling since the early weeks of the pandemic in March.
The week prior they were 1.4 million, which was down from 1.5 million, which was about the same as the previous two weeks.
The week before that they were 1.9 million which was down from 2.1 million, before that it was 2.7 million, from 2.98 million the week before, from 3.18 million, and 3.85 million and 4.4 million the previous weeks. (The weeks previous to that were 5.2 million and 6.6 million. The weeks before that there were 3.3 million and before that 282,000 claims.)
This is the 19th straight week US initial claims have exceeded one million.
US GDP had its worst quarter on record as it fell 32.9 percent in the second quarter; the next worst was in 1921.
While more industries open up and Scott "hopes" to have 100 percent of businesses back open within a couple months, he also extended his Emergency Order until August 15. He said earlier this week that Vermonters can expect he will again extend it another month.
There are still state and some federal grants available. See the latest business recovery grants guidance HERE, and Scott's $400 million economic recovery plan HERE. The US SBA loans and grants can be found at www.sba.gov.
The recently-launched Pandemic Unemployment Assistance (PUA) has added to the ranks of those receiving benefits, but is not counted in the official unemployment rate. The PUA serves the self-employed who previously did not qualify to receive UI benefits and might still be working to some extent.
This surge during the Great Recession for the entire year in 2009 spiked at 38,081 claims.
The claims back in 2009 pushed the state's Unemployment Insurance Trust Fund into deficit and required the state to borrow money from the federal government to cover claims.
Right now (see data below), Vermont has $327.9 million in its trust fund and despite 37,000 claims saw the fund increase by a net of $1.97 million last week, which lost about $5.2 million the previous week. Payments lag claims typically by a week. Balance as of March 1 was $506,157,247.
Vermont at the beginning of the pandemic had more than double the Trust Fund it did when the economy started to slide in 2007. It went into deficit and the state had to borrow money from the federal government to pay claims. Some states like California are already in UI deficit because of the COVID crisis.
"We are in a much healthier position than many other states," Labor Commissioner Michael Harrington said.
Given the Trust Fund's strong performance and the burden of unemployment taxes on employers, Governor Scott reduced the UI tax on businesses. He also announced that starting the first week of July, the maximum unemployment benefit to workers will increase about $20 a week.
While the UI Trust Fund will not fall into deficit under current trends, the governor has acknowledged that they simply cannot predict it given how economic conditions could swing if there is a second surge of COVID-19. Still, he's moving forward with the UI changes now because the burden on employers and employees is now.
The impact on jobs from the coronavirus (COVID-19) in Vermont on weekly unemployment claims is expected to be profound and the federal aid package more than doubles current UI payments to Vermonters.
UI tax rates for employers fell again on July 1, 2018, as claims continue to be lower than previous projections. Individual employers' reduced taxable wage rates will vary according to their experience rating; however, the rate reduction will lower the highest UI tax rate from 7.7 percent to 6.5 percent. The lowest UI tax rate will see a reduction from 1.1 percent to 0.8 percent.
Also effective July 1, 2018, the maximum weekly unemployment benefit will be indexed upwards to 57% of the average weekly wage. The current maximum weekly benefit amount is $466, which will increase to $498. Both changes are directly tied to the change in the Tax Rate Schedule.
NOTE: Employment (nonfarm payroll) - A count of all persons who worked full- or part-time or received pay from a nonagricultural employer for any part of the pay period which included the 12th of the month. Because this count comes from a survey of employers, persons who work for two different companies would be counted twice. Therefore, nonfarm payroll employment is really a count of the number of jobs, rather than the number of persons employed. Persons may receive pay from a job if they are temporarily absent due to illness, bad weather, vacation, or labor-management dispute. This count is based on where the jobs are located, regardless of where the workers reside, and is therefore sometimes referred to as employment "by place of work." Nonfarm payroll employment data are collected and compiled based on the Current Employment Statistics (CES) survey, conducted by the Vermont Department of Labor. This count was formerly referred to as nonagricultural wage and salary employment.
UI claims by industry last week in Vermont were very similar in percentage to those from a year ago, though of course much higher in each industrial category.