States hit hardest by rising unemployment claims could soon run low on funds
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With new government data Thursday, around 22 million people have now signed up for state unemployment benefits in the last month during the COVID-19 emergency.
In just the week ending Saturday, it’s 5.245 million new unemployment claims. States pay out these benefits — and states are strained.
Each state pays out unemployment benefits from a trust fund paid for by taxes on employers.
“In good times, you have significantly more going in than is going out. But you’re supposed to save up for times like the one we’re experiencing now,” said Jared Walczak, a researcher with the Tax Foundation.
Walczak says according to federal data, several of the hardest hit states, like California, New York and Texas, could be running low on funds in a matter of weeks.
“And some of these same states struggled with this during the Great Recession and only very recently paid off the debt that they accrued,” he said.
When unemployment funds run out, states still have to pay the benefits, they just have to borrow the money from somewhere else — usually the federal government.
“If this lasts more than three or four months just about every state will have to borrow,” said Chris O’Leary, an economist with the Upjohn Institute for Employment Research.
Borrowing could result in higher taxes for employers or reduced benefits down the line. But, O’Leary says, the federal government could just give the money to states — it has before as part of disaster relief.
COVID-19 Economy FAQs
What are the details of President Joe Biden’s coronavirus relief plan?
The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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