@NCCapitol

@NCCapitol

Unemployment fund rebounds, yet jobless rate lags

Posted November 12, 2015

— Gov. Pat McCrory announced Thursday that the state's unemployment reserve fund has reached $1 billion, its highest level since 2001.

That's a significant improvement over early 2013, when North Carolina businesses owed about $2.5 billion to the federal government for jobless benefits covered by the U.S. Department of Labor after the state's unemployment fund ran out of money during the recession.

In May, the governor announced that debt had been paid off years ahead of schedule. Retiring the debt ended several years' worth of federal employment tax increases on businesses to pay down the balance.

Hitting the $1 billion reserve level will trigger the end of a 20 percent state unemployment tax surcharge as well. That increase was enacted as part of Republican lawmakers' 2013 overhaul of the state unemployment insurance system, designed to speed the payoff of the federal debt by 2017.

However, about two-thirds of the savings from the overhaul came from deep cuts to jobless benefits. Lawmakers lowered the maximum benefit per week, made the benefit formula less generous and cut the number of weeks laid-off workers could receive benefits from 20 to 12.

At an event at the Division of Employment Services on Thursday, McCrory called the reform "a shining success of our Carolina Comeback," touting its benefits for workers.

"Our unemployment insurance system safety net for our workers wasn't in good shape," he said. "It wasn't sustainable for future generations of workers in North Carolina, and that's not fair to the workers of North Carolina.

"The reforms we've put in place have made North Carolina's unemployment system sustainable and financially strong," he continued. "This reserve is to protect the workers of North Carolina, and we're going to do just that."

Alexandra Sirota with the North Carolina Budget and Tax Center, a left-leaning think tank, says that's a misrepresentation.

"Jobless workers paid down this debt through benefit cuts," Sirota said. "The idea that this announcement of a tax cut for employers will help jobless workers is missing the big picture of how little we're doing to help the unemployed."

The overhaul has pushed the state's safety net "to the bottom of the pack" nationally, she said.

According to statistics from the U.S. Department of Labor, North Carolina now ranks 49th in the country for the percentage of jobless workers who receive unemployment. Just 13 percent receive assistance, down from 39 percent in the second quarter of 2013, before the overhaul was enacted.

The state ranks 47th for its average weekly benefit amount of $233. Before the overhaul, the state ranked 25th, at $301 a week. The state is ranked 50th for average duration of benefits, at 12 weeks.

Sirota also questioned whether the $1 billion reserve benchmark is enough to make the system fiscally solvent, noting that most analysts recommend a reserve about twice that size as a proportion of the state's weekly wages. By cutting the state surcharge now, she argued, "Really what we're positioning ourselves to do is repeat past mistakes by offering employers tax cuts while the economy is strong before we really position the system to weather the next downturn."

Supporters of the overhaul argue that lowering employment taxes on businesses will create jobs.

"In the next year, North Carolina employers will have $600 million additional to hire new employees," said state Commerce Secretary John Skvarla. "That goes back into our economy."

Sirota called that link "tenuous at best."

"What we know about how businesses operate is that they need demand for their goods and services, and that goes back to the purpose of the unemployment system to maintain the economy," she said. "We've not seen strong evidence that this is a big driver of business costs or that getting an unemployment tax cut drives them to add employees."

Thursday's announcement is a preview of what's likely to be McCrory's main re-election theme.

In recent months, the McCrory administration has been aggressively touting the state's economic growth since 2013, highlighting job growth, state rankings by groups such as the U.S. Chamber of Commerce Foundation and favorable press from business publications.

McCrory spokesman Josh Ellis said the state has added more than 233,000 jobs during McCrory's tenure, making up for the jobs lost during the recession, and has seen one of the largest unemployment rate drops nationwide. He added that from August 2014 to August 2015, North Carolina had the 9th best job growth in the country.

But the picture on the ground is more nuanced. While the state has been adding jobs, those jobs have largely gone to urban areas, where unemployment is already much lower than in rural counties, and it hasn't kept pace with the number of people moving into the state seeking work.

In September 2014, the state's seasonally-adjusted jobless rate was 5.8 percent, the same as the national rate. In September 2015, it remained at 5.8 percent, well above the national rate of 5.1 percent. Federal statistics show while NC employment increased by 118,509 over the last year, the state also gained 7,100 unemployed people during that time.

McCrory touts his tax cuts and unemployment overhaul as the reason for what he calls the "Carolina Comeback." but a skeptical Sirota said she thinks the improved economy since 2013 more likely reflects larger national trends.

She pointed out that, since before the recession in December 2007, North Carolina has had a net gain of just 91,800 jobs, a 2.2 percent increase. That lags the national growth rate of 2.9 percent for the same time period.

"We've seen these tax cuts in various forms play out over the past few years, and we've not seen the kind of exponential job growth that's been promised," Sirota said. "We're still not creating enough jobs to meet the growing population."

11 Comments

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  • Carl Keehn Nov 15, 2015
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    How can you, with one hand argue that the state is better and then cite the employment of undocumented aliens as proof. It's the current Legislature that significantly relaxed the e-verify requirement for private businesses. As previously drafted, the law required employment to be verified within 90 days. The current legislature rewrote it to not require verification until after the employee is employed in excess of 9 months.

    By the way, note how all of these sanctuary city restrictions apply only to government, not to private industry.

  • Steven Cousler Nov 14, 2015
    user avatar

    The unemployed were formally employed and they paid their taxes for years. No one wants to be out of a job - but if that day comes - the safety net of UI compensation should be there, they already paid for it. McCrory stole this money from hardworking victims to balance a phantom debt.

  • Kathleen Newberg Nov 14, 2015
    user avatar

    What happened to all the people who had no jobs and no money?

  • Dean Logan Nov 13, 2015
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    From the Center for Immigration Studies (June 2014) All Employment Growth since 2000 went to immigrants.

    Basically, if you look at the BLS report on the number of foreign born workers, the increase is equal to the amount of jobs created. So, you could conclude that the net create jobs all went to foreign born workers. You have to check the charts and do a little math to see the numbers they used for the report.

  • Matt Wood Nov 13, 2015
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    The state was actually doing pretty well before the recession, but people like to forget about the Great Recession and blame everything on the governor at the time.

    Also, I would like to see your source for the 75% figure you cite. It sounds pretty bogus to me.

  • Chris Perry Nov 13, 2015
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    Just admit it, this state is in better shape than it has been in hundreds of years. Had the GOP not taken over, we would be in debt up to our ears. This state was going down the tubes but not anymore.

    Good point Dean Logan. Go ahead and vote in Cooper and when all the jobs go to illegals, don't complain. Nearly 75% of new jobs have gone to immigrants in the past 10 years or so. Ever wonder why pay increases are stagnant. You libs will never wake up and smell the roses because you are to busy sniffing O and Clinton's rear ends.

  • Dean Logan Nov 13, 2015
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    You are going to vote for Illegal Alien supporting Roy Cooper because you want higher paying jobs? Good luck with that.

  • John Murphy Nov 13, 2015
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    "In the next year, North Carolina employers will have $600 million additional to hire new employees," Or to their bottom line. They make it sound like a given that all profits are for new employees.

  • Timothy Watson Nov 13, 2015
    user avatar

    It was on the backs of the unemployed! To cut benefits for the ones who needed it the most was Un-American. Two-thirds of that surplus came from cutting benefits for the unemployed. And then say it will create jobs by giving employers tax cuts now because you got a surplus in the unemployment fund is another just name for "trickle down economics". That policy wrecked many lives, Mr. McCroy and I pray everyday that you and your crew are voted out next election. When it all comes out, people will see that you did not do any of the unemployed any favors. Low paying jobs...... Yeah right! Vote Roy Cooper in the next election !!!

  • Chris Perry Nov 13, 2015
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    "On the backs of the unemployed" you make it sound like the unemployed paid it out of their pocket.

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