by Timothy McQuiston, Vermont Business Magazine Weekly unemployment claims our on their typical holiday season roller coaster. Claims fell last week after the previous week’s spike of 2,013, but have been trending up consistently the last two months. Claims fell 579 to 1,434 last week (up 895 from the same time last year).
As for the week’s ongoing jobless claims, for the week ending December 12, 2020, the Labor Department processed 13,343 claims, down 608 from the previous week and 9,235 more than the same time last year.
As for further comparison, initial Vermont claims for the week of March 21, 2020, were 3,784, up 3,125 from the week of March 14.
Labor Commissioner Michael Harrington said at Governor Scott’s media briefing last week that he and the governor have a lot of concern for the end of CARES Act funding and therefore the pandemic unemployment benefits and extended benefits for UI filers that came with it.
The extra benefits will cease the week after Christmas for nearly all those filers. They maintain that there are really about 30,000 Vermonters out of work.
The governor said Friday, however, that he is optimistic after talking with Vermont’s congressional delegation that a new stimulus package will come out of Congress in the next few days. What that will look like is not clear.
Scott is hoping that it includes allowing states more flexibility in use of their unemployment trust funds. And, of course, and extension of regular UI and PUA benefits.
Like the governor, he is hopeful that Congress will come up with what Scott called “bridge” funding for these programs until the Biden Administration and the new Congress can come up with a new CARES Act type funding plan.
There does appear that some level of federal help will be forthcoming. And if there is a new package before the New Year, there also could be another one coming after Biden takes over.
And Scott also hopes that if the feds do come up with a UI extension that they maintain the same formula. Even though it meant a lot of money for Vermont, their were significant technological requirements that caused several weeks of consternation for both the state and claimants. No one wants to go through that again.
The governor is also hoping that funding includes budget relief for states, but he is less certain of that, and it is doubtful it will be in the first package in any case.
Meanwhile, the state unemployment rate, which was the lowest in the nation before the pandemic, then spiked during the pandemic, has retreated and is now the lowest in the nation and back to its pre-pandemic level, which is not really that good of a thing.
The VDOL points out that the US Census modeling has not caught up with the reality of the pandemic and Vermont’s 3.1 percent unemployment rate likely portrays a rosier economic picture than what actually exists.
Harrington said in late November that the real unemployment rate is more in the 5 percent range, and if it included the PUA, the rate is likely more in the 6-8 percent range.
He and Scott said that while the data the US Census collects is not erroneous, they disagree with the methodology the federal government is using given the altered behavior of people during the pandemic.
They said people have left the workforce for reasons related to the pandemic, like for personal safety or childcare, which then lowers the total Labor force, which works as the denominator in the calculations, thus lowering the unemployment rate.
Per federal rule, this ultimately decreases the ability of the state to offer extended UI benefits, as they were able earlier in the year.
Governor Scott said the state has been in contact with Vermont’s congressional delegation on trying to change the formula the US Census Bureau uses to determine the state’s unemployment rate.
The PUA claims are not included in the unemployment rate calculation.
The PUA benefits in some cases are more advantageous. PUA claimants also can get partial payments even if they have some income.
What a new PUA looks like is unclear until and if one is signed into law. But it appears as of now that it might not include new filers after a certain time.
Scott has also extended his Emergency Order until January 15. He has said that he will continue to extend the Order as long as necessary and that we are “only half-way through” the impact of the novel coronavirus.
Also, the $1.25 billion CARES Act federal funds have all been fully allocated.
After a spike of claims at the beginning of the pandemic, followed by a steep decline as the economy began to reopen in April, initial unemployment claims fell consistently since the beginning of July before flattening over the last couple months. And now have climbed consistently the last couple of months.
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.
The official Vermont March unemployment rate was 3.1 percent, but the April rate was 15.6 percent, which is the highest on record. The Vermont unemployment rate in May fell to 12.7 percent.
The US rate fell to 7.9 percent in September from 8.4 percent in August from 10.2 percent in July from 11.1 percent in June and in May from 13.3 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.
Nationwide, according to the US Labor Department for the week ending December 12, initial claims for state unemployment benefits totaled 8885,000 last week, which was the highest total since September. Economists expected about 808,000.
Early on in the pandemic, US claims reached 5.2 million and 6.6 million claims. Just prior to the steep job loss, there were 282,000 claims on March 14.
US GDP had its worst quarter on record as it fell 32.9 percent in the second quarter; the next worst was in 1921.
The 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 $247 million in its Trust Fund and saw the fund decrease by a net of $2 million last 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 UI 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.
Scott said the UI fund is not expected to run out under current projections, which is why he wants permission from the federal government to use it for extended benefits now.
“We are in a much healthier position than many other states,” Labor Commissioner Harrington has 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.
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.
The Vermont Department of Labor announced Thursday, October 1, 2020 an increase to the State’s minimum wage. Beginning January 1, 2021, the State’s minimum wage will increase $0.79, from $10.96 to $11.75 per hour. The calculation for this increase is in accordance with Act 86 of the 2019 Vermont General Assembly.
This adjustment also impacts the minimum wage of “tipped employees.” The Basic Tipped Wage Rate for service or tipped employees equals 50% of the full minimum wage or $5.88 per hour starting January 1, 2021.
The Vermont Department of Labor has announced that the state is set to trigger off of the High Extended Benefits program, as of October 10, 2020. This determination by the US Department of Labor follows the recent announcement of Vermont’s unemployment rate decreasing from 8.3% in July to 4.8% in August.
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 are similar in percentage to those from a year ago, though of course much higher in number in each industrial category.