Md. borrowing to pay jobless benefits
Maryland, its unemployment trust fund nearly empty, is following more than 25 other states in borrowing money from Uncle Sam.
The state is about to begin drawing up to $250 million so it can keep its benefit payments going to the tens of thousands of people who are unemployed statewide.
In Washington County alone, that could be as many as 4,830 people.
“This is a strong recession, but the claims will continue to be paid,” said Julie Squire, assistant secretary for the Division of Unemployment Insurance at the Maryland Department of Labor, Licensing and Regulation (DLLR).
“Given that many other states are doing the same, I would say it’s a national problem,” Squire said. “It’s not a Maryland-only problem.”
Maryland is borrowing the money interest-free from the federal government as part of the nation’s economic stimulus program.
The estimated $250 million should be enough for Maryland to continue paying its unemployment benefits until April, when most businesses pay the tax that funds the state’s jobless insurance program, DLLR spokesman Bernie Kohn said.
As a result, “the trust fund is not going to run out of money,” Kohn said. Those receiving jobless benefit payments “are not going to notice any difference,” he said.
Out of work
After the recession hit in late 2007, unemployment rates across the nation began to increase as more and more businesses laid off workers and/or closed their doors.
In December 2007, the nation’s jobless rate was 5.0 percent, Maryland’s was at 3.6 percent and Washington County’s was 4.2 percent. By December 2008, the national rate had increased to 7.2 percent, Maryland’s to 5.4 percent and the county’s to 7.5 percent.
By December 2009, the nation’s rate had climbed to 10 percent and Maryland’s to 7.5 percent — its highest since 1983 — and the county’s to 9.7 percent.
The recession caused “a drastic increase in the number of Marylanders collecting unemployment insurance benefits,” DLLR said in a press release last October.
By then, data was showing that from January through August 2009, there had been 272,234 new claims for jobless benefits, the agency said. By contrast, it said, there were 171,630 new claims filed during the same period in 2008 and 141,982 in 2007.
By law, Maryland employers must pay a tax so money is in the state’s unemployment insurance trust fund when workers lose a job through no fault of their own and file for jobless benefits. The goal is to help people pay expenses while they search for new jobs.
The state fund pays up to 26 weeks of benefits — the maximum amount is $410 per week. Extended benefits beyond the first 26 weeks are paid by the federal government.
How many people currently are receiving jobless payments from the state is a bit of a mystery.
About 120,000 Marylanders are getting benefits, but some of them are being paid from the state fund and some, who have been unemployed for more than 26 weeks, are being paid with federal funds, Kohn said.
He said 4,830 Washington County residents are drawing unemployment benefits now, some being paid from the state fund and some with the federal funds.
Kohn said he couldn’t get more exact figures for the state or for the county now because so few people have been working at DLLR’s Baltimore offices since this month’s series of snowstorms began.
Payouts get larger
As the recession deepened, and more people lost their jobs and filed for unemployment, Maryland’s trust fund began paying out more money than it was taking in.
The fund contained $890 million by the end of September 2008.
Just a year later, by the end of September 2009, the fund had plummeted to $301 million as the number of so-called “initial claims” began to soar.
Most “initial claims” are filed by people who have never before been laid off, and the others are by seasonal workers who file now and again as they are laid off.
By far, most of a month’s claims are by people who have been laid off for several weeks or months and haven’t found work. These are called “continued claims.”
In October 2008, Maryland paid out $49 million as 29,079 initial claims were filed, according to the U.S. Department of Labor (DOL), which tracks the state data.
DOL doesn’t list the number of continued claims for the month in the same report. Kohn said he could not get the exact number now.
DOL lists both the initial and continued claims in a separate weekly report.
But the numbers in the weekly report don’t exactly jive with the monthly report’s total.
That is because October 2008 spanned part of one week, three full weeks and part of the following week. Those extra days aren’t accounted for in the weekly reports.
Nonetheless, using the weekly reports will give you a rough comparison.
A total of 25,785 initial claims were filed during four weeks in October 2008. In that same period, 197,458 continued claims were filed. Kohn said all of those claims would have been for the state money.
In December 2008, the state’s payout jumped to $84 million as 42,982 initial claims were filed, according to DOL’s monthly report.
In March 2009, the payout surged above $100 million for the first time. In all, $115.6 million was paid out that month, as 33,631 initial claims were filed.
By then, money was going out at the rate of $24.6 million per week.
“That’s when we knew the recession was so severe and we just knew this was going to have a large impact on the trust fund,” Squire said.
Things settled down some from May through July 2009, when the payments were $21 million to $22 million per week.
But in December 2009, initial claims shot up to 48,693 — Maryland’s highest monthly total in nearly 30 years.
The good news was that December’s benefit payments totaled just $80.2 million — far lower than in March 2009.
“One interesting thing is that the total payouts had not really increased that much,” Squire said.
That looks to be part of a trend the state has seen since last summer as the monthly payouts have seesawed, but mostly gone lower, she said.
In December, “we think a lot of employers had temporary shutdowns,” she said. “The data shows a lot of these claims may have not been for the entire month.”
That would be welcome news if those new claimants returned to work before December ended. But state officials must wait until January’s figures have been compiled to know whether the lower payouts continued, Squire said.
Some of the data is known, “but we have not done the analysis on that yet,” she said. “We did have significant claims in January.
“I’m optimistic we’re going to see improvement as we come into spring and the construction industry picks up.”
Construction is what worries John F. Barr, owner of Ellsworth Electric Inc., a large electrical contractor, as he tries to foresee what might happen to Washington County’s economy over the next six months.
Barr, who also is president of the Washington County Commissioners, said the continuing loss of construction jobs here might explain why in December 2009, Hagerstown had the highest unemployment rate among Maryland’s large cities — including Baltimore.
The data, issued for every month of 2009 by DLLR’s Office of Workforce Information and Performance, lists the jobless rates among people living in Annapolis, Bowie, College Park, Frederick, Gaithersburg, Hagerstown, Rockville, Salisbury and Baltimore.
Hagerstown’s unemployment rate was the worst all year compared to every other city except Baltimore.
Baltimore’s was the worst in most months, but Hagerstown’s exceeded it from February through May and again in December. That month, Hagerstown’s jobless rate climbed to 10.7 percent compared to Baltimore City’s 10.5 percent.
Hagerstown’s rate was higher than the countywide rate all year, just as the City of Frederick’s was higher than Frederick County’s all year. While Hagerstown’s rate ranged between 9.8 percent and 11.3 percent over the months, Frederick’s ranged from 6.0 percent to 7.0 percent.
So why was Hagerstown’s rate higher even than Baltimore’s in December 2009?
“I would bet that a lot of it is tied to construction,” Barr said. The answer lies “between the extremely tough winter we’re having and the lack of construction jobs in this area.”
“The weather’s No. 1,” he said. “No. 2 is the overall lack of construction jobs. And No. 3, the truth is what it is — Washington County Hospital is starting to wind down toward completion.”
Construction of the new hospital is “probably the single largest project that’s ever been in this county,” Barr said.
Since the work began in early 2008, he said, the project has kept about 550 to 575 construction workers — including up to 87 of Ellsworth’s — busy at the site near Robinwood Drive on Hagerstown’s eastern fringe. The new hospital is to open late this year, he said.
Figuring it out
Timothy R. Troxell, executive director of the Hagerstown-Washington County Economic Development Commission, said he doesn’t know why Hagerstown’s jobless rate jumped in December.
Troxell said the reason might not be because of any downturn here. Rather, he said, it might involve businesses in adjoining counties that draw workers from Hagerstown.
For instance, Troxell said, the unemployment rate in Berkeley County, W.Va., jumped to 9.6 percent in December from November’s 7.5 percent, and the rate in Morgan County, W.Va., increased to 9.7 percent in December from 7.1 percent in November.
Stephen Christian, executive director of the Berkeley County Development Authority, couldn’t be reached for comment.
Data issued by the U.S. Bureau of Labor Statistics show significant job losses from July through December 2009 in the “mining, logging and construction” trades in the Hagerstown-Martinsburg, W.Va., metropolitan regional area.
According to that agency, area employment in those trades was down to about 4,900 people by December after having fallen by as much as 13.6 percent per month compared to that same month a year ago.
Overall, the number of nonfarm jobs in the region in December totaled 99,400 — 1.7 percent fewer than in December 2008, the agency said.
Besides construction, significant job losses in December came in the areas of manufacturing, down 4.3 percent to 9,000 workers; trade, transportation and utilities, down 2.7 percent to 22,000 workers; financial activities, down 5.3 percent to 7,100 workers; leisure and hospitality, down 3.5 percent to 8,300 workers; and information, down 3.2 percent to 3,000 workers.
Job increases in December came in the areas of government, up 3.2 percent to 19,500 workers; education and health services, up 1.4 percent to 14,100 workers; and professional and business services, up 1.3 percent to 7,900 workers.
For better or worse
Where all of this is leading in the local economy is tough to say.
“Just because unemployment is still going up doesn’t indicate that the recession is getting worse and it doesn’t even indicate that we’re still in a recession,” said Stacey McGee, who teaches economics at Hagerstown Community College.
“It’s very typical to see this at the beginning of a recovery,” she said.
McGee said the nation’s gross domestic product (GDP) — essentially, the market value of all of the goods and services produced — has risen in the past two quarters, up 2.2 percent in July, August and September 2009 and up 5.7 percent in October, November and December 2009.
She cited a report by macroeconomist Mark Thoma of the University of Oregon, who says the unemployment rate usually can be expected to improve about three months after economic output begins to rise.
After the nation’s last two recessions, in 1990-91 and 2001, the jobless rate didn’t begin to improve for as long as a year or more, Thoma said. And so it might be this time as employers test the market and realign their businesses, he said.
McGee said she thinks the nation’s economic comeback will be “a slow, gradual recovery — hesitant. I think it’s going to be a sort of stop-and-startish type thing. I think it’s going to take confidence from businesses and consumers.”
That might be the view, too, of employers in the Hagerstown and Martinsburg area who were surveyed recently by Manpower Inc., an employment services company with offices in the area.
From January through March 2010, the survey showed, 12 percent of the companies interviewed plan to hire more employees, 10 percent expect to reduce their payrolls, 73 percent plan to keep staff at current levels and 5 percent are undecided.
This sounds a bit stronger than the October, November and December 2009 quarter, when 7 percent of the companies interviewed planned to add workers and 12 percent planned to reduce their work crew, Manpower said.
Through March, it said, local job prospects look best in such sectors as nondurable goods manufacturing, wholesale and retail trade, professional and business services, education and health services, leisure and hospitality, and what Manpower calls “other services.”
During the same time, employers in construction and durable goods manufacturing planned to cut their numbers of workers, Manpower said.
Manpower didn’t say how many companies it surveyed here.