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N.C. unemployment benefits drying up as Dec. 26 cut-off date looms

N.C. unemployment benefits drying up as Dec. 26 cut-off date looms

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As the expiration of two federal and one state extended unemployment insurance benefit programs looms Dec. 26, the amount paid to North Carolinians has dried up significantly over the past two months.

After $8.16 billion in state and federal UI benefits were paid from late March through Sept. 30, there has been just $670 million from Oct. 1 through Saturday, according to the N.C. Division of Employment Security.

There has been $1.77 billion paid in regular state benefits as of Friday, of which just $80 million has been provided since Oct. 1.

The state’s Unemployment Insurance Trust Fund was at $3.85 billion when the brunt of the pandemic began to be experienced in mid-March.

State legislators said Sept. 2 that between $2.9 billion and $3 billion remained in the fund. The state's third COVID-19 relief bill added $87 million.

About 31% of the 4.35 million North Carolinians considered part of the state’s workforce as of mid-October have filed a state or federal unemployment claim, according to DES.

"A decline in benefits should signal a decline in the number of people eligible to collect benefits under the existing rules," said Mitch Kokai, senior policy analyst with Libertarian think tank John Locke Foundation.

So, what's been the difference in the past nine weeks?

Most unemployed and furloughed North Carolinians having exhausted their 12 weeks of regular state UI benefits well before Oct. 1.

For those who began receiving regular state UI benefits at the start of the pandemic in late March to early April, they ran out of eligibility in June.

North Carolinians, at most, could have collected 34½ weeks of state and federal UI benefits, broken down as: 12 weeks of regular state-funded benefits; 13 weeks of federal pandemic emergency unemployment compensation; and between six to 9½ weeks of federal extended benefits.

The current maximum of 12 benefit weeks is tied with Florida for lowest in the country.

The number of weeks will expand to 16 in January for new claimants, reflecting the first use of the sliding scale written into the state UI law in 2013.

Unemployment insurance recipients who qualified for up to 22½ weeks of federal extended UI benefits likely began exhausting them in early November. Most of the rest will be done Dec. 26 unless an extension is passed by Congress during its current lame-duck session.

"The severe economic toll stemming from the prolonged pandemic taken on individuals’ employment and incomes, and the loss of employers, could linger for quite some time to come," said Mark Hamrick, a senior economic analyst for Bankrate,

North Carolinians have exhausted their regular state benefits much faster than most Americans, according to a report released in August by the Federal Reserve Bank of Richmond.

By comparison, unemployed counterparts in the 44 states that receive a maximum of 26 weeks didn’t begin exhausting their regular state benefits until early October.

Fewer claims being filed

As of Oct. 1, just more than 1.3 North Carolinians had filled more than 2.45 million state and federal jobless claims.

Over the next nine weeks, there have been about 60,000 new applicants.

There are an additional 400,000 claims overall, coming primarily from North Carolinians who are required to submit a new claim for most extended federal benefits after exhausting regular state benefits.

There's limited optimism that another COVID-19 stimulus relief package could be reached in Congress during its current lame-duck session before the Dec. 26 expiration of the pandemic emergency unemployment compensation (PEUC) and pandemic unemployment assistance (PUA) programs.

About 2 million Americans benefit from the two programs. DES has been provided how North Carolinians are receiving those payments.

PUA benefits are primarily for independent contractors, self-employed people and people with short work histories who became unemployed because of COVID-19. It is available for people who have to be at home to care for a child whose school has closed because of the virus.

As of 10 a.m. Friday, the PEUC program had paid $695.4 million in benefits to North Carolinians since April, while the PUA program has paid $691.6 million. That's up from $543 million and $530.1 million, respectively, on Oct. 1.

North Carolina and the nation already has seen the expiration — on July 26 — of the foremost UI benefit program being the federal $600 weekly benefit supplement. That program has paid $4.82 billion to North Carolinians, still representing 54.6% of all UI benefit funds as of Wednesday.

The N.C. Justice Center has said the state's economy has been losing about $350 million each week since the expiration of the $600 federal supplement.

"The patterns we are seeing are predictable given the current structure of the state's UI system," said John Quinterno, a principal with South by North Strategies Ltd., a Chapel Hill research company specializing in economic and social policy. "All of the federal programs have papered over many of the flaws in the state's system — a system that has been designed to offer as little aid as possible to as few people as possible for as little time as possible.

"There are lessons to be learned, but I don't see any changes to the status quo coming from Raleigh."

State borrowings?

It is unlikely state Republican legislative leaders would support borrowing again from the U.S. Labor Department for its share of the federal extended benefits, as up to 22 states may have to do to meet the president’s funding requirement.

A priority of the GOP when the party took super-majority control in January 2013 was paying off $2.8 billion in federal borrowing to pay extended state benefits during the Great Recession. The debt was paid off in May 2015.

“We have needed to raise our state benefits since they were first reduced after the last recession," House Minority Leader Darren Jackson, D-Wake, said. "If the federal government is not willing to do so, we need to do what we can to help out workers that have lost their jobs through no fault of their own.”

Yet, economists and political analysts expect little, if any, movement in the state legislature toward extending the $50 increased benefit state program, and are not optimistic about the two federal programs.

One unexpected hurdle to a potential extension: the faster-than-projected arrival of one to two COVID-19 vaccines from Pfizer and Moderna by January.

Dr. Mandy Cohen, the state's health secretary, said Tuesday the state is expected to receive within weeks an initial round of 85,000 doses of the Pfizer vaccine, and then weekly allocations from Pfizer and Moderna.

The state's strategy calls for the first doses to go to health-care providers and emergency responders who are at high risk for exposure, those who are vital to the initial COVID vaccine administration efforts, and staff in long-term care facilities.

The potential for widespread availability and use of the COVID-19 vaccines by mid-2021 could serve to jump-start the state's economy, economists said.

"There’s real concern that the economy might yet stall or even contract during this anxious time of transition to the widespread availability of vaccines," Hamrick said.

The General Assembly approved in September the $50 increase in response to requests to re-examine the state's maximum weekly benefit amount of $350 and maximum number of weeks at 12.

The $50 increase that became available in late October is estimated by DES to have benefited between 15% and 20% of current UI claimants.

Payments were at $97.6 million as of 10 a.m. Friday.

"My assessment is legislators will wait for the vaccine, with the expectation it will eventually defeat the virus and hiring will ramp up," said Michael Walden, an economics professor at N.C. State University.

Alexandra Sirota, director of left-leaning N.C. Budget & Tax Center, said it "has been clear that the economy won’t fully recover until the virus is under control.”

"So, while a vaccine is important to that goal, providing income supports to those who have lost work or can’t safely work until the virus is contained must be the priority of lawmakers," she said. 

"If they choose to wait and see, the damage of lost work and lost income will balloon to destroy the stability of housing for families, the opportunities in neighborhoods and the ability of businesses to stay in business through the pandemic."

Still saving for rain day

Kokai said that the idea with the state UI Trust Fund "is to have enough money in the trust fund to cover an emergency, but not so much that the taxes needed to build up the trust fund choke off too much economic activity."

Still, Kokai expects that "among the topics lawmakers are likely to discuss (in the 2021 session) is whether the state needs to tweak its unemployment program based on current conditions."

The General Assembly "seems to regard this as a downturn that is outside the normal business cycle, and they therefore are not interested in spending down the UI funds," said Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University.

"Unemployment has fallen, but the economic hurt has not. I seriously doubt that the legislature will do anything about this since, by design, unemployment insurance is supposed to be a temporary assistance program and there is no appetite among the majority of legislators to expand it," Madjd-Sadjadi said. "I do not think that unemployment expansion will be on the table." 

Sirota said it "will be critical for the General Assembly to fix the state unemployment insurance system early in 2021."

"With or without federal action, the pandemic has made clear that jobless workers in North Carolina are being hurt by too little in weekly unemployment insurance for too short of time," Sirota said.

"That pain in households, of not having the income to cover the basics, ripples through communities and holds back the recovery from taking hold." 

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