U.S. unemployment rates may have finally peaked last month, but the economic woes for many Americans are likely to continue for some time. For example, we learned this week that nearly 1 out of every 8 Americans uses food stamps. Yesterday, the Georgia Department of Labor reminded us of the severity of the unemployment situation in the state:
“Georgia’s job market is mired in a prolonged downturn. A year-over-year analysis of initial jobless claims shows that the number of Georgians filing for unemployment benefits in November declined by 2.9 percent compared to November 2008. This follows a year-over-year decline of 2.8 percent in October…unfortunately, Georgia’s job market is showing little improvement.”
The Atlanta-Journal Constitution interviewed state Labor Commissioner Michael Thurmond for additional commentary. Although unemployment rates may have finally peaked last month, it is clear that states like Georgia face on-going, perhaps deeply entrenched and structural problems in the labor force. The AJC reports:
“More than 1 million people – more than 20 percent of the state’s work force — have filed for jobless benefits since recession started in late 2007, said state Labor Commissioner Michael Thurmond. ‘It is astounding,’ he said. ‘That is why I think the crisis is worse even than it first appears.’
Most critically in the short-term, Georgia is running out of money to fund unemployment insurance:
“In two years, the state has paid roughly $2.6 billion to laid-off Georgians. That flood of checks has left the state’s trust fund nearly dry. In the next week, Thurmond will likely ask the federal government for a loan so the state can keep paying its share of the benefits.”
Unemployment woes like the ones faced in Georgia are common across the country. Here are just a few examples:
- A UCLA Anderson Forecast projects that California’s unemployment rate will remain above 10% through 2012.
- Maryland’s unemployment insurance fund nears bankruptcy.
- Texas will implement steep tax hikes to cover its mounting costs of unemployment insurance.
- Idaho continues to borrow money from the Federal government to keep its unemployment insurance program afloat. The borrowing will likely continue for the next 15 months.
These dire conditions continue to leave me extremely skeptical that the Federal Reserve will raise interest rates much earlier than its typical pattern (waiting 2-3 years after the recession ends).
Be careful out there!
Full disclosure: no positions