Unemployment benefits weeks will decline in July

Jobs unemployment

WINSTON-SALEM, N.C. — It’s not a matter of if, or even when, North Carolinians will face another reduction in benefit weeks for unemployment insurance.

With the jobless rate dropping 0.3 percentage points to 6.4 percent in February, those benefits will go down – per state law – on July 1.

The only question is by how much the benefit weeks will drop – four or five weeks – from the current maximum of 19 and minimum of 12. At a jobless rate between 6.1 percent and 6.5 percent, the weeks would fall to a maximum of 14 and minimum of seven.

The lowest current maximum benefit limit is 18 weeks in Georgia, while Florida also is at 19.

When Gov. Pat McCrory signed into law House Bill 4 in February 2013, he provided the first measuring stick for whether his conservative approach to running the state economy will create jobs. Before the bill was passed, the maximum benefit amount was 26 weeks – the same level that 44 states still maintain.

McCrory touted that the benefit reductions would “protect our small businesses from continued over-taxation and help provide an economic climate that allows job creators to start hiring again.”

However, the sliding scale doesn’t take into account factors contributing to the rate decline, such as discouraged workers exiting the labor force. Because those individuals aren’t counted as unemployed by federal and state labor officials, it serves to lower the rate.

There are 112,126 fewer North Carolinians listed as unemployed from February 2013 to February 2014, the N.C. Commerce Department said Friday.

Yet, the state only had a net gain of 48,459 jobs during that time period. The data do not distinguish how many of the new private-sectors jobs are full time, temporary or part time.

In that time, the state rate has declined from 8.6 percent to 6.4 percent.

Several research groups, such as the Economic Policy Institute, say there are at least three applicants for every job opening in North Carolina.

“This demonstrates the design flaw in a policy that uses one metric, the unemployment rate, to assess the health of the labor market for workers who want to work, but for whom there are not enough jobs,” said Alexandra Forter Sirota, director of the left-leaning N.C. Budget and Tax Center.

“The results of fewer weeks will only create greater hardship in communities.”

The N.C. law allows for the number of benefit weeks to be adjusted every Jan. 1 and July 1, based on the average jobless rate of the first three months of the previous six-month period, i.e., July, August and September for the first six months of the year and January, February and March for the second half.

Every 0.5 percentage point drop in the rate lower the maximum and minimum week levels by one. The scale stops at five and 12 weeks when the rate is at or below 5.5 percent.

McCrory and Republican legislative leaders say the tough-love approach have made individuals more willing to take available jobs, including at lower wages and potentially below their skill level, as their benefits run out.

Sen. Robert Rucho, R-Mecklenburg, serves as co-chair with Rep. Julia Howard, R-Davie, on a legislative oversight committee on unemployment benefits.

Rucho said Friday he is convinced that House Bill 4 is working as designed. Howard did not return phone calls seeking comment, although she has referred to extended UI benefits “as a welfare-dependent program in a lot of cases.”

Rucho said it is not fair to single out North Carolina’s declining labor force as a key factor for its lower jobless rate “since a similar thing is happening in every state.” Rucho said one key factor is an increasing number of baby boomers opting to retire.

The traditional jobless rate does not include several categories of people, including those who have stopped looking for work, including for job training or other educational efforts, are retired, are underemployed for their work skills, are able to work full time but can only get part-time work, or are receiving a severance package after the elimination of their job.

A rate compiled by the U.S. Bureau of Labor Statistics, the U6 index, includes those categories. As of Dec. 31, the U6 index rate for North Carolina was 14.7 percent compared with 12.6 percent nationally on Feb. 28.

Rucho said the sliding benefits scale is “necessary” as a means of limiting the benefits “to their original purpose, temporary assistance for people during a time of economic downturn as they look for another job.”

John Hood, president of the right-leaning John Locke Foundation, said “it might be reasonable to adjust the standard for benefit changes to take into consideration the reasons for long-term drops in jobless rates.”

However, John Quinterno, a principal with research firm South by North Strategies Ltd., said he does not believe the legislature will revisit the sliding scale in the short term since “they succeeded in enacting a major reform consistent with conservative priorities.”

The reasons why the jobless rate is declining, and the reforms initiated by the legislature, “have effectively decoupled the unemployment insurance system from actual conditions in the labor market,” he said.