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States are burning through cash reserved for unemployment claims as millions of workers put out of work by the coronavirus pandemic apply for jobless benefits at an unprecedented pace.
Nearly half of U.S. states have reported double-digit percentage declines in their insurance programs since the end of February, the month before the virus outbreak triggered strict stay-at-home mandates throughout the country and the closure of businesses deemed non-essential, according to a Wall Street Journal analysis of Treasury Department data,
Last week was another bloodbath for the U.S. labor market: The Labor Department revealed Thursday that another 5.25 million Americans filed for unemployment benefits in the week ending April 14. That brings total claims over the four weeks ended April 11 to nearly 22 million workers, which erased all of the labor market gains since the 2008 financial crisis, a stunning sign of the colossal economic damage inflicted by the pandemic.
States use the money to administer regular unemployment benefits, and the expanded $600 weekly payments for workers laid off during the tandem health and economic crises stems from the federal stimulus package signed at the end of March.
For instance, from the end of February to mid-April, New York had depleted about half of the money it had on tap, one of the steepest declines among states, the Journal found.
Massachusetts also has used up about half of its available funds, and California had the third-biggest drop over that same time period. The Golden State's balance dropped by about 40 percent.
Despite the historically long, 11-year economic expansion, 22 states’ unemployment trust funds were unprepared to pay out enough in unemployment benefits in the case of a recession prior to the crisis, according to Labor Department data. The trust funds need to have enough to pay benefits for a full year in order to be considered recession-ready.
But states like California, Massachusetts, New York and Ohio haven’t restored their funds since the Great Recession more than a decade ago. Unemployment insurance trust funds went insolvent in 35 states after the most recent recession, prompting some governments to reduce benefits.
After the 2008 crisis, states also asked the federal government for help in funding unemployment benefits. Some took years to pay back the loans.
No state has run out of money, but state officials are planning for the possibility, the Journal reported.
Connecticut’s commissioner of the state’s labor department said it will likely need to take out federal loans for regular benefits payouts in the next month.
Connecticut’s funding for unemployment benefits has declined about 30 percent since the end of February, the Journal analysis found.