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$85M federal grant boosts unemployment trust fund

Last month, Congress approved an unprecedented $85-million grant to help offset rising unemployment costs in Mississippi.

The Hurricane Katrina Unemployment Relief Act of 2005, approved by Congress October 19, provides for a transfer of $500 million from the Federal Unemployment Trust Fund (FUTA) to state unemployment accounts in Mississippi, Alabama and Louisiana.

“The money is grant-appropriated by Congress to address the extraordinary circumstances faced by Mississippi, Louisiana and Alabama,” said Mississippi Department of Employment Security (MDES) deputy director Jim Lott. “This is the first time such an appropriation has been made.”

The funds will help restore the states’ rapidly depleting unemployment insurance fund balances, and may also prevent or delay increases in employer taxes. Louisiana will receive the lion’s share — $400 million — and Alabama will receive $15 million.

The infusion will most likely save much-needed workforce training dollars that were in jeopardy of not being diverted from the Trust Fund. “The issue is when the Trust Fund dips below $500 million,” explained Lott. “There are several variables that impact if that will happen, including the number of people who apply for benefits, the length of time they receive benefits and the ongoing amount of the unemployment taxes collected.”

Since September 1, the Trust Fund has declined by $45 million. The infusion of $85 million increased the balance to $770 million.

Declining employment

From September 1 to October 31, MDES reported 119,737 combined DUA (disaster unemployment assistance) and regular claims were taken. The number of job placements since October 1 was 4,163. The first State Katrina Recovery Job Fair, held October 28 at the Resurrection Life Church in Picayune, drew 60 employers and more than 800 job seekers.

“As expected, labor force conditions took a turn for the worse in September due to Hurricane Katrina,” noted Lott. “Employment levels fell by 87,000 between August and September, primarily due to businesses along the Gulf Coast or in the path of the hurricane that were destroyed or damaged by the storm. Additionally, a significant number of part-time summer workers exited the labor force to return to school.”

The part-time summer workers’ workforce exit means they were not counted as employed or unemployed in September, Lott pointed out.

“Even in a normal September, we would expect to see the unemployed totals shrink from August because of students exiting the labor force,” he said. “Because of this and other seasonal factors, the increase in the number of unemployed individuals did not match the fall in the employed count, rising only by 22,400 over the month. These changes combined to push the state rate from 7% in August to 9.1% in September, the highest September rate recorded since 1988, when it also stood at 9.1%. The most recent month with a rate in excess of 9.1% was June 1992, when the rate was 10.3%. The seasonally adjusted rate increased even more substantially, rising from 6.9% to 9.6% over the month.”

Non-farm employment estimates validated the labor force trends, posting a loss of 56,000 jobs in September and 52,800 throughout the year. All major industries showed declines, except the government.

Harrison County posted the highest unemployment rate in September (24.2%), followed by Hancock County at 23.1% and Jackson County at 23% — the highest rates ever reported for the tri-county coastal area. Most of South Mississippi showed rates in excess of 10%. DeSoto County posted the lowest unemployment rate in the state (3.5%), followed by Lafayette County (4.1%) and Rankin County (4.3%).

“Unfortunately, the devastation brought by Hurricane Katrina will negatively impact the labor force conditions for quite some time,” said Lott.

New direction

MDES has shifted its focus from taking claims for unemployment benefits to connecting people with jobs via a toll-free number for employers to list jobs statewide, the mdes.ms.gov Web site with links for employers and job seekers, and the 24 WIN Job Centers open throughout the state.
Meanwhile, MDES is pursuing additional federal grants and appropriations.

“We continue to work with the Governor’s Office and the congressional staffs to identify concerns and additional funding,” said Lott. “Gov. Barbour’s relationship with key decision makers in Washington has been our best asset. We have benefited from a good relationship with the Department of Labor and will also work with them to find solutions to funding challenges. The Katrina recovery has been a learning experience for everybody. We’re optimistic there will be more funding and that the Mississippi Unemployment Trust Fund will continue to have a healthy balance.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.

About Lynne W. Jeter

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