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How will ongoing unemployment costs affect business

November 30, 2011

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Retailers beefed up their staffs as the holidays approached. Photo: The Clarion-Ledger

The monthly update to the national unemployment rate — the Department of Labor’s employment situation report — is due out Friday.

Among other things, it’s a reminder that about 14 million individuals in the U.S. still are classified as unemployed, and about half of them are claiming some sort of jobless benefits, according to the weekly claims report from the labor department. And roughly half of those people are on extended benefits beyond the regular six months that state unemployment programs typically offer.

(If you’ve never taken a close read of the weekly jobless claims report, you might to spend a few moments; it offers some interesting data beyond the new-claims figure, including states with the highest insured unemployed rate and other breakdowns.)

The failure of the Congressional budget supercommittee to reach a deal earlier this month undoubtedly has many of those millions of would-be workers wondering if extended unemployment benefits, set to expire in January, will be renewed.   The National Employment Law Project estimates that some 2 million people will lose benefits if Congress doesn’t act before the end of the year to extend them.  If you haven’t brushed up on UI benefit programs, the report is a valuable primer with historical perspective and data as well as information about current programs and recipients.

Obviously the plight of individuals and families dependent on unemployment benefits is a timely business feature you can consider.  Find some two-unemployed-worker families; I just heard about a husband-wife duo of my acquaintance who both lost jobs in the same week.

And to be contrarian about it, you might also add the perspective that not everyone on unemployment insurance is a few checks away from poverty.  Many unemployed workers have spouses who are well-employed and earn enough to support the household on one income. There is no denying the desperate situation of many Americans, yet I dislike it when reports portray every single unemployed person as being in dire straits.

And as we’ve suggested before, check in with landlords, local merchants, car dealers, local lenders and others about what happens to their business when jobless checks dry up.  Those households that are teetering on the brink will have to consolidate and further rein in spending or walk away from debts.  Might they leave empty apartments, repossessed vehicles and delinquent loans in their wake?  How much do unemployment benefits help keep your local economy afloat?

The other interesting angle to the unemployment story is the cost to businesses, and how increasing costs might influence hiring, at least at the small-firm level.

As this Stateline report points out, state governments already are deeply in debt — to the tune of more than $37 billion — to the federal government for loans to cover state unemployment benefits.   That means employers in some 20 states, according to Stateline, will be hit with higher federal  unemployment taxes (FUTA) in 2012 to  help cover the burden. That’s in addition to the unemployment taxes that employers pay to the states, which are known as SUTA.

Your state’s labor department should have an explanation of SUTA for businesses, like this one from Colorado.  You might get a CPA to help with an explainer about how the overhead costs per employee will change for companies that may be making hiring decisions in 2012.

It’s not always clear; here’s a worst-case-scenario feature by the New York Times, “Businesses struggle with the burden of unemployment claims,” that illustrates the pitfalls for employers, especially those who experience a lot of turnover.

Another angle: non-profits.  I’m not really clear on how the rules differ for non-profit employers, but apparently they do and organizations like this one, the Unemployment Services Trust, provide an alternative to paying state taxes.  What does this mean for workers at non-profit agencies and what should they be aware of?

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