Art Woolf is a columnist for VTDigger. He recently retired as an associate professor of economics at the University of Vermont.
The state processed a record 16,474 claims for unemployment insurance last week. The previous record was set two weeks ago when the state processed 14,700 applications. The week before that, 3,800 Vermonters applied for insurance, nearly a record high. In a normal week, about 500 people apply.
Since the economic shutdown began in mid-March, 72,000 Vermonters have applied for unemployment insurance, although only 35,000 claims had been processed through the end of last week. To put those numbers in perspective, in all of 2019, a total of 28,000 people applied for unemployment insurance.
How much higher can this go? The state estimates as many as 100,000 people may apply, almost one out of every three workers in Vermont. At the current rate of processing about 15,000 claims per week, it could take four weeks until the backlog of claims is processed by the Department of Labor’s antiquated computer system which, admittedly, was not designed to handle such a deluge of claims.
Ignoring the backlog issue, the number of people applying for unemployment insurance benefits will keep going up the longer the shutdown lasts.
The number of people applying is high not just because of the shutdown, but also because a change in eligibility requirements allows self-employed individuals to receive unemployment benefits. That has never been the case in the past because self-employed people do not contribute to the state’s unemployment insurance trust fund.
That fund has swollen to nearly $500 million over the past decade, but its level is now, for the first time since the Great Recession, decreasing as withdrawals exceed the amount of unemployment insurance taxes going into the fund.
It takes a week or two — or maybe longer giving processing delays — for people who apply for unemployment insurance to start receiving checks. In early March, before the economic shutdown, about 4,500 people were receiving unemployment insurance checks for a weekly total of $1.8 million. By the end of March that had increased to 8,400 people and $3.1 million. Last week, 12,000 people received $4.7 million in unemployment compensation checks.
While the number of people applying for unemployment insurance for the first time will decrease once the processing backlog ends, the number receiving checks will skyrocket from the current 12,000 to 100,000, if the state’s estimate is correct. Even if it is not, at least 70,000 people will be receiving checks.
The average weekly check from the state’s unemployment insurance fund is currently about $350 and is based on how much the person earned. That is now being supplemented by a $600 check, no matter what your previous weekly wage was, paid for by the CARES Act, the $2 trillion federal relief bill passed a few weeks ago.
When the Great Recession started in December 2007, the trust fund balance was $162 million. By the following December it was down to $1.8 million and by the bottom of the recession the state had borrowed $78 million from the federal government to finance its unemployment insurance payments. Nearly 40,000 Vermonters received an unemployment insurance check at some point during 2009 and they received an average of $300 weekly for nearly five months.
Today, the 72,000 people who have currently applied for unemployment benefits is nearly twice as many as at the trough of the Great Recession.
If 100,000 Vermonters ultimately receive unemployment checks, Vermont’s $500 million unemployment insurance trust fund will bleed $35 million per week and, if the shutdown continues through the summer, it will be empty.
