Please enable JavaScript to view the comments powered by Disqus.

We use cookies on our website to give you the best online experience. Please know that if you continue to browse on our site, you agree to this use. You can always block or disable cookies using your browser settings. To find out more, please review our privacy policy.

Economy Matters logo


The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.

The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.

Postings are weekly.

Unemployment insurance issues

Back in December, SouthPoint highlighted the issues Southeastern states were facing with their unemployment insurance funds. In our ongoing contacts with business owners and managers, we continue to hear about this pressure at a particularly bad time. Generally weak demand and low revenues have already depleted the cash positions of many businesses, especially small ones. Now, as a majority of states have drained their own unemployment insurance reserves, forcing them to borrow from the federal government, some states are increasing unemployment taxes to help replenish the funds:


Not surprisingly, anecdotal feedback we have received indicates that the timing couldn’t be worse. While any additional monetary outflows are of concern for businesses focused on surviving the current situation, for those with larger numbers of employees, dealing with the increased taxes has the potential to be devastating. Of course, some businesses that were considering staff increases are now going back and “doing the math” to determine if the additions are affordable given the new circumstances.

We have also noted that state lawmakers might be viewing the unemployment insurance tax increase as a problem for potential job-creating companies. In Florida, this issue is getting an increasing level of attention from both politicians and the media.

The good news (if you care to characterize it as good) is that some states are even worse off than those in the Southeast: California, Michigan, and New York, among others, have debt from the Federal Unemployment Account that is even higher than that of the worst Sixth District state. And employers in Hawaii may see an increase of more than 1,000 percent on the 2010 average unemployment tax per worker. Regardless of location, though, eventually businesses (and those they pass their costs on to) will have to pay for the significant insurance expenditures being made as a result of the large number of unemployed.

By Chris Oakley, vice president and regional executive of the Jacksonville Branch of the Federal Reserve Bank of Atlanta