A study analyzing 20 years of Michigan unemployment data shows that claims are at a record low. The study was conducted by the Mackinac Center for Public Policy, a nonpartisan education and research organization.
According to the study's authors, each state has an unemployment insurance fund for which employees can collect a paycheck if they lose their job through no fault of their own and, additionally, have been employed for a minimally prescribed amount of time, about five months.
James Hohman, a fiscal director at the Mackinac Center, told The Center Square that the number of people claiming unemployment surged during the Great Recession but has since declined.
“This allowed the state of Michigan to pay down some of its debts because when you have a period of prolonged unemployment, you drain your unemployment trust insurance fund, and so you borrow, and we’ve been paying down that debt and lowering our unemployment tax rates,” Hohman said.
We’re about at a low point, he said, but claims typically increase in December and peak around February.
Hohman said that Michigan set a record low last year and might set another this year.
Don Grimes, assistant director for the Center of Labor Research at the University of Michigan, told The Center Square that a booming economy means that few workers are losing their jobs.
“That means the economy in Michigan is doing pretty well, at least for the people who are employed,” Grimes said. “Because this is really a function of people getting laid off, it means that firms aren’t really laying off any of their existing workers.”
Fewer unemployment claims should bring a surplus to the state insurance fund, in case of a recession.
When states deplete that fund during high unemployment such as the Great Recession, the federal government provided another 26 weeks for a maximum of one year of unemployment insurance benefits.
The state repays the federal government when the economy recovers.
Grimes said that Michigan had been hit hard during recessions due to auto industry layoffs, which also had a negative impact on durable goods, factories and manufacturing plants.
“Michigan will suffer more during a recession because that’s the one thing people can really put off buying,” Grimes said. “You really can’t put off buying food. You can put off buying your car.”
That cushion amount in the fund depends on the interest rate the federal government charges states, Grimes said.
“If there’s no interest, you might be willing to run a lower balance,” Grimes said. “Because if you borrow for free, then why stop? I don’t know the answer. Does the federal government charge interest if you have to pay for the fund?”
The Federal Reserve didn’t respond to interview requests.
The federal extension ran out when the unemployment rate dropped in 2012-2013.
Michigan reduced the maximum length someone unemployed can collect unemployment insurance to 20 weeks.
Grimes said that some workers may still struggle to find work, but that a tight labor market encourages firms to act strategically.
“Some people unemployed still have difficulty if you don’t have the right skill set,” Grimes said. “But an employer, once he’s got an employee who’s doing a good job, should be able to decide if he wants him before six months, so he doesn’t have to pay unemployment.”
Michigan’s June unemployment rate increased to 4.3 percent from 4.2 percent the previous month.
But that doesn't count the workers who entered the labor force, said Jason Palmer, director of the Bureau of Labor Market Information and Strategic Initiatives.
"Since July 2018, the state's labor force expanded by 65,000 residents and employment was up by 47,000," he said.
Grimes said that a tight labor market, an aging population, and baby boomer retirement has encouraged firms to hang onto good workers.