OLYMPIA — After months of mostly downbeat data from Washington state's job market, this week brought several pieces of promising news.
New, or "initial," claims for unemployment benefits fell last week to 17,734, a 9.4% drop from the prior week, the state Employment Security Department (ESD) reported Thursday morning. While that's still more than triple the level of the same week last year, it's also the lowest number since the second week of March, as the big pandemic-related layoffs were starting.
And earlier in the week, employers in Washington learned they'll be seeing a smaller than expected tax increase next year to help fill a financial hole left by the pandemic.
Thanks partly to a new and more optimistic forecast for the state economy, the ESD now says the unemployment insurance trust fund used to pay unemployment benefits isn't headed toward insolvency, which a July report from ESD predicted could happen in early 2021. Instead, the trust fund, which has fallen from $4.7 billion in early March to $2.3 billion as of Sept. 30 due to huge benefits payouts in the pandemic, is projected to bottom out at around $131 million in early 2021 before recovering.
That rosier outlook for the trust fund means employers won't need to cough up a so-called insolvency tax — one of three possible unemployment taxes paid by businesses — next year. And that means employers' overall unemployment tax burden won't increase quite as much as ESD forecasted in July, when the agency warned of a near-tripling of employers' tax load — from an average of $317 per worker for 2020 to $936 per worker by 2022.
"Coupled with a stronger than expected state revenue forecast last week, this means an improved outlook overall and a break for employers when they most need it," said ESD Commissioner Suzi LeVine in a statement.
Still, employers shouldn't expect a huge break in taxes. Although ESD hasn't yet calculated exactly how the new forecast will affect employers' average per-employee tax next year, ESD spokesman Nick Demerice said, the change will mean a reduction in the combined tax rate that employers pay, from 1.88% to 1.7%, in 2021. Employers paid a combined rate of 1.08% in 2019.
The remaining tax hike "is still a significant increase for businesses, but this new forecast improves the outlook considerably," Demerice said, adding that ESD still projects needing an insolvency tax in 2022 and 2023.
In those years, the combined unemployment tax rates will be 2.57% and 2.43%, respectively, which are both marginally lower than the rates that were projected in July.
Further, thanks to ESD's improved forecast, the agency no longer anticipates having to borrow federal funds to replenish the trust fund.
The developments in the state's job market came as the nation as a whole saw a modest decrease last week in new jobless claims, which fell 4.3% to 837,000 over the prior week, the U.S. Labor Department reported Thursday.
The nation's unemployment rate was 8.4% in August, the most recent month for which data is available. Washington's August unemployment rate was 8.5%, and roughly 328,000 Washingtonians were collecting unemployment benefits as of last week.