UI Outlook

UI Outlook

OVERVIEW

Twice each year, when the Office of Management and Budget issues economic assumptions for the federal budget, the Division of Fiscal and Actuarial Services (DFAS) of the Office of Workforce Security (OWS) uses those assumptions to develop financial projections for the Unemployment Insurance system.

Using the economic assumptions, the paths of key program variables are projected for the following five years. It is important to keep in mind that the economic assumptions beyond the first two years are not intended to be forecasts but rather are based on long-term trends. Deviations from the assumed economic path could have a significant effect on the accuracy of the estimates shown in the UI Outlook.

Highlights of the analysis for the FY 2009 President's Budget are detailed below. The total unemployment rate (TUR) is projected to average 4.9% in FY 2008 as well as in FY 2009.

Under these assumptions:

The insured unemployment rate (IUR) is projected to be 2.0% in both FY 2008 and FY 2009.

State UI regular benefit outlays are estimated at $33.55 billion in FY 2008 and $36.10 billion in FY 2009, compared to Midsession Review estimates of $32.02 billion and $34.18 billion, respectively. Outlays are higher than prior estimates throughout the projection period.

Revenues and interest earnings for state trust fund accounts are projected to exceed outlays by $3.84 billion in FY 2008 and $3.03 billion in FY 2009.

Despite the higher outlays, state trust fund account balances are projected to grow throughout the next five years, although at a declining rate.

Borrowing from the Federal Unemployment Account (FUA) is projected to increase over the next few years due to higher projected outlays. There were no outstanding loans at the end of FY 2007.

The interest rate on FUA loans for CY 2008 is 4.8078%.

Reed Act distributions, which occur when all three of the Federal accounts reach their ceilings, are projected starting in FY 2013.

These projections assume no funding of employment services from the Unemployment Trust Fund after FY 2008, consistent with the Administration’s budget request.

Proposed Legislation

The tables in this publication are based on current law, under which the effective FUTA tax rate drops from 0.8% to 0.6% in CY 2009. The FY 2009 President’s Budget includes a proposal to extend the 0.8% rate for one year, through CY 2009. This change would increase FUTA collections by $1.9 billion for FY 2009-10. Federal account balances would reach their ceiling sooner, with projected Reed Act distributions in FY 2012.

Questions and/or comments regarding this document are welcomed. Please contact Mike Miller at miller.michael@dol.gov or (202) 693-2930, or write to:

Office of Workforce Security
Division of Fiscal and Actuarial Services
Room S-4231
U.S. Department of Labor
200 Constitution Ave., NW
Washington, DC 20210