Lousy times for the jobless, and the worst is yet to come

Minnesota's unemployment woes have come to this: the state's job commissioner was quoting TV psychologist Dr. Phil this week in a bid to encourage laid-off workers.

"People who have lost a job have a new job — to find a job," Commissioner Dan McElroy said Thursday, attributing the wisdom to celebrated TV advisor Phil McGraw.

There are jobs to be found in Minnesota, especially in government, health services, education and certain banks.

But 188,925 Minnesotans were unemployed in November, the highest number since 1983, McElroy's Department of Employment and Economic Development reported http://www.positivelyminnesota.com/lmi/Home.htm Thursday. The ranks of the unemployed jumped by 14,400 jobless workers in November, bringing the state's seasonally adjusted unemployment rate to 6.4 percent.

By several measures, the worst is yet to come. Reports of major staff reductions at Best Buy Co. Inc. in Richfield, North Memorial Health Care in Robbinsdale and several other Minnesota workplaces suggest that thousands more jobs will disappear.

"We expect the first quarter in 2009 to be the busiest in the history of the program," said Lee Nelson who directs legal affairs for DEED's unemployment insurance program. "We are planning on it, gearing up staffing those kinds of things."

Funds running dry
The trust fund that pays for Minnesota's unemployment compensation can't gear up fast enough, Nelson said, and it is on track to run dry a year from now.

That does not mean checks will stop going to eligible workers who lose their jobs. Under law, they must be paid. Instead, the state expects to borrow from federal unemployment funds as it has during past recessions.

Minnesota will not be the first state to tap federal funds. With nationwide applications for jobless benefits the highest in 26 years, 30 states are at risk of insolvency over the next few months in the funds that pay out unemployment benefits, the New York Times reported this week.

States build the funds with unemployment taxes collected from employers. Any state that comes up short has the option of borrowing from the federal government, but if the loan is not repaid within the federal fiscal year, 4.7 percent interest is accrued, the Times reported.

The funds in Indiana and Michigan already are broke, the Times said. California, New York, Ohio, Rhode Island and other states are inching toward insolvency as well, and may have to borrow from the federal government to get through at least the first quarter of 2009.

Under current projections in Minnesota, "a deficit looks inevitable," Nelson said. Because the largest share of the employer payments come in springtime and then dwindle off later in the year, the impact of any shortage won't hit until early 2010, he said.

Minnesota had to borrow from the feds in 2002, the early 1990s and the mid-1980s. The interest is repaid by a surcharge on employers, Nelson said, not out of the state's general fund.

In 2002, the Legislative Auditor said the state's fund was below the national average and should be beefed up. To withstand recessions, it should have a $1.5 billion balance at year's end, Nelson said. This year it is on target for a $500 million balance.

Just packed 
The need to borrow this time could change if the economy perked up in a hurry. But experts don't foresee that. The unemployment rate is expected to climb well into next year, the Federal Reserve Bank of Minneapolis said Wednesday in its annual outlook report.

Kathy Carney sees the rising tide at the Minneapolis WorkForce Center on Lake Street where she is the workforce development operations manager.

Last Monday, more than 200 people packed into the center looking for help with their job hunts. But Mondays always are busy. Then came Tuesday. Full house again. Wednesday? Full again.

"We were just packed in here," Carney said. "We're seeing people at all levels — manufacturing, financial services, newspapers and even health care which we always thought was the most recession-resistant of all."

Anecdotal support for her observations came from job hunters sitting in classes at the WorkForce Center and punching keyboards at banks of computers.

The halt in housing construction took away Garey Ledin's work installing footings for basements and home additions. Now his savings are running out and at age 38 he finds himself counting on "mom or whatever," he said, while he applies for jobs running computers or even plowing snow.

"I'm just trying to survive," said Ledin, who is from Brooklyn Center.

Chris Coffey from Minneapolis lost his job as an exercise physiologist at Childrens' Hospital. After looking for work, he made connections to launch his own exercise therapy clinic. Still, you can't be too careful in these times. So he also was looking into dislocated worker training programs.

La'Shawn Nicks-Bey was told that his layoff from Olympic Steel Co. is temporary. But he's nervous, especially with a 12-year-old daughter who depends on his health care benefit.

"I was thinking about getting a sign saying 'I Need a Job' and walking up and down the streets," said Nicks-Bey, 37, of Golden Valley. "It's hard, man. What little money I had saved is gone....Right now I feel like less than a man. I feel like a bum."  

Cities hit harder
Unlike the deep recession of the early 1980s when Minnesota's unemployment rate peaked at 9 percent, this one hit urban workers harder than many of their rural counterparts. Then, Greater Minnesota took the double whammy of the farm crisis and a meltdown in northeastern Minnesota's taconite industry.

This recession is almost like the 1980s recession turned on its head, said Rob Grunewald, associate economist at the Federal Reserve Bank of Minneapolis.

"Rural areas have been doing better than urban areas," he said.

While Northeastern Minnesota is suffering again this time, the region's economy is more diverse than it was in the 1980s.

As for farmers, they are faring better than almost everyone else, thanks to favorable weather and high commodity prices last year. While relatively few Minnesotans run farms, the money from those who do circulates in regional economies.

"Farmers have a propensity to invest their profits in farming operations, and that includes purchasing machinery and upgrading buildings," Grunewald said. "It adds to the local economy."

Even so, workers in rural areas who do lose jobs can have a tougher climb to recovery, said Professor Connie Wanberg, an unemployment expert at the University of Minnesota's Carlson School of Management. Many types of jobs are rare if not unique in small towns. The skilled marketing expert who gets laid off may have to uproot the family and move somewhere else.

For everyone who loses a job — rural and urban alike — the duration of the stress and anxiety may be longer this time than during any recession in recent memory. The need for community support will go far beyond unemployment compensation as laid-off workers suffer aftereffects that can range from depression to fighting within families.

"Job loss is very, very hard on individuals," Wanberg said.

For those who lost jobs, she advises: Exercise. Eat healthy foods, even if your budget tightens, and "don't start just eating chips for lunch." Tap your social network for both mental health and re-employment strategies. Tend to spiritual needs, which can mean going to church for one person and meditation for another. And don't slip into a downward spiral of negative thoughts; keep thinking you're a good person with skills to offer.

Her advice for everyone else: "It's a time for communities to hang together, and for neighbors to support neighbors."

Sharon Schmickle writes about national and foreign affairs and science. She can be reached at sschmickle [at] minnpost [dot] com.