The recession and Nevada's record joblessness will weigh on the state's economy for years, as jobs rebound slowly and federal loans to pay unemployment benefits come due, an economist told a state panel Tuesday.
Jered McDonald, with the Nevada Department of Employment, Training and Rehabilitation, said while the national jobless rate has eased to around 10 percent, Nevada's continues to spike, reaching a record 14.2 percent in June, the highest in the nation. Before the Great Recession, the previous state record was 9.9 percent in the early 1980s.
McDonald said the state may not see significant job growth "until late this decade." He predicted Nevada's jobless rate will peak next year and not recede to single digits until 2014.
Nevada's unemployment trust is funded by a tax on employers, currently averaging 1.3 percent on the first $27,000 in wages. It pays 26 weeks of claimants' jobless benefits and does not include the additional 73 weeks of unemployment extensions currently paid by the federal government.
The Nevada Employment Security Council will hold another hearing in October before recommending the unemployment tax rate for 2011 and deciding how Nevada should pay back its federal loans and shore up the trust fund for future economic troughs.
Rates are adjusted annually and are generally based on economic strength. In good times, employers have paid more to beef up the fund and prepare for the next downturn.
Nevada's trust was in good shape in 2007 leading up to the recession, said David Schmidt, another agency economist.
But this recession has been deeper and more prolonged than any since the 1930s, economists say. As it choked Nevada's tourism- and gambling-dependent economy, the state's jobless rate soared and its unemployment trust fund went bust. Since October, the state has borrowed roughly $450 million, and officials project the sum could reach $1 billion by the end of the year.
Nevada isn't alone. As of July 27, 35 states and territories have had to borrow from the federal government to pay jobless benefits, and some experts have projected the combined debt could reach $70 billion.
The amounts borrowed don't include interest that begins accumulating on outstanding balances Jan. 1, said Cindy Jones, Employment Security administrator. Under federal law, money paid by employers to fund the trust can't be used to cover interest payments.
Agency officials said unless Nevada comes up with a plan that will undoubtedly cost employers more, the federal government will impose its own repayment terms on employers.
Ray Bacon, with the Nevada Manufacturer's Association, said the options will be painful but he urged the council to avoid federal intervention.
"This is not going to be fun. This is not going to be pretty. But we're going to have to do something," he said.