As expected, Colorado announced this past week that the unemployment fund is broke and the state will borrow money from the Feds to continue paying claims. Colorado joins 25 other states who have had to borrow money from the Federal government. The loans are interest free for this year.

The national picture is grim. In the past two years, the construction industry has shed 1.6 million jobs, more than 20% of the total jobs lost in all industries. The finance sector has lost 548,000 jobs since December 2007, about 7% of it’s workforce. Office and administrative workers have thinned by 10.1%.

After going broke in the 1980s, Colorado instituted some actuarial changes to strengthen its unemployment fund and started the recession with a seemingly fat cushion of almost $700 million. In the middle of this decade, I was one of many employers who grumbled at paying a “solvency tax surcharge” to meet these more stringent guidelines for the unemployment fund’s reserves. In a 2008 report, the National Employment Law Project rated Colorado as one of 20 states with adequate reserves capable of paying at least 24 months of unemployment benefits. Colorado had actually improved since a 2007 assessment that included Colorado as one of eight states that would have financial difficulty in case of moderate or severe recession.

After several extensions of benefits mandated by the Congress, unemployment benefits now exceed a year in many states, more than double the normal 26 week limit. Designed to provide a temporary safety cushion for unemployed workers, they have become a welfare program under a different name.

Knowing that unemployment tax rates will likely double or even triple in the hard hit construction industries, employers are reluctant to take on new employees unless they are very sure of an upturn in business. Already saddled with high workmen’s compensation rates, an increase in unemployment taxes just piles on more of a cost burden on employers in this sector of the economy. Expect a slow job recovery.