Jobless payout: $10M a week

South Carolina's jobless rate has hit its highest point in 15 years, forcing the state to write so many unemployment insurance checks that the account is about to go broke.

The state's unemployment rate spiked to 7.6 percent in August, according to the S.C. Employment Security Commission. Right now, the agency is paying more than $10 million in unemployment insurance benefits every week, about twice as much as in recent years.

The fund has only about $130 million left.

"You do the math," said Executive Director Ted Halley. "Even if we drop below the 7.6 percent rate, I estimate that it will go broke about the second week in January."

Money flows into the fund from South Carolina businesses, which pay taxes on the first $7,000 of each employee's annual salary. Halley said he's meeting with Gov. Mark Sanford's office Monday to discuss raising the tax rate.

"We're going to have to do something to make our trust fund solvent," Halley said.

Sanford spokesman Joel Sawyer said the governor was unaware of the situation, and "it's something we'll have to take a look at."

But Sanford's office won't even entertain the idea of raising taxes.

"If unemployment is an issue, the last thing you want to do is raise taxes on businesses," Sawyer said.

Halley characterized the fund's depletion as a long-term problem that has accelerated in the past few months. Back in 2001, the fund held a healthy $800 million, but it has steadily fallen each year since then.

Still, South Carolina residents' unemployment benefits are not in jeopardy, Halley said. When facing insolvency, state employment officials can take out a bailout loan from the federal government to cover costs.

Out-of-work residents are allowed to draw from the state's unemployment fund for 26 weeks following a job loss that's no fault of their own.

In past years, the commission typically gave out between $5 million and $6 million each week. But a slowed economy has led to losses in construction jobs, a tightening in tourism spending and a string of layoffs at major manufacturers across the state. As a result, the state's unemployment rate has soared to levels unseen since the early 1990s.

The rate stood at 6.1 percent in June, but since then has posted two sharp increases to its latest 7.6 percent perch in August.

"That kind of jump over the course of two months is probably unprecedented," said Don Schunk, research economist at Coastal Carolina University.

The unemployment rate would have been worse if government and hospitality jobs hadn't posted sizable gains, he added.

As the national economic slowdown took hold, South Carolina's economy initially held strong. The state's manufacturing base and the Port of Charleston boomed as a weak U.S. dollar caused a jump in foreign exports.

But the dollar has gained strength lately, while two major markets for United States-made goods — the European Union and Japan — posted negative GDP growth rates, possibly signaling a recession for both.

"If South Carolina could benefit from the fact that they have the most export-oriented economy in the U.S., now their motor of growth — it's not there when we need it," said Paulo Guimaraes, an economics research professor in the University of South Carolina's Moore School of Business.

Both Guimaraes and Schunk predicted that the unemployment rate won't fall to a healthier level until early next year. That's because of the expected fallout from this past week's financial crisis on Wall Street.

That bleak outlook doesn't hold much promise that the $130 million left in the employment commission's reserve fund will stretch far into the new year.

Other states have faced dwindling unemployment funds. California, New York, Ohio and Michigan are among other states that expect to run out of unemployment insurance funds either this year or in 2009, according to news reports.

Reporters Brian Hicks and Allyson Bird contributed to this report. Reach Katy Stech at kstech@postandcourier.com or 937-5549.