Tuesday, Aug. 3, 2010 | 3:52 p.m.
CARSON CITY – The economy in Nevada, already among the worst in the nation, isn’t going to get better anytime soon with the gaming and construction industries still suffering, state employment experts predicted Tuesday.
The record unemployment rate of 14.2 percent in June will grow to 14.7 percent by the fourth quarter of this year, said Jered McDonald, an economist for the state Department of Employment, Training and Rehabilitation.
Through the end of July, the state had borrowed $486.5 million from the federal government to pay claims to jobless workers, said economist David Schmidt. He said 34 states are expected to increase the tax rates paid by employers or freeze benefits.
The economists briefed the Employment Security Council, which must make a recommendation Oct. 5 for the tax rate on businesses in an effort to restore the state’s depleted trust fund and to repay the federal government.
The average tax now is 1.33 percent on the first $27,000 of an employee's wages. The rate can range from 0.25 percent to 5.4 percent depending on an employer's job turnover. New employers pay 2.95 percent for about three years until they get an experience rating on turnovers.
Department officials outlined various plans on raising the rate for the nearly 60,000 employers in Nevada.
McDonald told the council Nevada has the highest unemployment rate in the nation and the Las Vegas area has the highest rate among metropolitan areas.
He said he doesn’t see job growth until 2012 and the unemployment rate wouldn't fall into the single digits until 2014. He said he was uncertain when spending would return to previous marks within the casino industry.
Construction was the first segment of the economy to be hit, McDonald said, and there is little building of new homes or businesses.
Ray Bacon, spokesman for the Nevada Manufacturers Association, told the council there were no good or easy answers. He estimated the state is taking in $25 million a month from its employers and paying out $55 million in benefits.
“We’re six to eight years from coming out of this,” Bacon said. One suggestion is to raise the top rate paid from 5.4 percent to more than 6 percent, he said.
The state’s unemployment trust fund went belly up last October and borrowing started from the federal government. Under the current scenario, the interest on the loan will start piling up this coming January and the first payment by the state is due in September.
Cynthia Jones, administrator of the state Employment Security Division, said it has asked that a bill be drawn for the 2011 Nevada Legislature to allow the division to impose an assessment on employers to pay the interest on the federal loan, which may reach $800 million by the end of the year.
The federal loan will be repaid one way or another, Jones told the council. If the state doesn’t repay it, the federal government can raise tax rates to Nevada employers from the current 0.8 percent on $7,000 on wages to up to 6.2 percent.
The agency presented the council with a variety of options, including raising the current 1.33 average rate to 2, 2.75, 3.5 or 4.25 percent. And a question facing the council is whether the increase should be in one lump sum to quickly repay the federal government or whether it should rise in steps.
The council meeting was televised in Carson City and Las Vegas, but there were no speakers in Las Vegas.