Total unemployment rate calculation for extended benefit triggers

UIPL16-11acc.pdf (https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2011/UIPL16-11acc.pdf)

                                                            CLASSIFICATION
   EMPLOYMENT AND TRAINING ADMINISTRATION                   DFAS
                                                            CORRESPONDENCE SYMBOL
               ADVISORY SYSTEM
                                                            OUI
          U.S. DEPARTMENT OF LABOR
                                                            DATE
             Washington, D.C. 20210                         May 20, 2011



ADVISORY:          UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 16-11

TO:                STATE WORKFORCE AGENCIES

FROM:              JANE OATES /s/
                   Assistant Secretary

SUBJECT:           Federal-State Extended Benefits Program – Methodology for Calculating
                   “on” or “off” Total Unemployment Rate Indicators for Purposes of
                   Determining When a State Begins and Ends an Extended Benefit Period.

1. Purpose. To inform states of the new methodology used to calculate the “on” or “off” total
unemployment rate (TUR) indicators to determine when extended benefit (EB) periods begin
and end in a state.

2. References. The Federal-State Extended Unemployment Compensation Act of 1970 (EUCA);
Section 2005 of Division B, Title II, the Assistance for Unemployed Workers and Struggling
Families Act, Public Law (P.L.) No. 111-5; Section 502 of the Tax Relief, Unemployment
Insurance Reauthorization, and Job Creation Act of 2010, P.L. 111-312; 26 U.S.C. 3304(a)(11)
note; 20 CFR 615.12; Unemployment Insurance Program Letter (UIPL) No. 45-92; UIPL No. 4-
10, Change 6.

3. Background. EB is payable in a state only during an EB period in the state, that is, a period
of unusually high unemployment. Section 203, EUCA, provides methods for determining
whether a state’s current unemployment situation qualifies as an EB period. EB periods are
determined by "on" and "off" indicators (commonly referred to as triggers) in the state. Section
203(d), EUCA, provides for an “on” indicator based on the insured unemployment rate (IUR).
The IUR is calculated weekly by the states using administrative data on state unemployment
compensation claims filed and the total population of employed individuals covered by
unemployment insurance. States trigger “on” EB if the IUR for the most recent 13-week period
equals or exceeds 5 percent and equals or exceeds 120 percent of the average of such rates for
the corresponding 13-week period ending in each of the preceding two calendar years. The
calculation of the relationship between the current rate and prior year’s rates is commonly
referred to as the “look-back.”

The Unemployment Compensation Amendments of 1992, P.L. 102-318, added Section 203(f),
EUCA, to provide for an optional alternative indicator that states may use to trigger "on" EB
based on the TUR. That indicator requires that, for the most recent three months for which data
for all states is published, the average TUR in the state (seasonally adjusted) for the most recent
three-month period equals or exceeds 6.5 percent and the average TUR in the state (seasonally

 RESCISSIONS                                               EXPIRATION DATE
 None                                                      Continuing

adjusted) equals or exceeds 110 percent of the average TUR for either or both of the
corresponding three-month periods in the two preceding calendar years (look-back). The 1992
amendments also provided for a calculation of a “high unemployment period” when the TUR in
a state equals or exceeds 8 percent and meets the 110 percent look-back described above,
permitting the payment of additional weeks of EB. Section 203(f)(3), EUCA, provides that
“determinations of the rate of total unemployment in any state for any period . . . shall be made
by the Secretary.” An EB period ends when the state no longer meets any of the “on” triggers
provided for in state law.

Regulations at 20 CFR 615 implement the provisions of EUCA relating to the IUR indicators,
including how they will be calculated. The regulation, at 20 CFR 615.12, explains the IUR
triggers and how the rates are calculated. The regulation does not address the TUR indicator.
The Department is issuing this guidance to describe how the TUR indicators are calculated for
purposes of determining whether a state meets the 110 percent look-back requirement. The
Department plans to promulgate regulations about this methodology in the near future.

In the absence of explicit guidance and regulation, the Department previously adapted a portion
of the existing guidance for the IUR look-back indicator as a basis for calculating the TUR look-
back indicator as well. Specifically, in computing the look-back percentage for the TUR trigger
the procedure for determining the number of significant digits from the resulting fraction
followed 20 CFR 615.12(c)(3).

The TUR trigger is calculated using unemployment rates determined by the Bureau of Labor
Statistics. These rates are determined using sampled data and therefore have error around them.
In contrast, IUR triggers are calculated from administrative data and thus represent the full
universe. Because of these differences in the calculation of the insured and total unemployment
rates, the Department has determined that an appropriate methodology for calculating the look-
back on the TUR indicator is to switch from truncation at the fourth decimal place as used for the
IUR to rounding at the second decimal place.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
permitted states to amend state law in order to make determinations of whether there is an “on”
or “off” indicator by comparing current unemployment rates to the unemployment rates for the
corresponding period in the three preceding years. Authority to use this three-year look-back
applies only for weeks of unemployment beginning after December 17, 2010, and ending on or
before December 31, 2011. The Department will also use the methodology described below in
determining whether a state meets the three-year TUR look-back criteria for those states that
chose to amend their law to take advantage of this temporary authority.

4. Methodology. The Department will now use the following method of computing the current
rate as a percentage of the comparable rate in prior years (look-back) for the TUR indicator: on a
monthly basis, the three month average, seasonally adjusted rate of total unemployment, is
divided by the same measure for the corresponding three months in each of the applicable prior
years, that is, either a two or three-year look-back, as specified in state law. The resultant
decimal fraction is then rounded to the hundredths place (the second digit to the right of the
decimal place). The resulting number is then multiplied by 100 and reported as an integer and
compared to the statutory threshold to determine the state’s trigger status.




5. Effective date of implementation. In order to give full effect to this methodology, and to
ensure that all unemployed individuals who are eligible to receive EB are paid in a timely
manner, the Department is implementing the methodology described in Section 4 of this
guidance retroactive to April 16, 2011.

6. Action Requested. Administrators are to provide this information to the appropriate staff.

7. Inquiries. Please direct inquiries to the appropriate Regional Office.