The news from the recent US bank stress tests was stellar, and the stock market is booming. But how is the real economy doing? I keep looking for signs of the boom on the ground.
One of the statistics I started tracking during the Credit Bust of 2008 was the California Unemployment Insurance Trust Fund. It first went insolvent in January, 2009 and now has a balance of -$9.8 billion. The state of California has borrowed almost ten billion from the federal government in order to continue paying unemployment benefits. There is always a big improvement in May when taxes are collected, then it continues grinding deeper in the hole. The graph through December, 2011 sure doesn't look like a boom is under way or that the fund is reversing the trend.
California employers are now paying a higher federal unemployment insurance tax rate because of the state's poor performance and inability to pay back the federal loan. Under the original loan terms, the state was to begin paying interest on the loan in 2011, but that has been deferred. This is a ten billion off balance sheet liability for the state.
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