Pathway to the Future: How Workforce Development and Quality Jobs Can Promote Quality Care Conference Package. National Economic Outlook

05/01/2004

During calendar year 2003 the national unemployment rate peaked at 6.3% in June and dropped to 5.7% by December. When examining individual state unemployment rates, however, twelve states had unemployment rates at, or in excess of, 6.0% in November 2003. Of these, three states (Alaska, Michigan, and Oregon) had unemployment rates of 7.0% or higher.

Information collected during the 2003 survey continued to show that, generally, vacancies of direct-care workers continued to be a serious workforce issue for most states. This trend has continued since the first survey conducted in 1999 and in subsequent surveys conducted during both strong and declining economic periods. It is worth noting that the severity of direct-care worker vacancy rates did diminish for some states: in 2003, 79% of the 44 states responding to the survey indicated that high vacancy rates continue, compared to 88% of states in 1999 and 86% of states in 2002. Thus, the recent high unemployment rates may have contributed to improved vacancy rates in some states. It will be interesting to observe whether those workers who were attracted to enter (or re-enter) direct care during the recession because of limited job opportunities, remain in the field once the overall job market significantly improves.

However, responses received from states re-affirm that the economy is not the primary factor impacting serious vacancies of direct-care workers. Repeating trends found in previous surveys, both the state with the highest unemployment rate as of November 2003 (Alaska at 7.5%) and the state with the lowest unemployment rate (North Dakota at 3.2%) reported serious direct-care workforce vacancies.

In spite of the unemployment rate and continued slow job growth during 2003, there were clear signs an economic recovery was underway. Indications that state economies were improving were welcome news for states, which have struggled to balance their budgets over the past several years. A November 12, 2003 article in USA Today reported that state and local spending increases were annualized at 1% for the two consecutive quarters ending September 2003.2 This growth rate represented the smallest growth spending during back-to-back quarters reported since 1952. In contrast, the good news for states during this same period was that revenue collection was picking up, increasing to a 9.2% annualized rate during these same two quarters. However, much of these increases was reportedly due to increased federal payments to states, a significant portion of which was one-time money to offset Medicaid costs, and increased tax collections.

The December 2003 Fiscal Survey of States published by the National Governors Association and the National Association of State Budget Officers confirmed that while the economy was improving, states continued to have difficulty balancing their budgets during State Fiscal Year 2003.3 Medicaid is a major expense for states, and the report indicates that every state has taken at least one step to control Medicaid costs during State Fiscal Years 2002-2004. The report listed the following key actions:

  • All 50 states either reduced or froze payments to provider organizations;
  • All 50 states took steps to control prescription drug costs;
  • 35 states reduced benefits;
  • 34 states took steps resulting in reduced or restricted eligibility for services; and
  • 32 states increased co-payments required by consumers.

Some of these actions have had a direct impact on direct-care workforce issues. Detailed Medicaid policy actions taken by states during the 2003 fiscal year are described in Section D below.

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