Main Street Economics: States running out of jobless relief funds

Wall Street may be getting a bailout -- but not state unemployment relief funds, which according to Stateline.org are running dry across the country:

Laid off from your job in Tennessee? Good luck getting unemployment checks right away. So many people have been calling the state lately to apply for benefits that callers often can't get through. "We're sorry. We're unable to take your call at the present time due to extremely high call volume," says a recording.

In North Carolina, where more people are out of jobs than ever, state employees are working overtime and on weekends to reduce a backlog of requests to verify unemployment benefits that has been as high as 17,000, compared to only a few cases a day a year ago.

Unemployment is shooting up across the country, and Mississippi, South Carolina and North Carolina are among the 10 states with the highest number of workers who can't find a job.

But state unemployment insurance funds -- which are collected from employers through payroll taxes -- are running out:

South Carolina has only enough money in its unemployment fund to pay benefits through the middle of January. The state has been hit by a wave of layoffs in manufacturing and construction.

The problem isn't going away -- there is a structural recession underway, which has so far been neglected thanks to the focus on the finance sector. As one expert notes:

"I can't see the bailout short-circuiting processes that were already under way," said Michael Bordo, a RutgersUniversity economist. "To the extent we're already going into a recession, unemployment will probably keep rising."