The Pew Charitable Trusts

(Updated 11:10 a.m. EST, Jan. 9, 2009)

As the number of jobless workers rockets to unprecedented levels, state unemployment agencies are struggling to meet demand - and in some cases, their phone and computer systems are collapsing under the pressure.

In December alone, employers shed 524,000 jobs, bringing 2008 job losses to 2.6 million, and the unemployment rate to 7.2 percent, the U.S. Bureau of Labor Statistics reported today. That increase, combined with a normal uptick in first-time applications right after the holidays, wreaked havoc last week with the state agencies that hand out checks

In North Carolina, New York and Ohio, Web sites used for filing claims crashed intermittently early in the week. Michigan benefit seekers got an "all circuits busy" phone recording. And Missouri 's unemployment agency had to shut its doors two days a week so staffers could catch up on a backlog of claims.

Unemployment insurance is a federal-state program that temporarily provides laid-off workers with a portion of their paychecks. States administer the program, determining who is eligible, how much the benefit will be and the length of time benefits are available. The program is funded through federal and state employer payroll taxes, with states levying the lion's share of the tax.

State unemployment taxes are designed to fund benefits, while the smaller federal tax covers administrative costs and any additional benefits needed during an economic downturn. In this recession, the federal government already has drawn from its approximately $30 billion unemployment trust fund to extend the length of time jobless workers can receive benefits, and the Obama administration promises to make further extensions if needed.

At the end of last year, more than 11 million people were unemployed, 4.6 million people were receiving unemployment benefits and 2.6 million had been out of work for more than six months, the most in a quarter century, according to the U.S. Bureau of Labor Statistics . The new unemployment rate of 7.2 percent is the highest in 16 years and compares to a 4.9 percent unemployment rate in December 2007 when the recession began.

State benefits last for a maximum of 26 weeks, and federal benefits are now available for at least 20 more weeks. In states with higher than average unemployment, jobless workers can receive an additional 13 weeks of federal benefits.

In nearly every state, the number of unemployment claims doubled last year while state budgets and staffing levels shrank, said Douglas Holmes, President of the National Foundation for Unemployment Compensation and Workers' Compensation , which represents businesses.

"In addition, states have been inundated for the last two months with applications for federal benefits. They're trying to get checks to people whose state benefits have run out, and it's creating a significant increase in workload," Holmes said.

The last time jobless workers waited in long lines outside of unemployment offices was in the early 1990s. Now nearly all applications are filed online or over the phone, making benefits available to far more people than in the past. In addition, instead of checks in the mail, most benefits are issued electronically by direct deposit or debit cards.

Still, unemployed workers are often frustrated by long waits on the telephone, slow Web sites and delays in getting their checks. Even a minor delay in receiving benefits checks can make a big difference to unemployed workers falling behind on their bills, labor advocates say.

North Carolina 's computer log jam created a 24-hour delay in benefit checks for thousands. "We've never dealt with anything of this magnitude before," said Larry Parker, spokesman for the Employment Security Commission of North Carolina .

The day after the computer failure, North Carolina issued 106,575 benefit checks - a one-day record. In December 2007, 93,176 North Carolinians received weekly unemployment benefits. Last month, the number had zoomed to 189,458, Parker said.

"Everyone is just trying to provide services the best they can. It's a horrible climate right now," said Ingrid Evans, director of the National Association of State Workforce Agencies . "The horizon is scaring us to death."

See Related Stories:

Policy challenge - How to expand safety net (1/5/2009)

State jobless funds are running dry (10/7/2008)

States adopt bold anti-poverty measures (8/7/2008)

State jobless benefits reserves low (6/2/2008)