Ohio’s unemployment rate sees slight decrease to 4.3% in January

Ohio’s latest jobs numbers look to be a modest improvement from the end of last year, but the state’s financial position, specifically surrounding its unemployment benefits, isn’t entirely rosy.

An Ohio think tank says lawmakers should approach budgeting cautiously amid “macroeconomic headwinds.” The warning comes as legislators grapple with how to shore up the state’s unemployment trust fund.

The new January 2026 jobs report from the Ohio Department of Job and Family Services showed that the state’s 4.3% unemployment rate was a slight decrease from the December 2025 rate of 4.4%. Non-agricultural wage and salary employment in the Heart of it All increased by 16,300 over the month, hovering in the 5.6 million range for December 2025 and January.

Additionally, the Buckeye State’s January labor force participation rate was 62.2%, down from 62.3% in December 2025 and 62.9% in January 2025. Nationally, the labor force participation rate was 62.1% in January, down from 62.4% in December 2025 and 62.6% in January 2025.

In a statement, Rea S. Hederman Jr., executive director of the Economic Research Center and vice president of policy at The Buckeye Institute, a Columbus-based think tank, said that the state’s numbers “are in line with the national jobs report.” He added that “Ohio’s unemployment rate improved at the expense of fewer workers in the job market” and said that lawmakers should be “circumspect” in their budgeting.

“In January, Ohio’s unemployment rate declined from 4.4 to 4.3 percent, and its labor force participation rate declined one-tenth to 62.2 percent,” Hederman said.

“January’s report—which was delayed while the federal government recalculated its state employment data—shows that Ohio’s job market remains slow-growing, and macroeconomic headwinds, such as higher fuel prices, will continue to slow the job market,” Hederman added. “Given these challenges and other budgetary pressures, Ohio lawmakers should be circumspect as they consider this year’s capital budget.”

State lawmakers are considering House Bill 376, which would reduce the maximum duration of unemployment benefits in Ohio from 26 to 20 weeks.

“This proposal pulls the rug out from under Ohio workers at the exact moment they need stability,” state Rep. Sean Patrick Brennan, D-Parma, said in a release. “Unemployment benefits are not a handout, they are a lifeline that workers have earned through their labor. Cutting six weeks of support will have real consequences for families trying to stay afloat.”

However, backers of the bill said the move is necessary to shore up Ohio’s unemployment compensation fund, which is funded by payroll taxes Ohio employers pay and is considered insolvent under federal guidelines as it holds less than one year of benefits in reserve.

In prepared sponsor testimony to the House Public Insurance and Pensions Committee, state Representative Michelle Teska, R-Clearcreek Twp., said the Buckeye State “has not met the federal government’s target for unemployment trust fund solvency since 1974.” The lawmaker added that the fund balance would be insolvent “within just six months if the state were to enter a recession.”

“For decades, Ohio has struggled to maintain a solvent system, and there has historically been reluctance to fully address this structural challenge,” Nikki Cooper, vice president of business engagement and external affairs for the Ohio Business Roundtable, said in prepared testimony. “When the fund is insolvent, the state must borrow from the federal government to pay benefits, often incurring higher interest costs and long-term financial implications for employers and taxpayers alike.”

Should lawmakers opt to ignore the fund, Teska said the state might need to increase taxes in an emergency to cover its unemployment payouts.

“A healthy reserve ensures that benefits can be paid promptly during recessions without triggering emergency borrowing, which ultimately results in higher payroll taxes on employers and increased costs borne by taxpayers,” Teska said.

“Stability in the fund also helps create a more predictable business climate, allowing employers to plan, invest, and grow without the uncertainty of sudden tax hikes tied to federal loan repayments,” Teska added. “In short, solvency supports economic resilience, protects jobs, and reduces long-term financial risk for the state. Ohio has put off meaningful action on these needed reforms for far too long.”