The Pelosi Congress extended unemployment benefits in 2009 to a maximum of 53 weeks. This has been renewed until the new Republican Congress after 2010, unable to get Obama to negotiate, allowed the extra benefits to lapse.
Federal unemployment benefits that continue for 26 weeks after a person uses up the 26 weeks of state unemployment benefits ended Saturday, so now some 1.3 million people won’t be getting their $1,166 (on average) monthly check. By June, another 1.9 million will be cut off.
Many in the federal government are talking about the need to extend benefits. President Obama labelled it an “urgent economic priority” and called a couple of senators to pressure them to bring the matter up when the Senate reconvenes next week, and is urging Congress to extend the benefits for another three months. Senate Majority Leader Harry Reid has promised a vote no later than January 7 for the three month extension. Gene Sperling, the head of Obama’s National Economic Council, lamented the end of the federal aid…
Disaster was predicted.
Amazingly, the disaster did not happen. In fact, job growth went up.
Just looking at the economy’s overall size, you wouldn’t think that the last year was much different from any of the others since the recession. The U.S. economy grew at about the same rate in 2014 as it did in the previous four years — less than 2.4 percent, according to the Federal Reserve’s most recent projection. Yet last year was different. People started going back to work. The percentage of Americans working, more or less stuck in a ditch since 2009, increased from 58.6 percent in December 2013 to 59.2 percent last month. Employers added an average of 246,000 positions a month, about 3 million jobs overall.
What happened ?
Economists will debate what happened, but one of the more controversial theories is that Congress’s decision not to extend federal unemployment benefits at the end of 2013 encouraged those out of work to settle for more poorly paid jobs, giving firms a better reason to expand and hire new workers. That’s the conclusion of a new working paper from the National Bureau of Economic Research. The authors, Marcus Hagedorn of the University of Oslo, Iourii Manovskii of the University of Pennsylvania and Stockholm University’s Kurt Mitman concluded that the reduction in benefits created 1.8 million jobs last year — more than half of the total.
That article is from the Washington Post so, of course, they provide rebuttals.
This is an interesting result which contradicts much prior research indicating that shortening benefit duration had little impact on employment growth (e.g. here, here, here, and here). It is worth testing this result with an alternative data series. HMM use the Current Population Survey for the state level data and the Local Area Unemployment Statistics (LAUS) for the county level data. These series are both problematic for this sort of analysis.
Oh yes, other interpretations can be found. The leader of this new (1999) Democrat think tank is a leftist economist with a reliable view for the Washington Post to cite. His credits include: “He writes a weekly column for the Guardian Unlimited (UK), the Huffington Post, TruthOut, and his blog, Beat the Press, features commentary on economic reporting. His analyses have appeared in many major publications, including the Atlantic Monthly, the Washington Post, the London Financial Times, and the New York Daily News. He received his Ph.D in economics from the University of Michigan.”
The Wall Street Journal also weighs in on the report.
Assuming that the pre-2014 trends would have continued among the two groups, the authors find that “the cut in unemployment benefit duration led to a 2% increase in aggregate employment, accounting for nearly all of the remarkable employment growth in the U.S. in 2014.” They then confirm these results with a second experiment that compares adjacent counties in different states whose economies are otherwise equal except for their unemployment benefits.
Notably, job growth improved most in states and counties that offered the most generous benefits before Congress took away the punch bowl. This suggests that the extra jobless benefits reduced the incentives for businesses to create jobs and for jobless workers to fill the vacancies.
Of course, Obama is now bragging about the new job growth.
Mr. Obama is now taking credit for 2014’s job gains that his policies inhibited, much as he is for the boom in oil and gas drilling that his Administration resisted. Thus comes the opportunity for a late-term “Seinfeld” economic epiphany. Imagine the possibilities if the President realized that everything he thought about economics is wrong.
7 thoughts on “Unemployment and Jobs.”
Political Calculations did a two parter last summer proving marginal employment – part time, temp, or low wage – surged in Illinois after the long term unemployment benefits expired
despite the best intentions of government bureaucrats to hide the fact.
Naturally, to the WaPo they are ” poorly paid jobs,”
So, we are at dinner with one of my husband’s friends – goes without saying academic goes without saying to the left. Distinguished prof & lawyer in tax accounting.
He tells us that we should raise the minimum wage because he feels sorry for the cleaning people on campus. (at the big school I’m sure they have perks and doubt they get minimum wage, but they may and be at the mercy of academic administrators, always a fairly shady lot). I say that is ridiculous. I don’r even have to say it will mean few jobs. His next statement is, he doesn’t care if it reduces the number of jobs, he wouldn’t want to work for minimum wage. Probably not, but then he’s 79. Having run a small business I am quite aware that my workers were essentially apprentices in the workday world. They were learning to be arrive on time, to look engaged, to get jobs done competently, to develop people skills – with customers, with coworkers, and with me. They did not arrive “in shape” – but they left a good deal more ready to do a job.
More importantly, our friend (a generally decent person) was denigrating work, the importance of a job, the importance of a conventional and responsible life. Indeed, the importance of maturity and connectedness. His wife and he, as had we, spent much of dinner bewailing the aimlessness we too often see in young men, the lack of purpose, the sense that supporting a family is not their goal or even, once acquired, their responsibility. (Fortunately my sons-in-law do have jobs that may not use to the full their extraordinary capabilities, but at least do reflect some sense of that responsibility. Since neither is too happy with me because I consider their political visions well, wrong, I do want to say that. And his sons are actually doing quite well.)
Okay tmi. But to some, feeing better about your sympathies for those on minimum wage triumphs caring about others ambitions and goals, their own, dare we say and Charles Murray certainly would say, happiness. They know minimum wage jobs do pay something; they also know they are gateways. Welfare robs them of dignity and experience. (The tart response of my libertarian daughter to this description was that he just wants to feel good about himself.)
We’ve had a branch office in France for 20 years and you got to know guys onthe extended and generous unemployment they never started looking for jobs until about six months before their dole ran out
The days when kids began at minimum wage in high school are gone. Now, most of those jobs are held by illegals.
My one suggestion for unemployment benefits is to have the payments taper over time. The paid amount would be reduced weekly the closer one got to the expiration of the benefit. Rather than face a ‘cliff’ when benefits stop, there would be an apparent reduction weekly that should/would stimulate interest in finding a job before the benefit became uncomfortable.
What could it hurt?
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