New Jobs Figures Show Need To Extend Long-Term Unemployment Benefits

October 13, 2011

Another month, another bad jobs report from the Bureau of Labor Statistics. You’ve probably already read the top-line figures, but maybe not all these.

The unemployment rate is still stuck at 9.1%. Nearly 14 million people officially unemployed last month — about the same as in August.

An additional 1 million who looked for work during the past 12 months but gave up because they felt it was futile. Presumably lots who gave up earlier and so didn’t get counted as “discouraged.”

More than 6.2 million who’d been looking for at least 27 weeks, i.e., long enough to have exhausted their regular state unemployment insurance benefits — if they every qualified. This is a higher number than reported for either July or August.

A new brief from the National Employment Law Project tells us that jobless workers today face an average of somewhat over 36 weeks of unemployment. This figure is also higher than last month’s.

Not much hope for these people in the new jobs data. A total of 103,000 more people on non-farm payrolls than in August.

But about 45,000 of them were striking Verizon employees who’d returned to work. Discounting them, the private sector created roughly 92,000 jobs.

Meanwhile, the public sector shed an additional 34,000, bringing the total to more than half a million since September 2008.

Thus, the economy actually created about 58,000 jobs last month. NELP reports that it would need to create, on average, 400,000 per month to bring the unemployment rate back down to its pre-recession level in the next three years.

One might think that these dismal figures would prompt a substantial majority in Congress to vote for some targeted investments in job creation. But only if one had been living on another planet for the last two years.

House Majority Leader Eric Cantor (R-VA) has announced that the President’s jobs bill won’t even come up for a vote. But Republicans may pick out parts they agree with, he said.

Same seems to be the case in the Senate, where Republicans, joined by two Democrats, just blocked a vote on the bill.

Surely, one would think, they could agree to extend the federal programs that provide long-term jobless workers with some extra weeks of UI benefits.

One of them — Emergency Unemployment Compensation — is due to expire at the end of the year.

The other — Extended Benefits — will lose full federal funding. These benefits kick in after EUC benefits have been exhausted. So those receiving EUC benefits now will be shut out of the EB program unless Congress acts. Those who’ve already gotten to the EB phase will lose their benefits in January.

NELP estimates that nearly 1.8 million workers will lose their benefits by February. By the end of the year, the number will swell to at least six million.

As I’ve written more often than I wish I’d had to, UI benefits are one of the best quick-acting stimulus options we’ve got. According to Congressional Budget Office estimates, every $1.00 spent delivers as much as $1.90 in economic growth and employment.

Take the expanded benefits away and you can expect job losses. The Economic Policy Institute puts the 2012 figure for EUC alone at 528,000.

But the House Republican leadership finds potential common ground with the President only in certain UI reforms, not in the proposed extension of benefits for the long-term unemployed.

“More federal spending,” their memo says. If that were the answer, adds House Speaker John Boehner (R-OH), then the economic stimulus package would have kept the unemployment rate below 8%.

What’s needed are cuts in spending, taxes and those dreadful government regulations that are supposed to do things like prevent a repeat of the reckless financial transactions that helped land us in this mess to begin with.

So it looks as if we’re in for yet another donnybrook. And yet another round of made-up reasons for letting the extended UI benefits die.

Speaker Boehner’s argument is one of them, as the Center for Economic and Policy Research shows.

And then there’s this old warhorse trotted out by Congressman James Renacci (R-OH): “[T]he length of compensation eligibility has turned from a bridge between jobs into an excuse to put off that job search for just one more week.”

As if people who’ve been laid off just kick back when their benefits average $296 a week — much less for low-wage workers, of course.

In any event, as Renacci should know, you can’t get UI benefits unless you’re actively searching for work. And, at this point, there’s only one job for every four people looking.

Pushing more people into poverty faster isn’t going to change that.

UPDATE: BLS has just released the results of its Jobs and Labor Turnover Survey for August. EPI economist Heidi Shierholz, my source for JOLTS analyses, reports that the ratio is now one job for every 4.6 jobless workers actively looking.

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Employer Tax Holiday Won’t Jump Start Hiring

June 25, 2011

The White House seems well aware that the upcoming Presidential election will pivot on the economy — and more specifically, the unemployment rate. Prospects for a spontaneous burst of growth are too dim to see with the naked eye.

But the President and his people are understandably wary of proposing anything that could be labeled stimulus spending.

Facts notwithstanding, the Republicans seem to have convinced a majority of Americans that the economic recovery act failed. Also that Congress must cut federal spending now to begin dealing with the deficit.

But tax cuts are good, right? At least so long as they benefit us.

Republicans continue to insist that cutting businesses taxes will create jobs — though we need big cuts in spending and regulations too.

For his part, the President seems eager to prove that he’s listening to business leaders, who, of course, would like lower taxes.

Not so eager, however, as to support another “tax holiday” that would let multi-national corporations bring foreign earnings home at a drastically lower rate. Or at least, say Treasury officials, not unless the giveaway is part of a broader tax reform package. In short, not right now.

But what about giving businesses a temporary reprieve from payroll taxes? They’d like it. Congressional Republicans should like. They sure used to, though they’re reportedly iffy now.

Best of all, it can be cited to show that the President has done something about the jobs crisis.

I’m no economist. But when I read about the payroll tax holiday, I said to myself, it’s not going to get businesses hiring people they wouldn’t have hired anyway.

Businesses aren’t holding back on new hires because they feel they can’t afford the additional 7.65% they’d have to pay on top of the wages.

They’re not hiring because their current workforce is sufficient — if not more than sufficient — to meet the demand for their products and services.

Corporations are sitting on a pile of dough. If they wanted to hire here in the U.S., they would. Small businesses — those putative engines of job growth — are shrinking their payrolls. And a short-term nick in labor costs won’t stop them — let alone get them hiring again.

“I hire workers to do jobs,” says the president of a North Carolina graphics firm. “If we don’t have the work coming in, nothing will make me hire another worker.”

In any event, businesses are adding jobs, though at a pretty sluggish pace. The unemployment rate isn’t budging because state and local governments are still shedding jobs — another 30,000 in the month of May.

A payroll tax holiday won’t save one of them. Another round of fiscal aid to the states could. But a proposal for that would be DOA in Congress.

The Atlantic‘s Daniel Inviglio has some other ideas. Maybe a couple of these would fly. Maybe they’d step up hiring a bit.

But the Economic Policy Institute tells us that the economy would have to create 11 million jobs for the unemployment rate to settle back to its pre-recession rate.

This figure keeps growing as the labor market fails to make up for the many millions of jobs lost and add enough to keep up with the increasing number of youth who’ve become old enough for full-time work.

Those who don’t get jobs soon are likely to face years of lower earnings and future unemployment. And they generally don’t have much by way of safety net supports to tide them over while they’re looking.

People at the other end of the working-age range may be left on the sidelines, even if jobs proliferate faster than anyone expects.

So we’ve got a complex policy problem that I don’t think anyone in Washington wants to confront. It’s bigger than how to create a whole lot more jobs quickly. Bigger than how to rapidly retrofit workers whose jobs aren’t coming back.

I don’t have the glimmer of an answer. But I’m sure as can be that an employer payroll tax holiday isn’t it.

Also sure as can be that the President’s in trouble if he doesn’t come out with a plan that gives us some hope we can believe in.


Widely-Reported Flat Poverty Rate May Be Deceptive

February 17, 2011

A New York Times editorial cites one of the Census Bureau’s alternative poverty estimates as evidence that “the safety net, fortified by stimulus” kept the number of people in poverty from rising in 2009.

For this, it relies on an analysis by the Center on Budget and Policy Priorities — the same one I used to arrive at a similar, though more cautious conclusion.

“Sorry,” says Shawn Fremstad, Director of the Inclusive and Sustainable Economy Initiative at the Center for Economic and Policy Research. “Poverty really did increase in 2009.”

True, the expanded food stamp benefits and tax credits that were part of the economic recovery act may have kept poverty from increasing as much as it would have otherwise. But they didn’t offset the impacts of massive job losses and related losses of health insurance.

According to Fremstad, the alternative poverty rate didn’t go up in part because the alternative poverty threshold that produced the no-increase result went down. This, he says, was also true for the threshold used to produce the official poverty rate, but the decline was smaller — slightly over a third of a percent, as compared to 1%.

The gap reflects differences in the data sets Census uses to establish the thresholds.

As I’ve written before, the official threshold is set at three times the early 1960’s cost of the U.S. Department of Agriculture’s Economy Food Plan, adjusted for inflation. The alternative threshold at issue is instead tied to the amount that moderate-income households spend on housing, utilities and food.

When the housing market tanks, as it certainly has, the alternative threshold won’t keep up with the overall inflation rate — even actually decline, as it did in 2009. This could boost some people above the cut-off, though they were as income-poor as those who fell below it were in 2008.

But if their housing costs were actually lower, wouldn’t their resources come closer to covering their basic needs? For the purposes of the poverty measure, that depends on what counts as a basic need.

Which brings us to Fremstad’s second point. The no-increase alternative measure doesn’t fully account for medical costs. Instead, it adjusts only for out-of-pocket medical expenditures, e.g., deductibles and co-pays.

Sounds reasonable enough until you consider what can happen when people lose health insurance, as 4.4 million did in 2009.

Some will be well enough off to pay for essential health care costs, notwithstanding the bigger drain on their resources.They’ll seem to be poorer because the measure picks up their costs.  Others will forgo care. They’ll seem to be relatively better off, though they could well be poorer than those who continue to pay for care.

Fremstad says the Census Bureau actually did publish some alternative poverty measures that include medical expenses, rather than just out-of-pockets. These produced higher thresholds than in 2008 and somewhere between 1.1 million and 1.8 million more people in poverty.

Still less than the 3.74 million in the official estimate, but enough to suggest that the poverty rate didn’t stay flat — if the test is whether people could afford essential expenditures.

Lastly, Fremstad notes that the Census Bureau counted the full value of refundable tax credits as 2009 income, even though “nearly all” the families who gained from the expanded Earned Income Tax Credit and Child Tax Credit got their benefits as a lump sum in 2010, i.e., after they filed their 2009 tax returns.

So they were no less poor in 2009 than they would have been with no refunds at all.

None of this is to say that CBPP erred in finding that major safety net programs, including the expansions effected by the recovery act, kept some millions of people out of poverty. Nor that the Times is wrong in saying that Congress should “take a good look at those numbers … before it commits to any more slashing and burning.”

But it does, I think, show how urgently we need a single, reliable poverty measure to tell us how many poor people there are — and who they are — at any given time and over time.

As the Times editorial indicates, this is not just of interest to economists and others of a wonkish bent. It’s got real world consequences for policymaking and for a still-unknown number of poor people affected by the policies made.