On December 29, with long-term unemployment still elevated, unemployment benefits expired for some 1.3 million jobless Americans. Congress decided not to renew funding for the program, which was created in 2008 to give aid to unemployed Americans who have exhausted the usual 26 weeks of state jobless benefits. Democrats say they will revisit the issue when Congress reconvenes on January 6.
Jared Bernstein says this is not just about politics: “this is not a simple tale of good D’s and bad R’s. It’s also the result of a fiscal policy standard, often supported by both parties, that stands firmly against any deficit spending.”
North Carolina, meanwhile, has become something of an economic test case for ending extended unemployment benefits. In fact, James Pethokoukis writes, it’s being held up by some Republicans as a shining example. In July, with its unemployment rate at 8.8%, the fifth highest in the nation, the state effectively opted out of the Federal extended unemployment benefit program.
JPMorgan’s Michael Feroli calls the results the “Tar Heel test tube” -- since July, the state’s unemployment rate fell 1.5 percentage points, while the U.S. headline rate fell .4 points. The limited evidence from North Carolina, Feroli writes, suggests that benefit cuts pushed some unemployed people to accept lower-paying jobs than they would have otherwise (an employment effect) and pushed residents out of the workforce (a participation effect). "In this case," he writes, "it would appear both channels are operative but the participation effect may be more important."
Wells Fargo economist Mark Vitner argues that the participation effect seems a bit more powerful: North Carolina’s labor force shrank at roughly the same rate it that had in prior months. Evan Soltas, on the other hand, says the North Carolina example shows how to “crush the unemployed”:
The state is experiencing the largest labor-force contraction it's ever seen -- 77,000 fewer people were working or searching for work this October than a year ago. This should, but won’t, settle a partisan debate. Cutting unemployment insurance apparently hasn’t encouraged the unemployed to look harder for work: It has caused them to drop out of the labor force altogether.
"Practically everyone, liberal and conservative alike” agrees that long-term unemployment is a catastrophe, Kevin Drum writes in a post on its economic consequences. Brad Plumer has a nice guide to the topic here. The American Enterprise Institute’s Michael Strain has a conservative plan to tackle the issue -- including combining a lower-minimum wage with tax credits for the long-term unemployed. -- Ryan McCarthy
Correlation Of The Day
In the middle of the 20th century, poverty fell dramatically and global GDP soared - Roger Pielkejr
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The Groundhog Day guide to personal finance - Psychological Science
Progress
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Looking Back
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Billionaire Whimsy
The best Kazakh bank embezzlement scandal you will read about today - Charles Forelle
Awesome
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Huh
The problem with reporters is... skepticism? - Sam Biddle
Wonks
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Wow
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So Hot Right Now
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Innovation
Innovation finally comes to the bucket - Wired
Welcome to Adulthood
The debt loads of college dropouts - NBC
Bitcoin
Why I like Bitcoin: because the payments industry sucks - Chris Dixon
New Normal
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Whistleblowers
NYT editorial board: Give Snowden clemency as a whistle blower - NYT
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