Pethokoukis, Economics, U.S. Economy

The latest on the North Carolina unemployment experiment

Image Credit: shutterstock

Image Credit: shutterstock

Last July, North Carolina lost its eligibility for the federal Emergency Unemployment Compensation program. So how has the benefit cut off worked out? Well, the jobless rate went way down, to 6.9% in December, according to new BLS numbers, from 8.8% in June — the month before the cut. Nationally, the jobless rate has fallen to 6.7% from 7.5%.

But why did the jobless rate drop in the Tar Heel State? Sure, state employment rose by 41,000. But that was accompanied by a sharp drop in the labor force participation rate to 61.2% from 62.2%. That full percentage point drop is even larger than the decline nationally of 0.7%. Overall, 52,000 have left the labor force since June. So more have left the labor force that have found employment.

Another way to look at it: if NC labor force participation had only fallen by the national average, just 28,000 would have left the labor force. So to sum up, the state has gained 41,000 employed while 24,000 more folks left the labor than one would expect, at least by looking at the national average. And that’s if you have confidence in all those numbers. As a BLS official told Evan Soltas:

We can say of the seasonally adjusted LAUS data for North Carolina that the approximate thresholds for statistically significant changes (90-percent level) over a 6-month period (using the change from June-December 2013) are as follows: 68,000 for civilian labor force; 61,000 for employment; 32,000 for unemployment; and 0.7 for unemployment rate. So, our official estimates indicate that unemployment (both in terms of the level and rate) in North Carolina has gone down significantly since June, but neither the labor force nor employment level changes were significant.

Now your mileage may vary here, of course, but still at this point I would rather have extended EUC — especially given the unusually high long-term unemployment rate — and combined that with smart UI reforms than just pull off the band-aid — especially given sample sizes and data reliability. As AEI’s Mike Strain has put it:

We should want to keep the long-term unemployed attached to the labor force until the economy picks up, more jobs become available, and they can find work. We should not want today’s long-term unemployed to permanently exit the labor force simply because their UI benefits expire. Why? Because many may end up on government assistance until they reach retirement age. That  is worse for them, worse for the economy, and more expensive for the federal government over the long term.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

18 thoughts on “The latest on the North Carolina unemployment experiment

  1. The objection to unemployment insurance was always that it served to pay people for not working. The conservative solution is not to maintain unemployment insurance but rather to cut off other forms of government assistance like SSDI in addition to cutting off unemployment insurance. For those at reitirement age, the eventual goal is to move all but the very destitute off of social security.

  2. James: I really recommend getting away from the minutia your government issued reports in favor of paying attention to the way people behave – I believe you’d come up with some different conclusions about what works, what doesn’t and why.

    I would argue that people dropping out of the labor force after losing their unemployment benefits is probably more indicative of their gaming the system for the handout (by claiming to be seeking work) than it is of their changing their minds about wanting a job after losing unemployment benefits. Once the benefit is no longer available, there’s no longer a reason to pretend to be out of work.

    To argue what you seem to be doing just doesn’t make sense. Whether or not an unemployment check shows up in the mail is irrelevant to someone who truly wants a job; they’re going to keep working, check or no check.

    Here’s a simple rule that I think would help your analysis: if you can’t envision real people doing what your data suggests they’re doing, then they’re probably not doing it and you need to look at your data in a different way. Just because your data might be accurate doesn’t mean it’s accurate.

    • just because you appoint yourself an expert in behavioral psychology doesn’t mean you know squat. There is a small army out there who aren’t pretending to look for jobs. They’re looking because the jobs aren’t there.

      Because the jobs aren’t there, the odds are truly stacked against applicants who have some explaining to do: young, old, high school grads, working mothers. So people settle. Junior is living in the folks’ basement. Mom can’t find a job that covers child care. Granddad is drawing down his IRAs. In NC, if the data is correct, a fair number of people are saying “screw it.” Not good for the folks upstairs. Not good for the family short a paycheck. Not good for taxpayers who are watching a generation limp into retirement.
      Here is a simple rule that will help your analysis, If you haven’t had a heart-to-heart lately with a person who is looking for a job, don’t present opinion as fact.

      • Your sob story doesn’t come close to explaining why someone who wants a job decides to say ‘screw it’ just as soon as the unemployment runs out. If you want a job, you want a job, and you don’t stop wanting a job once you’ve reached the end of your unemployment benefits. If anything, losing those benefits ought to make one even more anxious about finding a job.

        • The argument for extended UI is that it encourages jobseekers not to give up. And it is entirely possible to give up in the real world, as opposed to Steve’s textbook world. There is a fourth way to give up in addition to the ones I cited above: the carpenter who has stayed alive by moonlighting and says screw it I’m never paying taxes again.

          Here is the scariest stat around: 37 percent of recent college grads are working in jobs that don’t require a college degree. And that’s among the 85 percent of college grads under age 25 who HAVE full time jobs, 7 percent are unemployed; 8 percent are working part time but want FT.

          If in a couple years these kids decide the American Dream is dead, who do you suppose they’ll be coming for? In short, a smart person would be say it’s the job market stupid.

  3. I can’t help but think government data points in this area misses the huge gray economy where people are working “off the books” while collecting unemployment. Once benefits end they continue to work OTB but no longer are counted since they no longer have to state their efforts at looking for work.

    The increased costs of hiring and the increased availability of labor has expanded the OTB labor universe.

  4. Can’t say I am a fan of long-term UI—or for 3.7 million receiving monthly “disability” checks from the VA, a number that rivals those on UI.
    One thing—the UI eventually runs out but “disability” has legs and legs…

    • Disability has no legs when it comes to SSDI. Increase the termination rate from 8.2% to 10% and SSDI is not an issue in your lifetime.

      Considering that the tail edge of the baby boomers is now at maximum morbidity age (50), 2013 new awards were less than 2008 new awards.

          • Of course, you couldn’t fill out the application page for a MOOC.

            Since it is Super Bowl weekend, I will take the under of 825,000 new SSDI awards in calendar year 2014. Are ya game?

            Hint: From here on out, the number of baby boomers moving through morbidity to retirement exceeds the number of baby busters doing likewise. See you in 2026.

          • LOL,nice bullshit response. We’re not talking about total adds. We’re talking about trust fund drawdown.

            Are you insinuating that the SSDI trust fund goes dry in 2026?

            See you in 2016 at the latest, asshat.

          • “This is not the first time the Disability Insurance Trust Fund has faced insolvency. As recently as the early 1990s, the DI trust fund was facing imminent insolvency and, in 1994, Congress enacted a change in the allocation of payroll taxes between the DI and OASI trust funds. The allocation of tax revenue to the DI trust fund was increased from 1.2 percent of taxable payroll to 1.8 percent. The 1995 Trustees Report estimated that, on the basis of the intermediate assumptions, the reallocation of taxes that occurred in 1994 would leave the DI trust fund solvent until 2016. Reallocations have also been made in the opposite direction, with Congress reallocating taxes away from the DI trust fund to the OASI trust fund. For example, the 1983 Amendments reduced the allocation to the DI trust fund and established a future schedule of tax allocations between the DI and OASI trust funds to help ensure solvency of the retirement program.”

            Excerpt from 2005 SSA Report


            You’re an idiot.

            A payroll tax increase of 3.4% is currently required (CBO numbers) to “stabilize” Socialist Insecurity. The chances of that are exactly zero.

            They may try a reallocation band aid, but with the overall trust fund insolvent in 2029 (read: 2025), that’s shuffling the deck chairs on the you-know-what.

            As I said before, the window to “fix” Socialist Insecurity was prior to 2005. That window is now closed.

            DI trust fund dries up next year, and SS overall evaporates in 2020 – 2025.

            The subsequent benefit cuts constitute a 1.5% GDP cliff, which will be violent, in combination with any required tax increases.


            This train is heading straight for a giant steel barrier.

    • It’s Super Bowl weekend. Let’s do the over/under for the Employment Situation unemployment number on Feb 7.

      I’ll take the under on a 6.4% unemployment rate. Like 1.3 million emergency insurance beneficiaries @$297 per week compensation found jobs in January. How about you?

  5. Forty-five years ago, you could go to the Texas employment office and get a job that paid enough to survive. You could choose white collar or blue collar work and agree to the position on the spot. You would be given the address and start work that day. The company would be notified by the employment office before you arrived at the work site.

    We need that service in each county of each state and in each town and city.

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