South By North Strategies, Ltd.

Extending Unemployment Insurance Benefits

The Economic Policy Institute estimates that an extension of the long-term unemployment insurance benefit program set to expire at the end of 2011 would help save or create 560,000 jobs and preserve or generate $72 billion in GDP through the end of 2012. From the analysis …

Spending $45 billion on unemployment insurance extensions in 2012 would increase GDP by an estimated $72 billion, raising our $15.2 trillion GDP by roughly 0.5 percent. This increase in economic activity translates into roughly 560,000 payroll jobs. In other words, extending the federally funded unemployment insurance extensions through 2012 would not only extend a lifeline to the families of millions of long-term unemployed workers, it would also generate spending that supports well over half a million jobs. If this program is discontinued, the economy will lose these jobs.

The study also weighs in on the issue of whether the benefit extension would cause some people not to seek work.

Is it possible that continuing the UI benefit extensions could weaken the labor market by providing a disincentive for UI recipients to return to work? The answer is a very clear “no.” In the most careful study to date on the effects of UI extensions on job searches in the Great Recession, Jesse Rothstein (2011) finds that the unemployment rate in December 2010 would have been about 0.3 percentage points lower if UI benefits had not been extended. The unemployment rate that month was 9.4 percent, up from 5 percent in December 2007, an increase of 4.4 percentage points. Thus, he finds that a very small fraction—0.3 out of 4.4—of the increase in the unemployment rate during the Great Recession and its aftermath can be attributed to the UI benefit extensions. Furthermore, Rothstein shows that at least half of the extension-induced increase in the unemployment rate is due to the fact that workers who receive UI benefits are less likely to give up looking for work. His estimates suggest that less than 0.2 percentage points of the 4.4 percentage point increase in the unemployment rate in the three years from December 2007 to December 2010 was due to an extension-induced reduction in the rate at which workers get a new job.

Around The Dial – November 8, 2011

Economic policy reports, blog postings, and media stories of interest:

• Jan-Werner Mueller wonders “what does Germany want?”
• Jared Bernstein describes “warning signs” of diminished income mobility.
• Ezra Klein mulls what went wrong with the Obama administration’s economic policy.
• Robert Kuttner is not wild about the Super Committee.
• Nancy Folbre asks “who rules the global economy?”

Concentrated Poverty In America’s Metros

The Brookings Institution maps the increases in poverty that occurred in the United States between 2000 and 2010, paying special attention to significant concentrations in poverty in the nation’s most populous metro areas.

Imagining A “Good” Jobs Report

Rortybomb describes what a “good” national employment report would look like.

First of all, there would have been job growth that gets us back to full employment instead of job growth that is slightly around the rate of population growth. There would be well over 150,000 jobs created a month, ideally above 200,000 and even beyond that — there’s a lot of catching up to do. The key indicator to watch is the employment-population ratio, which is the percentage of the workforce that has a job. As unemployment only indicates the number of people actively searching for a job, and many are dropping out of the labor force and giving up on finding a job, the unemployment rate tells us less and less. And if the population is growing faster than the number of jobs created, we are losing out. The employment-population ratio tells us the actual rate at which we are employing people. It is currently at 58.4 percent, the same it was in January 2011.

Around The Dial – November 7, 2011

Economic policy reports, blog postings, and media stories of interest:

• Rortybomb depicts changes in income inequality.
• Off the Charts pictures the latest national employment report.
• Econbrowser explains trends in auto and housing sales.
• Martin Wolf points out that creditors and debtors go together.
• Economix describes “the lasting financial impact of a layoff.”