"Unemployment could be 6.8% instead of 9.5% if we hadn't extended unemployment benefits"

[Kurt_and_Hunter]

I usually post worthwhile things by non-RW economists. Sometimes, however, it is good to be reminded of the degree to which the other side is not making any real arguments at all. This WSJ piece is like numerology or something.

Seriously.

Robert Barro is an economics professor at Harvard University and a senior fellow at Stanford University's Hoover Institution. So he is a serious person who one should take seriously on account of all his seriousness.

He argues in the WSJ that the reason long-term unemployment is higher in this recession is because unemployment benefits were extended. He seems to be arguing that the duration of unemployment and percentage of long-term unemployed are independent of he character and duration of the down-turn.

Why is long-term unemployment so much higher today than in other post-WWII downturns? I would guess because this is the worst systemic unemployment event since the Great Depression and has been going on for a long time. This serious bozo argues (sic) that it must be because we extended unemployment benefits. (Is he arguing that not extending benefits would have created jobs or arguing that not extending benefits would have caused a bunch of unemployment to not be counted, which is the objective of economic policy... to distort statistics until the statistics 'recover'???)

Seriously...

These numbers provide a stark contrast with joblessness today. The peak unemployment rate of 10.1% in October 2009 corresponded to a mean duration of unemployment of 27.2 weeks and a share of long-term unemployment of 36%. The duration of unemployment peaked (thus far) at 35.2 weeks in June 2010, when the share of long-term unemployment in the total reached a remarkable 46.2%. These numbers are way above the ceilings of 21 weeks and 25% share applicable to previous post-World War II recessions. The dramatic expansion of unemployment-insurance eligibility to 99 weeks is almost surely the culprit.


To get a rough quantitative estimate of the implications for the unemployment rate, suppose that the expansion of unemployment-insurance coverage to 99 weeks had not occurred and—I assume—the share of long-term unemployment had equaled the peak value of 24.5% observed in July 1983. Then, if the number of unemployed 26 weeks or less in June 2010 had still equaled the observed value of 7.9 million, the total number of unemployed would have been 10.4 million rather than 14.6 million. If the labor force still equaled the observed value (153.7 million), the unemployment rate would have been 6.8% rather than 9.5%.

It is super serious stuff. As befitting such seriousness, there's an awesomely serious illustration accompanying the op-ed:



http://online.wsj.com/article/SB10001424052748703959704575454431457720188.html

[hobbit709]

1. If they're no longer getting benefits then they're no longer being counted.

Lies, damned lies, and statistics.

[FBaggins]

5. That's incorrect... and unbecoming of a hobbit.

Receipt of benefits is unrelated to whether you are counted as unemployed.

[hobbit709]

11. Once your benefits are exhausted, you aren't counted if you don't file for nonexistent benefits.

If you no longer go down and file because you get no more benefits, then you are no longer in the unemployment count. If you're not getting benefits any longer, why waste time and money going to the unemployment office.

When I got laid off in 2001, I was told I was eligible for retraining. But first I had to jump through some hoops, including not finding work for 4 months. I jumped through all the hoops and two weeks before my benefits ran out-no extensions back then, TWC tells me the retraining budget is spent for the year and I would have to wait until the next fiscal year. When I asked what should I do until then I was told I was basically SOL. so I filed for my last two weeks worth of benefits and never went back. In that 6 months the only job interviews I had I found on my own-not a single one from TWC.

[FBaggins]

14. Sorry... no... that's simply wrong.

The people who count you as employed or unemployed don't even know whether you're receiving unemployment benefits or not.

If you're not getting benefits any longer, why waste time and money going to the unemployment office.


The people in the unemployment office have nothing to do with the count.

[rfranklin]

19. Could you educate us as to how the statistics are compiled?

You seem to have inside information on the methodology.

[FBaggins]

22. Sure. Here's a useful resource.

http://www.bls.gov/cps/faq.htm#Ques2

What do the unemployment insurance (UI) figures measure?

The UI figures are not produced by the Bureau of Labor Statistics. Statistics on insured unemployment in the United States are collected as a by-product of UI programs. Workers who lose their jobs and are covered by these programs typically file claims ("initial claims") that serve as notice that they are beginning a period of unemployment. Claimants who qualify for benefits are counted in the insured unemployment figures (as "continued claims"). Data on UI claims are maintained by the Employment and Training Administration, an agency of the U.S. Department of Labor, and are available on the Internet at: http://workforcesecurity.doleta.gov/unemploy/claims.asp.

These data are not used to measure total unemployment because they exclude several important groups. To begin with, not all workers are covered by UI programs. For example, self-employed workers, unpaid family workers, workers in certain not-for-profit organizations, and several other small (primarily seasonal) worker categories are not covered. In addition, the insured unemployed exclude the following:

IIRC, the last filings report for unemployment cited the insured unemployment rate (which is essentially what the rate would be if only these people were counted) as 3.5%

[rfranklin]

13. There is such a thing as "hidden unemployment"

The unemployment or underemployment of workers that is not reflected in official unemployment statistics because of the way they are compiled. Only those who have no work but are actively looking for work are counted as unemployed. Those who have given up looking, those who are working less than they would like, and those who work at jobs in which their skills are underutilized are not officially counted among the unemployed, though in a sense they are. These groups constitute hidden unemployment.


•Because of hidden unemployment, official statistics underestimate unemployment.

http://www.answers.com/topic/hidden-unemployment

[FBaggins]

17. Of course there is... but it has nothing to do with receipt of benefits.

The unemployment or underemployment of workers that is not reflected in official unemployment statistics because of the way they are compiled. Only those who have no work but are actively looking for work are counted as unemployed.

That's true only for the "headline" U3 number. Underemployment and/or the "discouraged" are "reflected in official unemployment statistics"... just on a different line from the same report.

[ThomCat]

25. Actually, yes it does.

Receipt of benefits is HOW the government knows who is unemployed and who isn't. It is the way the government counts the number of people who are unemployed.

Once you don't receive benefits anymore, they don't have a way to count you anymore, so you don't count.

[FBaggins]

27. Wrong.

Receipt of benefits is HOW the government knows who is unemployed and who isn't.

Nope. It's a survey (a really big one... but a survey nevertheless). They don't even ask if you're getting benefits.

As I pointed out in a previous post, the people who do know about your benefits compare it to the household survey employment base and come up with a different unemployment measure that specifically counts just those receiving benefits. That number is currently 3.5%

[Yo_Mama]

35. Get it right

The Barro hypothesis is indeed ridiculous, and many have rebutted it.

However, regarding the way unemployment is calculated:
A) The Census and the BLS conduct the household survey each month to figure out the size of the workforce and how many employed and unemployed there are.
B) To be counted as unemployed or unemployed:
http://www.bls.gov/news.release/empsit.tn.htm
Household survey. The sample is selected to reflect the entire
civilian noninstitutional population. Based on responses to a series
of questions on work and job search activities, each person 16 years
and over in a sample household is classified as employed, unemployed,
or not in the labor force.

People are classified as employed if they did any work at all as
paid employees during the reference week; worked in their own business,
profession, or on their own farm; or worked without pay at least 15
hours in a family business or farm. People are also counted as employ-
ed if they were temporarily absent from their jobs because of illness,
bad weather, vacation, labor-management disputes, or personal reasons.

People are classified as unemployed if they meet all of the follow-
ing criteria: they had no employment during the reference week; they
were available for work at that time; and they made specific efforts
to find employment sometime during the 4-week period ending with the
reference week. Persons laid off from a job and expecting recall need
not be looking for work to be counted as unemployed. The unemployment
data derived from the household survey in no way depend upon the eli-
gibility for or receipt of unemployment insurance benefits.

C) You can find the base results of the household survey here:
http://www.bls.gov/news.release/empsit.t01.htm

D) The official unemployment rate is known as U-3. But other rates are calculated and published each month in Table A-15:
http://www.bls.gov/news.release/empsit.t15.htm
U-4 includes discouraged workers.
U-5 includes discouraged workers and marginally attached workers.
U-6 includes discouraged workers, marginally attached workers, and involuntary part-time workers.

E) Figures for both discouraged and marginally attached workers are published each month in the employment report. Here are the exact definitions:
About 2.6 million persons were marginally attached to the labor force in July,
an increase of 340,000 from a year earlier. (The data are not seasonally ad-
justed.) These individuals were not in the labor force, wanted and were avail-
able for work, and had looked for a job sometime in the prior 12 months. They
were not counted as unemployed because they had not searched for work in the
4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 1.2 million discouraged workers
in July, up by 389,000 from a year earlier. (The data are not seasonally ad-
justed.) Discouraged workers are persons not currently looking for work because
they believe no jobs are available for them. The remaining 1.4 million persons
marginally attached to the labor force had not searched for work in the 4 weeks
preceding the survey for reasons such as school attendance or family responsi-
bilities.

[ThomCat]

24. Um, yes, after you stop receiving unemployment benefits

you are considered to be no longer looking for work, and therefore no longer unemployed. You are considered to be voluntarily out of the workforce.

Paul Krugman has written about this, as have others. It is not exactly a secret.

The government only counts you as unemployed if you are registered for unemployment benefits so that they know you are unemployed.

[FBaggins]

28. See the link in #22 - You've made a very common error.

And there is no way that Krugman has gotten this wrong.

What he's written about are the "discouraged" workers who no longer count because they are no longer looking for work (though that are counted in the U4-U6 figures).

[ThomCat]

32. No, the government consideres people discouraged workers

and assumes they aren't looking for work anymore because they have been out of work for more so long, but just because they have been out of work for so long that doesn't mean they are no longer looking for work. That is dogma.

Being out of work for so long doesn't magically make bills go away. It doesn't magically make it possible to live without income.

What is assumed by most economists isn't always or even often true.

[FBaggins]

34. I encourage you to read up on the subject.

You've been badly misstating the facts.

the government consideres people discouraged workers and assumes they aren't looking for work anymore because they have been out of work for more so long

Nope. They're counted as discouraged if they respond that they want to work and are available to work, but have stopped looking because "there just aren't any jobs out there" (or similar). Being unemployed for a long time will not make you "discouraged" (as a statistical category... obviously it is pretty discouraging) if you are still looking for work.

[n2doc]

2. And of course all the jobs for those people would have magically appeared

Or, what the WSJ really hopes for, is that people will be driven in starvation in order to accept starvation-wage "jobs" with no rights, except the right to be worked to death and discarded like a used plastic cup when done.

[Tiras De Carne Seca]

4. Spot on comment.

You nailed it.

[TheKentuckian]

3. Those fuckers are nuts but the scary thing is ours listen to them. That's why the 99ers are left to

die and it is pulling teeth to even get the established extensions renewed and why they will only renew them piece meal for such short periods.

They want to clear the rolls so everyone can be "discouraged" and not counted so they can bring down the number and pretend all is well and they fixed the problem.

The real unemployment number can rot for all they care and so can the unemployed.

For pukes it is even better because of course on the ground misery obviously will continue to grow and tax revenues will crash adding to the deficit so they can push for more pig drowning.

[FBaggins]

6. This confuses both cause/effect and structural/cyclical unemployment.

There is no indication that many people remain unemployed because of benefit extensions.

[closeupready]

7. Note author is a Harvard economics professor - acquainted, no doubt, with Summers, who was Harvard's

president until 2006. So I'd really discount this op-ed on that basis alone.

[truebrit71]

12. I'd discount it because of the Fish-Wrap that printed it..

..

[closeupready]

15. That moreso, lol.

:rofl:

[JHB]

8. Maybe if they outsourced and offshored Harvard professors and Hoover Fellows...

...he'd have a different perspective.

How many elephants had to die for all the ivory in his tower?

[qb]

9. So jaded by his love for numbers and/or ideology...

he has lost touch with reality.

[JHB]

16. Antidote (and anti-dolt): Krugman

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x9048873

[qb]

21. Indeed!

[Name removed]

10. Deleted message

Message removed by moderator. Click here to review the message board rules.

[depakid]

18. As if we needed further proof that The Wall Street Journal is

nothing more than an ideological tabloid- no different in many respects than those that pay big money to be placed on the supermarket checkout aisles.

[Kurt_and_Hunter]

20. The comments section is really good

95% loudly negative, which is interesting since it's the WSJ.

One of the few comments in favor of Barro's piece caught my eye as noteworthy over-the-top self-parody.

"Good article. Talking truth about such matters however sure opens the door for being attacked and ridiculed Alinsky-style. Americans have largely become soft and spoiled and those that think that the govt can make all their booboos go away had better wake up because the wealth we all have inherited as Americans was created by rugged individuals who sacrificed a lot and had little and gave much, and it's all being frittered away by an entitlement mentality."

[Kurt_and_Hunter]

23. ...

[OmahaBlueDog]

26. The way I understand it is this

If the benefits run out, rather than looking for a job that meets your talents and qualifications, you are forced to take the first minimum wage job you can get (if one is available). Heck, you might have to string together two or three of these winners.

So now you're building tacos or flipping burgers or stocking at a big box store. You make 7 whatever it is an hour that is minimum wage. BUT, you are no longer unemployed. You are, however, most likely, on food stamps, and perhaps Section 8. Sure, that sounds like a good trade :sarcasm:

I do wish that more emphasis in the unemployment benefits packages were placed on educational assistance and retraining.

[Better Believe It]

29. And if we didn't have unemployment compensation the unemployment rate would be 0%!

Hey, why didn't we think of that?

[BzaDem]

30. He's arguing that the reason there is so much unemployment is that getting unemployment benefits is

so attractive that the unemployed don't even try to find work. In other words (to paraphrase him), he's saying if we take away benefits, they will get off their lazy rears and get a job.

Aside from the obvious craziness of the argument, he is missing the core problem. The problem is not that people aren't willing to look for jobs. The problem is that there aren't enough jobs to look for. The problem is the supply of jobs, not the demand for jobs. This fits with the typical right-wing ideology that economic problems are all caused by poor people (people "living beyond their means," the lazy unemployed, people "using their house as a piggybank," etc.), as opposed to systemic problems (such as inequality, an unregulated financial sector, etc.)

[EstimatedProphet]

31. This is why economics is not considered a science

Unemployment was unusually high at the same time that unemployment benefits had lasted an unusually long time.

Therefore, the long-lasting unemployment benefits caused unemployment to be so high.

[Fumesucker]

33. That cartoon makes Mallard Fillmore look like sheer genius..

What the hell does it even mean?

I can usually tell what Mallard Fillmore is intending to convey, on this thing I don't have a clue.