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Dean BakerIf you don’t follow economist Dean Baker on Twitter or the blogosphere, you should. This week, Baker has, among other things, dissected the bombs being lobbed at the Affordable Care Act because of the finding that it might lead to lowering of employment numbers.

As Baker notes here:

“Apparently a lot of media folks have made such a habit of repeating Republican talking points that they can’t see what is right in front of their eyes. The Republicans are touting the fact that the Congressional Budget Office (CBO) expects the Affordable Care Act (ACA) to reduce the number of people working.

Guess what? This was one of the motivations for the ACA. It is a feature, not a bug. Read More

At a time when we should be boosting investments to ensure that the Tar Heel state can compete for good-paying jobs in an increasingly knowledge-based economy, our legislative leaders have taken a different path. Our prized public 4-year university system serves as an example.

Since 2008, state funding on a per student basis within the UNC System has been cut by nearly 16 percent when adjusted for inflation. Managing these funding cuts have meant reducing course offerings, which can prolong the time it takes students to graduate; reducing academic- and student-support services; and steady tuition hikes. For the 2014 academic year, the average tuition and fees cost with the university system is around $6,100, up from around $4,400 in 2008 – an increase of nearly 40 percent.

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Governor McCrory’s Economic Development Board released it’s long-awaited strategic plan for the state’s economic development efforts this afternoon. Here is the Budget and Tax Center statement in response:

We all want to create jobs and grow an economy that works for everyone in North Carolina, and the best way to make sure that happens is to focus on raising family incomes after a decade of decline. While the Governor’s plan includes a number of useful proposals, there is an important contradiction between the plan’s call for additional tax cuts and the resources necessary to achieve the goals related to workforce development, innovation/entrepreneurship, and rural prosperity. These goals will be impossible unless the state provides adequate investment in higher education, community colleges, and rural community development initiatives. Funding for these initiatives are already well below where they were before the recession started in 2008, so it’s unlikely the state will be able to make significant progress on achieving these goals given the steep revenue losses resulting from last year’s tax cuts and any future round of tax reductions.

 

It’s the myth that will not die.

In the ongoing debate over the impact of last year’s draconian cuts to unemployment benefits, we keep hearing the story that reducing benefits for the jobless has helped reduce the unemployment rate.

If only this were true.

While the unemployment rate has undoubtedly fallen, this is because unemployed workers have simply fallen out of the labor force, rather than moving into employment—a trend the unemployment rate simply doesn’t take into account. Just this point was made yesterday in a New York Times piece by Annie Lowrey profiling North Carolina’s economy, which noted that for every unemployed person who moved into employment, another two unemployed people gave up looking for work and dropped out of the labor force altogether.

In fact, the state’s labor force contracted more than 2.5 percent in 2013 at the same time that the state’s population grew by almost 1 percent.  And anytime the labor force shrinks while the population grows, the economy is moving in the wrong direction.

If the Times piece gets it right about the connection between unemployment benefit cuts and the shrinking labor force, it is a bit too trusting of Governor McCrory’s claims that his plan helped boost job creation in the state.

Perhaps Ms. Lowrey should have noted Ned Barnett’s important point from last week—by any measure, employment growth in 2013 was the weakest of any year since the end of the recession. North Carolina created just 37,700 jobs from January to November last year, almost half the 66,000 jobs created over the same period in 2012 and still short of the jobs created in 2011 and 2010. At the rate of employment growth achieved in 2013, it will take another 13 years for the state to create enough jobs to replace all those lost during the recession and keep up with population growth.

If Governor McCrory was correct that cutting unemployment benefits forced unemployed workers to find work, then we would expect to see unemployed workers moving into employment. But we don’t—we actually see the opposite.  There were actually 9,000 fewer people employed in November than in January—again, the worst performance since 2010. This means that unemployed people aren’t moving into jobs, they’re just dropping out of the labor force altogether.

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In remarks at Monday’s economic forecast forum, a number of speakers sought to take credit for enacting policies in 2013 that they believe have contributed to big drops in the unemployment rate since last January, an idea that has been repeated in recent business news reports. Unfortunately, as much as we all want to make progress reducing North Carolina’s persistent joblessness, we’re still waiting for a jobs recovery to actually happen.

The unfortunate reality is that the unemployment rate may have fallen due to mathematical quirk in how it’s calculated, but unemployment itself still remains high due to anemic job creation and a contracting labor force.

Perhaps the most problematic claim involves the mistaken notion that the General Assembly’s deep cuts to unemployment benefits that took effect in June somehow spurred an impressive reduction in unemployment in the following months. According to this view, the “employment effect” associated with cutting unemployment benefits forces workers to find jobs that they otherwise would not have accepted because the wages of those new jobs pay less than what their old jobs paid. And since the unemployment rate has gone down, proponents of these cuts have argued that the employment effect must have worked in just this way.

There is a serious problem with this idea—it assumes that unemployed workers who lost their benefits in June went out and found jobs in August through November, a claim that just doesn’t bear up under serious scrutiny.

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