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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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A lot of bad analysis and outright false claims are being circulated about unemployment in North Carolina and recent cuts in the state’s unemployment benefits that are hurting workers and their families.

Let’s clear the air with some facts.

An unemployed worker can’t move to NC and receive unemployment insurance here.

If a person is unemployed, moves to another state and applies for unemployment insurance, the benefits would be paid by the state where his or her former employer was located. To suggest, as Gov. McCrory did recently, that unemployed people were flocking to North Carolina to collect benefits from the state reflects a fundamental misunderstanding of how unemployment insurance works.

The evidence is also clear that there has not been a mass influx of unemployed workers to North Carolina.

The drop in North Carolina’s unemployment rate is largely due to people leaving the labor force, not the cut in unemployment benefits.

As we have noted elsewhere, as have numerous well-respected economists here, here and here, the superficial improvement in the state’s unemployment rate is not signaling a much-improved level of employment.  Rather, the unemployment rate is dropping largely because many jobless North Carolinians have stopped looking for work, shrinking the state’s overall labor force. Why? There are simply not enough jobs for those who want to work.  And that is happening while the working-age population is growing. Read More

mccrory1106Not that there was really any doubt that Gov. Pat McCrory’s up-is-down, day-is-night claim that people were moving to North Carolina to take advantage of supposedly generous unemployment insurance benefits was complete baloney on multiple levels, but the reporters at WRAL.com “NC Capitol Fact Check” have confirmed that this is the case.

“North Carolina’s own rules prohibit people who have not worked in the state from tapping the state’s unemployment insurance system, and economists say there’s scant evidence for people moving across state lines for any work-related reason, much less because they’re comparison shopping for unemployment insurance.

Given that McCrory can offer scant evidence for his claim, it would be hard not to rate his statement as false.”

As for what happens next in the aftermath of a high public official uttering such a blatant and malicious untruth, don’t hold your breath waiting for any kind of apology from the Guv. A more likely outcome: some kind of convoluted claim that it’s all Bev Perdue’s fault. Stay tuned.

mccrory1106More confirmation today that Gov. Pat McCroy’s contempt for people in need (and the facts) literally knows no bounds. Check out this excerpt from Mark Binker’s story at WRAL.com about unemployment insurance and some new and utterly ridiculous statements  from the Guv:

“‘We had the ninth-most-generous unemployment compensation in the country,’ McCrory said. ‘We were having a lot of people move here, frankly, from other areas to get unemployment … People were moving here because of our very generous benefits, and then, of course, we had more debt. I personally think that more people got off unemployment and either got jobs or moved back to where they came from.’”

It’s hard to know whether to laugh or cry at someone who is that pathetically misinformed — a) people who become unemployed elsewhere and then move here aren’t eligible for unemployment benefits and b) even if they were somehow eligible,  the average benefit was something like $290 a week prior to McCrory’s cuts!

 

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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