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NC Budget and Tax Center

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

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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.

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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!

 

NC Budget and Tax Center

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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Over the last decade, poverty in our state has been on the rise. UNC Economics Professor Patrick Conway, in his new paper Poverty in North Carolina since 2000, explains that “poverty in North Carolina until 2000 had been a chronic but declining disease,” a trend that has been cruelly reversed.

In the face of this disturbing trend, Conway examines the links between unemployment and poverty, with an important emphasis on the role of unemployment insurance.

The general link between unemployment and poverty is straightforward: conditioning on other factors, those without jobs are more likely to have income falling below the poverty threshold than those with jobs. Those without jobs, however, can be divided into two groups – those who qualify for unemployment compensation and those who do not. Unemployment compensation provides a support that will lift a portion of those receiving it once again above the poverty line.

Conway concludes that unemployment explains only part of the increase in poverty, but that “the unemployment insurance program has played an important role in keeping North Carolinians above the poverty line.”

It’s a timely message, given the lack of action to renew  federal Emergency Unemployment Compensation (EUC), ensuring that long-term unemployed workers in 49 states will lose benefits just in time for the holidays.

Of course, long-term unemployed workers in North Carolina have first-hand experience simply by living in the one state that has been ineligible for EUC for the last four months. Thanks to HB4, which reduced the number of weeks and the amount of state benefits for jobless workers, North Carolina’s long-term unemployed residents also lost access to the federally-funded EUC program.

Where have these cuts taken us? North Carolina is still lagging the nation in job creation and unemployment and even the conservative think tank the American Enterprise Institute is questioning the cuts made to NC’s UI program.