No, A Decent Jobs Report Does Not Mean We No Longer Need an Extension of Unemployment Insurance!

December 6th, 2013 at 10:08 pm

OK, there were too many negatives in that title.  Let me say it more positively: we positively must extend UI benefits, lest 1.3 million UI recipients lose needed UI benefits in a job market that is improving, but still slack.

Here’s the argument: the Senate and the House are working on a budget deal, and key Democrats, including the White House, are arguing that the deal should include another extension of UI benefits.  Opponents say, “been there, done that.”  We’ve already extended benefits a bunch of times and now that the job market’s getting stronger, we don’t need to do so again.

Not so.  As I wrote this AM, “Policymakers must not conflate an improving labor market with a healed job market.  Until job opportunities are more robust, the extension is needed, both for the sake of the long-term jobless and the macro-economy (since UI has a large multiplier).”

Take a gander at the figure below.  It shows the share of the labor force that has been seeking work for at least six months, aka the long-term unemployed.  More to the point, it shows what that share has been in past recoveries when Congress allowed the extended UI program to expire.  The current share of long-term job seekers is twice what’s it has been at this decision point in the past.


Source: CEA (link above), Table 1; *This is the November long-term share with the month that the extension would expire.

I’m well aware of the argument that if we keep extending UI benefits, people will choose to take UI over a job, and that’s by no means a crazy argument.  But the question really is this: are there enough jobs out there?  Is this a demand-side problem, suggesting the need for another extension, or a supply-side problem, suggesting UI recipients are gaming the system?

The research, reviewed recently by both my CBPP colleague Chad Stone and by the White House Council of Economic Advisers, as well as the figure above, suggests it’s demand, not supply.  That is, this work finds that past UI extensions have only slightly boosted that amount of time that people voluntarily spend out of work.

The reason is that Congress has supported those extensions only in slack job markets, where the number of jobseekers solidly outpaces the number of job slots.  That matchup is improving, but the jobs gap is far from closed.

I speak from experience when I tell that one mistake policymakers have consistently made since the Great Recession has been to end stimulus/safety net/counter-cyclical measures too soon.  We have seen economic “green shoots” through rose-colored glasses and acted precipitously in response, cutting out fiscal support before the private sector was humming along on its own.  I’m first in line to stress that it would be a mistake to waste valuable resources on a UI extension that we, or more precisely, the long-term unemployed, don’t really need.  But that’s not what happening here and now.

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5 comments in reply to "No, A Decent Jobs Report Does Not Mean We No Longer Need an Extension of Unemployment Insurance!"

  1. David Lund says:

    “I’m well aware of the argument that if we keep extending UI benefits, people will choose to take UI over a job, and that’s by no means a crazy argument.”

    I’m sorry, Jared, but that’s just a crazy argument, as anyone who’s ever been involuntarily unemployed will tell you. It’s not just the money, though it should be obvious to everyone that the money one gets from unemployment insurance is little enough that it’s no inducement to remain unemployed. It’s that one’s sense of self-worth and one’s sense of a secure future take a nose dive when one is unemployed. The vast majority of people not only need to work, we have a psychological need to work.

    • urban legend says:

      If the argument had any legitimacy at all, we would not have had a labor participation rate over 67% in 2000. Or in the neighborhood of 75% in states with strong middle classes and educational systems. When jobs are plentiful people take them, period, and for the reasons you state. That’s simply a fact that has been established over and over and over when unemployment was low, and no alleged “research” can contradict it.

      On another point: “a job market that is improving, but still slack.” C’mon, Jared, the accurate phrasing of that is “job market that is improving slightly and at a painfully slow rate, but still has immense slack worth about 10 million jobs in it.” The President is being damaged by his downplaying how bad things still are, probably out of a perceived need not to appear ineffectual. He needs to figure out how to put his hair on fire about intractable high unemployment, low wages and insufficient incomes for the majority of Americans to drive a real economic recovery in the State of the Union, blame it (properly) on Republicans dedicated to opposing him rather than helping the American people, and translate it into a national desire to drive Republicans out of office wherever possible. Continuing to stay calm and collected on the economy (and paying any deference whatsoever to Third Way obsessions with the deficit) makes him look out of touch with what’s bothering Americans the most.

      When the press insists on asking about the deficit, there’s a simple answer people will understand and support: “Our first job has to be getting Americans back to work. Nothing does a as good a job at controlling deficits as a strong economy. We’ve done it that way before and we can do it again.” (29 out of 37 words of one syllable!)

  2. smith says:

    Clearly we are living in an alternate universe, here’s how the world operated before the tear in the space-time continuum, note the panic that 6% employment will persist. Inept political operatives refuse to consider or quote Bush, and Obama has no memory because he wasn’t even in the Senate at the time.

    Unemployed workers ”need our assistance in these difficult times, and we cannot let them down,” Mr. Bush said in his weekly radio address.

    ”I have shared these concerns with the leaders of the House and the Senate, and they understand the need for early action,” he said. ”When our legislators return to the Capitol, I ask them to make the extension of unemployment benefits a first order of business. And the benefits they approve should be retroactive, so that people who lose their benefits this month will be paid in full.”

    The unemployment rate last month stood at 6 percent, equaling its highest rate since mid-1994. The figure represents 8.5 million people who do not have jobs but are looking for work. With the the stock market also in the doldrums, the White House has become increasingly concerned about the political implications for Mr. Bush as he heads toward his re-election race in 2004.”

  3. Ronald Jones says:

    Well said, David Lund. You hit the nail on the head.

  4. Perplexed says:

    -” Let me say it more positively: we positively must extend UI benefits, lest 1.3 million UI recipients lose needed UI benefits in a job market that is improving, but still slack.”

    Or is what we really need just the enforcement of Constitutional Rights to Equal Protection Under the Law? The Clayton Act denies anti-trust protections to those whose “product” just happens to be labor. No other product or commodity than that of the 95% is excluded from these protections. How is this justified under the 14th Amendment and why is no one pushing to enforce the rights of these people that are already supposedly “guaranteed” under the Constitution? Denying Constitutional protections is not subject to “majority rules,” that’s the reason they’re supposedly protected; to avoid even the possibility of tyranny of the majority.

    It equal protection under the law was more than just words on paper, and was actually extended to the unemployed, they would be suing and collecting treble damages, not begging for “handouts” from those that denied them these protections in the first place.

    What is it about “equal protection under the law” that’s so difficult to understand or enforce? Where is it written that these protections are subject to the convenience of employers, plutocrats, and economic “science”?