Data for ‘me’ & data for ‘you’

Quoting from the same source:

The ‘´conservative´s data says:

[the] end of extended unemployment benefits at the start of 2014 explains much of the pick up in employment growth in 2014 compared with 2013. The story would be that the end of benefits gave people an incentive to find work. Their method is to compare the change in employment in states that previously had lengthy periods of benefit duration with states where benefit duration was already short prior to January of 2014.

The argument is that in the states that previously had long benefit duration we should expect the cut in duration to have a large effect. By contrast, in the states where benefit duration was relatively short, we would expect to see little effect. This means that we should see a bigger uptick in job growth in 2014 relative to 2013 in the states that previously had long periods of benefit duration than in states that had short periods.

The ‘´liberal´s’ data says:

An unweighted average of the long duration states showed their rate of job growth increasing from 1.31 percent in 2013 to 1.41 percent in 2014. By comparison, job growth in the short duration states increased from 1.43 percent in 2013 to 1.82 percent in 2014. (The calculations run from November to November in both cases, since data are not yet available for December.)

This runs completely counter to the claim that shortening benefit duration provided a boost to employment growth. The states in which HMM expected the cuts in duration to have the greatest effect on growth actually saw less of an uptick than the states where they expected a small effect. This is consistent with prior research showing that the main impact of cuts in benefit duration is that more people leave the workforce, not that more people get jobs.

Bottom line for the ‘agnostic’:

The incentive effects ofthe elimination of extended benefits increases labor supply and contributes to keep wages ‘in line’.

Those that have a hard time finding employment drop out of the labor force and so the unemployment rate falls.

4 thoughts on “Data for ‘me’ & data for ‘you’

  1. The judgement that I have came to (see the link to my presentation at the 2013 UK labour market statistics user group conference) is that the changes in US benefit regime help to partly explain the poor US employment performance after the recession. This was because benefits durations were extended without a compensating extension of an ‘activation’ regime during these extended benfit durations.

    To me, therefore, the period up to 2014 is the unusual one and that is basically a restoration of the ‘normal’ US situation where the labour market clears quickly. [And because it is independent of demand I expect productivity to probably perform worse than in the recessionary period unless growth is realtively substantial.]

    One thing that I did expect in 2014 given this judgement is for the activity/participation rate to pick up. It hasn’t and I think that one of the questions for the future is why?

  2. I have a post on North Carolina’s experiment in ending extended UI benefits early.

    It’s almost a year old, but the link in the post points to current data. And I still lean toward the opinion the absence of extended benefits is more likely to reduce the duration of unemployment, but results in dropping out of the labor force when exiting a bout of unemployment rather than to exiting to employment, an opinion consistent with a report from the San Fran Fed.

    • Just to add to this, I don’t believe that circumstances of unemployment are always the same. Believing so would mean that I also believe all recessions are the same; and they aren’t. The point here is that what happens when exiting unemployment is highly dependent on whether or not employment conditions have improved – in a general sense. So there really doesn’t seem to be any hard and fast rule that can developed that says “extended UI” always causes X.” And I would certainly avoid arriving at the conclusion that extended UI makes people want to just sit around because they can.

  3. Both liberal and conservative economist have proven they can generate models and observations that validate their pre-existing biases.

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