What largely explains the drop

By John Hood | Jul 09, 2014


RALEIGH — The next time you see or hear a politician, policy analyst, activist, or journalist say that North Carolina’s unemployment rate has fallen “largely” because of workers dropping out of the labor force, ask for a definition of the term.

I don’t mean the term “unemployment rate.” Generally speaking, when people use that term they mean the most-reported rate from the Bureau of Labor Statistics, the U-3 rate that excludes adults who’ve stopped looking for work. Nor do I mean the term “labor force,” which is actually not a separate statistic from BLS but is simply a total of the number of workers who say they are employed plus the number of people who say they are unemployed and looking for work.

No, the ambiguous term here is “largely.” You see, by any standard definition, it doesn’t belong in the sentence.

Last year, Gov. Pat McCrory and the General Assembly adopted several key changes in economic policy. They restructured and reduced state taxes, for example. They lightened the regulatory burden. And they reformed the state’s unemployment-insurance system — lowering the amount and duration of benefits in order to speed up repayment of billions of dollars in debt to Washington and thus avoid job-killing increases in payroll taxes. As a consequence of the benefit changes, North Carolina was also forced to exit the UI extended benefits program six months before the rest of the country did.

UI reform went into effect in July 2013. The other policies were enacted at about the same time but were not in force until 2014, although it is conceivable they may have had a signaling effect on business decisions during the latter half of 2013.

At the time, left-wing critics warned that the end of extended benefits, in particular, would have a negative impact on North Carolina’s economy. There weren’t enough jobs to accommodate the long-term unemployed, they argued, and the resulting loss of purchasing power would weaken the state’s recovery. Conservative politicians and economists pointed to strong empirical evidence that extended UI benefits keep unemployment rate artificially high — that workers are more likely to accept available jobs after their benefits end and that some employers are even more likely to create jobs in labor markets where extended benefits have expired.

We now have 11 months of data with which to test these predictions. From June 2013 to May 2014, the number of unemployed North Carolinians dropped by 87,403. The number of employed North Carolinians rose by 85,461. Thus the state’s reported labor force has declined by 1,942 since mid-2013, or about four-hundredths of a percent. (The national average decline during the same period was a tenth of a percent. Labor-force participation across the country is lower than it used to be for a variety of reasons, including the aging of the population.)

In other words, 98 percent of the drop in North Carolina unemployment since the end of extended benefits is attributable to workers gaining employment. Two percent is attributable to workers dropping out of the labor force. Other federal data also show substantial improvements in North Carolina’s labor market during the same period. Payroll jobs rose at a rate 16 percent faster than the national average. The state’s ratio of employment to population rose three times faster than the national average. And the number of discouraged and other marginally attached workers outside the labor force went down in North Carolina, not up.

Would you say that a basketball team losing by a score of 98 to 2 had “largely” outperformed its opponent? To suggest that labor-force decline is largely responsible for the state’s falling unemployment rate since the end of extended benefits and the enactment of other conservative reforms in mid-2013 is to do one of three things: to lie, to expose gross ignorance of the subject matter, or to employ an innovative definition of the term “largely.”

Nice person that I am, I don’t want to assume the worst. I’ll just wait for someone to send me that innovative definition. I always enjoy learning more about the English language.

Hood is president of the John Locke Foundation.

Comments (13)
Posted by: Scott Lilly | Jul 10, 2014 06:22

Come on left-wingers.  You've got to admit that the facts and evidence do determine that conservatives got this one right.  Is there any left-winger out there that has enough integrity to give props out to the right-wing on this?  Isn't it nice to have 87,403 more people working?  And isn't it nice to perform better than the national average by 16%?  If you can't find it in your left-wing heart to cheer, "Yea, North Carolina!" -- then you need to consider the advice: "Don't hate, don't hate!"



Posted by: Penny R Wallace | Jul 10, 2014 07:15

How many of the re-employed are being subsidized by food and medical support that the taxpayers provide?  Simply looking at one set of numbers will not give a fully accurate picture.



Posted by: Scott Lilly | Jul 10, 2014 08:34

True.  Some people still take from public funds for assistance.  The action of stopping extended unemployment benefits was intended to reduce the strain on the economy related from unemployment checks and by not having employed contributing to the economy.  This is most directly measured in the number of people working in the economy.  That number increased 87,403 -- it did not decrease as the Left predicted.

 

I would love to see things done so that people don't need subsidized food and medical support that the taxpayers provide.  Off the top of my head I don't know what legislative things are out there that might reduce those "takes" from public funds.  On a macro-level, more opportunity in the economy would in theory provide more opportunity to escape the need of public assistance.  More people are working, which means more people are earning more money they can spend, which means there is more ways to earn the money of those willing to spend it.  It's all about "motivation".



Posted by: Scott Lilly | Jul 10, 2014 09:14

Just to quantify what this means... Assume all of the people now employed are employed at 40h/week and all earn minimum wage.  That's probably a fair assumption since some will not work 40h/week but some will earn more than minimum wage.

 

87,403 people working 2000 hours per year at $7.25 per hour

 

That's $1.2 BILLION dollars in additional earnings being recorded by the IRS.  Now take the same number that were drawing unemployment.  I have no clue what the real average number might be.  But for illustrative purposes, let's say $300/week.  That's $1.3 BILLION in unemployment check costs to us taxpayers.  ($300 x 52 weeks x 87,403 unemployed)  So you add the two together to see why we should be cheering this NC success: Our economy is helped $2.5 BILLION as a result of having more workers in the workforce! 

 

If there are 4,100,000 taxpayers in NC and all paid taxes equally, (they don't) every tax payer would get an extra $609 back from the NC Department of Revenue -- or (more likely) those in Raleigh will find some other way to spend your $609 and you likely won't see it come tax refund time.  (Hence the reason conservatives like to take "extra" taxes out of the hands of politicians.)

 



Posted by: Ron Rookstool | Jul 10, 2014 09:54

More propaganda supported by Art Pope (major supporter and founder of the Locke Foundation).

What about not expanding Medicaid? What about teachers pay? Voter ID, Gerrymandering of the districts?  $1.2 billion additional earnings by IRS? Not sure how this is true since the majority of these minimum taxpayers will not pay more taxes to IRS???
Regardless, let us see what the voters think in upcoming elections.



Posted by: Ron Rookstool | Jul 10, 2014 09:54

More propaganda supported by Art Pope (major supporter and founder of the Locke Foundation).

What about not expanding Medicaid? What about teachers pay? Voter ID, Gerrymandering of the districts?  $1.2 billion additional earnings by IRS? Not sure how this is true since the majority of these minimum taxpayers will not pay more taxes to IRS???
Regardless, let us see what the voters think in upcoming elections.



Posted by: Scott Lilly | Jul 10, 2014 10:30

"$1.2 billion additional earnings by IRS?" -- Regardless of if the wage-earner pays income tax, their employer will pay employment taxes on their behalf.  The $1.2 Billion in earnings is what the IRS records as income.  That's income registered and generated in the NC economy producing goods or services.

 

All that other stuff, (Medicaid, teachers pay, etc) is another topic.

 

So no takers out there on giving the right-wing credit on the unemployment, huh?  :-)



Posted by: Charles Zimmerman | Jul 11, 2014 08:37

        More b.s. to whitewash the ill-effects of their administration.

         This does not take into account the number of people that left N.C. for jobs elsewhere, like gee, I don't know, teachers! Nor the difference in pay/benefits of the job gained verses job lost. This is significant as there could be many filing for bankruptcy or losing their homes/assets as the result of being forced into a job paying less with fewer benefits. Nor does the claim of increase in taxes hold true without comparison to what these employees were paying previously. Nor is any comparison done to take into consideration seasonal work such as construction, farming, tourist season, etc, etc, that could explain the up-tick in employment. He merely takes credit for the whole effect being caused by their policies when if anything the loss of paid for unemployment benefits actually caused much ill-effects if common sense were applied. Then there is the failure to expand Medicaid. This didn't just merely cost US the use of OUR own money, it cost lives. But of course this isn't being told. But it will be.

           Here is my observances:

            1. There are fewer latino workers employed/present from what I have seen. This is the result of Obomanater's crack-down/enforcement of hiring quailifications. Did hood take this into account?

             2. There are many more houses on the market for sale in the $75.000. to 150,000. range than before mccrory, indicating the owners left to go elsewhere. Most of these are standing empty. Did hood make any consideration for this?

              3. There seems to be far less tourists than before mccrory thereby requiring fewer employees/businesses to accommodate their tourism. Just look at Maggie and count the number of motels that have closed since mccrory took office. Where in hood's calculations is there any consideration for this?

           Simply stated, there are many reasons for the changes in employment rates. hood chose only to claim the success of mccrory's policies while ignoring the big picture.

 

               C.Z.

             



Posted by: Scott Lilly | Jul 11, 2014 09:06

"This does not take into account the number of people that left N.C. for jobs elsewhere" -- There are MORE people working than before.  If people left NC for jobs elsewhere, then at least as many moved into NC to work.  Your statement is misleading at best.

 

True that there could be "underemployment" -- but UNDERemployment is more desirable than UNemployment.

\I made no statement that taxes increased.  I simply stated that the IRS can account for more revenue from the formerly unemployed.  Minimally, the unemployed should earn $1.2 Billion in NC producing goods and services.  Accordingly, the IRS will minimally collect employment taxes on those that were formerly unemployed.

 

"Seasonal work" would be seasonal.  There are 11 months of data. (June-May)  Unless you define "seasonal" as an 11 month period, your statement is incorrect.

 

"there are many reasons for the changes in employment rates" -- And in the same national economy, something about NC makes us perform 16% better than everyone else.  That "something unique" is the event of stopping extended unemployment benefits.

 

I suggest there are partisan people who would rather see failure and misery than cheer a success if it meant recognizing positive contributions to "the other side".

 

I ask again, who from the left-wing can demonstrate integrity and give credit where credit is due?  Why is that so hard to do?  What kind of Kool-Aid has MSNBC and other left-wing cultures been serving that polarizes their audience so much that a right-wing success is to be shouted down?



Posted by: Charles Zimmerman | Jul 11, 2014 09:12

                You take credit for what you have not shown you deserve. To fail to take into account all contributing factors is to build a case on a lie. 

                 I stand by my comments.

 

                   C.Z.



Posted by: John C Sanderson | Jul 11, 2014 15:03

No claims of economic expertise here, but I do think any pronouncements of "victory" for "right-wing" [Mr. Lilly's words] economic policies is premature, and not particularly constructive in the first place. Offering something akin to a "Nanna-nanna, boo-boo" dare in the opening salvo of this discussion is hardly the way to encourage serious commentary - i.e., "Come on left-wingers.  You've got to admit that the facts and evidence do determine that conservatives got this one right.  Is there any left-winger out there that has enough integrity to give props out to the right-wing on this?"

Really, that's your question?

 

The NC job figures seem to be moving in the right direction, and everyone should be pleased that things seem to be looking better. But there are still plenty of questions to be answered before the state - and that would be ALL of us, Mr. Lilly, not just the "right-wing" - can say that we have the level of employment, and the QUALITY of employment we need to have. Mr. Zimmerman brings up some valid points (e.g., full or part-time employment?, pay scales?, expected longevity of jobs?, benefits provided or lack thereof?, etc.), and there is no doubt that Mr. Hood (as is always the case) spins his presentation in a predictable manner. And of course, the same "spinning" is true of "left-wing" [Mr. Lilly's words] commentators, as well. And that only highlights the importance of each and every one of us looking at ALL of the information available in an objective and critical manner, and not jumping on one bandwagon or the other prematurely - if ever. If you want to take my words as evidence of someone "who would rather see failure and misery than cheer a success," then I guess that's how you're going to take my comments, but you would be incorrect in doing so.

 

One of the comments Mr. Hood made in his column that bothers me, and that I have some serious concerns about is as follows:

"Conservative politicians and economists pointed to strong empirical evidence that extended UI benefits keep unemployment rate artificially high — that workers are more likely to accept available jobs after their benefits end and that some employers are even more likely to create jobs in labor markets where extended benefits have expired."

So, people who have no income whatsoever, because their unemployment benefits have been stopped, but who still have bills to pay and mouths to feed are more likely to take any job whatsoever, no matter what it pays or how many hours it involves? Pardon me, but I don't find that to be a particularly earth-shattering announcement. Desperation drives people to do lots of things they otherwise would not do, and they otherwise SHOULD NOT do.

And some businesses are "even more likely to create jobs in labor markets where extended benefits have expired?" Is it just me, or does that statement trouble anyone else? Why on earth would the elimination of extended unemployment benefits serve as an incentive to a business to now begin to offer jobs .... UNLESS those particular businesses know they now have an essentially captive pool of potential workers to whom they can offer substandard pay, unreasonable work schedules, and part-time hours (with no benefits, of course)?

 

See, it's stuff like that that concerns me about pronouncements of economic "victory" on the basis of information spun by ideologues. Sorry, Mr. Lilly, you won't get that pat on the back from me UNTIL and unless we have more evidence than we have so far of the genuine economic turnaround we all want and need.



Posted by: Scott Lilly | Jul 11, 2014 15:47

"Really, that's your question?" -- YES!  And here's why... I see lots of people from all persuasions wearing blinders and will not even consider the other side.  If one cannot cheer decidedly positive news when it's the "other side" that ought to be credited, I am hoping to cause internal refection as to why that is.

  

"But there are still plenty of questions to be answered..."  --- And there is the issue.  I didn't ask about any of the "plenty of questions".  I want to know who can cheer more people working in NC producing goods and services due largely in part to motivating the unemployed to become employed.  If that's so difficult to agree and more easy to deflect to "plenty of questions", that is something I want to call out for the left-wingers.

 

I believe this is where we fundamentally disagree:

"Desperation drives people to do lots of things they otherwise would not do..."

As a right-winger, I believe in equal opportunity -- not equal distribution.  It's precisely desperation that motivates people most.  As well, once you know desperation it's a pretty powerful motivator to avoid it in the future!  Been there; done that.  It is perfectly acceptable for the public looking in the interest of it's public funds to expect this from people needing assistance:

 

1) If you can't find a job, lower your standards (ego?)until you can.

2) If you can't afford the lifestyle you have, downsize until you can.

3) If the economy is tough where you live, move somewhere it's better.

4) If you have property and resources that can get you through a pinch, sell it and use it.

 

And I absolutely LOVE the concept being used in the proposed halfway house.... if you aren't working while staying here, volunteer.

 

"Why on earth would the elimination of extended unemployment benefits serve as an incentive to a business to now begin to offer jobs" -- (You're setting me up, Mr. Sanderson, with a softball here!)  If you have a large low-wage population, that screams "manufacturing".  Sure, nobody is going to get rich working manufacturing jobs, but then look at how Evergreen has been recognized as "important" in the economy.  If everyone in Canton had a minimum wage of $50/hour, Evergreen would be long gone already!

 

"Sorry, Mr. Lilly, you won't get that pat on the back from me UNTIL and unless we have more evidence than we have so far of the genuine economic turnaround we all want and need." -- Economic turnaround is a much broader topic.  I was merely looking for props on the one specific benefit of increasing the number of working citizens largely in part by motivating the unemployed to become employed.  If a left-winger can do that, they are worthy of continued debate on meaningful topics and issues.  Otherwise, it's like expecting Sean Hannity and Rachael Maddow in a room to set an example for our politicians to follow in "working together".  :-)

Reference:

Left-Wing: Defined as use of government to redistribute wealth and force equal benefit to all.  More government is better.

Right-Wing: Defined as use of government to ensure fairness and equal opportunity.  Less government is better.



Posted by: Charles Zimmerman | Jul 12, 2014 10:18

      When a person acquires a job whereby unemployment insurance benefits are cut from them and their employers, they also enter into a contractural agreement that their benefits will be based on their wages and will last so long. mccrory administration broke that contract. They lowered the maximum amount anyone could receive regardless of what they had paid in based on income received. How many people suffered needlessly because of this? How many suffered needlessly because unemployment benefits were cut prematurely?

                  mccrory failed to extend Medicaid to US. Even though We had alreddy paid for it! How many needlessly suffered and/or died?

                  mccrory shifted the tax burden off of the well-off to everyone else by adopting flat-tax and lowering/eliminating taxes for those well-off and also adding incentives for new business to come here. How many people have needlessly suffered from this anti-republic, ill-liberal action?

                  mccrory has enacted legislation that has been challenged by numerous civil rights organizations. How much will this cost US? How many people will suffer needlessly before this legislation is reversed/

                   It will take time to sort things out. But to claim a mere increase in employment without taking into consideration all matters affecting such an increase is akin to jumping the shark. Only illiterate non-intelectuals having no experience in analytical observation could be  fooled into supporting such immature nonsense.

                      Furthermore! What is the effect from Obamanater policies?

                      What is the amount of increase due to seasonal labor increase?

                      And. Is the difference referenced significantly different from other years?

                      Without these considerations taken into account, hood is just blowing his own horn.

 

                         Having been a farmer for over 50 years plus graduating out of the school of Agricultural Engineering, Purdue, I have trained myself to look at the big picture and not just the small part that supports my previously established opinion.

                          Mr. Lilly OUR Founders clearly established the intent of OUR govt.  You don't have a clue.

 

                       C.Z.



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