Stage manager John Hood took to the pages of the Wall Street Jourinal recently, with a crafty column about the so-called Carolina Comeback. Too bad the whole piece was full of bull, designed to prop up the catastrophic failure of his boss's economic policies. Thankfully, Dean Baker slogs through the miasma, so we don't have to.
As far as the great news on unemployment that Hood cites, this is entirely a story of North Carolina workers giving up looking for work and leaving the labor market. (In order to collect unemployment benefits, workers must be looking for work.) While the size of the labor force in the rest of the region grew by 1.0 percent over the last year, the labor market shrank by 0.2 percent in North Carolina. Employment growth in North Carolina, as measured by the Labor Department’s survey of households, was 1.9 percent over the last year. That compares to 2.2 percent growth for the rest of the region. Again, no evidence that the ending of benefits got people to be serious about looking for work. The evidence is that they gave up looking for work and dropped out of the labor force.
Not content to rest his case that cutting unemployment benefits increases employment on the North Carolina alone, Hood moves on the national picture:
“Still not convinced that leaving the extended-benefits program encouraged both job creation and job acceptance? As of Jan. 1, 2014, the extended-benefits program expired nationwide. Yet there has been no sudden exodus of discouraged workers to the fringes of the national economy. Both job creation and household employment are up. The nation’s employment-population ratio was 58.9% in May, up from 58.6% in December. The labor-market effects of reforming unemployment insurance may not be massive. But they certainly don’t appear to be negative.”
Actually what is most striking in the data for 2014 is the sharp drop in labor force participation. The labor force participation rate is down by an average of 0.5 percentage points from the first six months of last year to the first six months of this year. This corresponds to roughly 1.3 million people leaving the labor force. Usually labor force participation rises during an upturn, so this is certainly consistent with a story of many unemployed workers giving up looking for work when their benefits expire.
In short, if we look at the data instead of playing games with it, the story is pretty clear. There is zero evidence that cutting unemployment benefits in North Carolina or the rest of the country did anything to spur job growth. There is much evidence that it led those who saw their benefits to end to give up looking for work and to drop out of the labor force