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Why few claim credit for better job numbers

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By James McCusker
Herald Columnist
John F. Kennedy’s televised presidential news conferences were genuinely live. Although he prepared for them, there was no sense that viewers were watching a canned or scripted event. In response to questions he had a fondness for quoting proverbs to illustrate his points, and one of his favorites was an Italian one that translates roughly to “success has many fathers, while failure is an orphan.”
The proverb is certainly a hallmark of modern politics goes. Even a hint of an improvement in the economy, for example, usually energizes politicians to jump up and attribute the success to their efforts, the programs they fathered.
It has been surprising, then, that no one stepped up to take credit for the reduction in long-term unemployment. This portion of our labor force consists of those who have been jobless for more than 27 weeks, and has been a source of concern throughout our sickly economic recovery.
From a statistical standpoint, long-term unemployment was a significant component of the reduction in unemployment. A year ago it represented more than a third of the total number of workers without jobs.
The total unemployment number now stands at 6.1 percent and its gradual but welcome reduction from 7.5 percent a year ago — and the persistent 10 percent in the depth of this recession — is emblematic of our economic recovery.
We would think, then, that finally cracking the toughest nut of all of our unemployment — those without jobs for longer than a half-year — would have even the most lethargic politicians jumping up to accept a round of applause for their achievement.
The fact that the politicians didn’t try to take credit for the improvement could just possibly mean that they are smarter than they sound, and that is an even more hopeful thought than the brightening jobs picture.
The wisdom involved in not taking credit for this one comes from a fundamental uncertainty about the data. The truth is that while the number of long-term unemployed workers declined, a lot, we’re not yet sure what happened to them. They may have found jobs or they may have simply dropped out of the labor force.
Six months ago, Congress decided not to renew federal funding for the long-term unemployed. Those who opposed the move believed that it was unfairly punishing those who, through no fault of their own, could not find work. Those who favored cutting off the benefits believed that extending benefits indefinitely acted as a disincentive to seek and obtain jobs. This has been a problem in parts of Europe, especially France.
Both those who favored this action and those who opposed itterminating benefits after 26 months would have predicted an effect on unemployment, but neither side gave much thought as to how that effect might be measured.
We now have six months of data since the change was made, and there has been an impact on the long term unemployment category. In January of this year, there were 3.69 million people counted as long term unemployed. By June, that number had been reduced to just over 3 million, a reduction of 685,000 workers.
That sounds impressive, and it is, but was it due to cutting unemployment benefits? We’re not sure.
That uncertainty isn’t politics talking but the data itself. The reduction in the long term jobless number, 685,000, sounds like a lot, but when we look back a full calendar year to June, 2013, we find that the improvement was not sudden remarkable. Over the past year, long term unemployment shrank by 1.24 million workers. In six months, we might reasonably expect that it would decline by half that — about 620,000 people.
The actual reduction of 685 thousand was an improvement, then, but not a dramatic turnaround. Rather than being the result of some specific economic policy or legislative action, it looks more like a modest acceleration of an established trend. What caused the trend isn’t known, but it doesn’t appear to be the cutting of unemployment benefits.
The data puzzle at the national level parallels the experience of analysts attempting to assess the impact of North Carolina’s ending long-term unemployment benefits a year ago. The answer there, too, is that we don’t know.
With their reputations still bearing the bruises of their Great Recession flop, what economists do not need at this time is another “we don’t know” situation. There are still puzzles about why this recession produced enduring long term unemployment at levels not seen in modern times. And, at bottom, we’ve got clues but no clear evidence to support a conclusion. The numbers simply do not tell us whether long term unemployment benefits are counterproductive or a compassionate and worthwhile use of taxpayer money.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for The Herald Business Journal.
Story tags » Economy, Business & Finance



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