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The number of new weekly claims for unemployment insurance has been flat to slightly down so far this year, and that suggests that conditions in the labor market are not deteriorating and are probably improving a bit on the margin. We see the same story in the number of new jobs created this year: modest improvement.
One of the biggest changes affecting the labor market has gone largely unreported, however: emergency claims for extended unemployment insurance have dropped by 30% (about 1.75 million) since March. When we add those who continue to receive claims, we find that the number of people receiving some form of unemployment compensation insurance has dropped by 3 million since January (bottom chart). Undoubtedly many of those are feeling pretty badly right now, but some (almost a million) have new jobs, and some are going to be more inclined to find and accept a job, even if it means the pay doesn't match their expectations. (I've seen numerous reports of businesses that are having trouble finding willing workers, since the pay they offer doesn't beat the combination of leisure and unemployment insurance that unemployed workers are receiving.)
I would add that never before in history has the government been so generous in its provision of unemployment insurance, thanks to the size and extent of the emergency program. Whether that has been a factor retarding the recovery, or whether on balance it has helped, we really don't know. But if you're looking for "what's different" about this recovery, here is a big one.
3 comments:
How many bank, finance company, or auto employees are receiving unemployment benefits via support of their failed institutions?
You're only adding up half of the moral hazards plaguing our society.
The problem is greatest at the low end of the pay scale. There are always minimum wage jobs and an honest person can get such a job in a few months. Now if someone can work for cash, is getting free medical care, can get loans to go back to school and has 99 months of benefits - why would he take a low wage job? I know people personally who are in this situation.
There is an issue at higher pay levels. Rather than extend unemployment benefits, they should have allowed people to use income averaging over a two or three year period.
On the other hand, I am sure there are many deserving people whose situation has been greatly eased by this program.
The answer is to stop the job-destroying policies of the Obama administration and allow the economy to recover.
Here's my first (of many I hope !) monthly economic reports; due to the M3 money supply numbers and the continued reduction in credit availability, my word for the month is deflation:
http://themeanoldinvestor.blogspot.com/2010/07/monthly-overall-economy-report.html
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