Back in July of 2013 North Carolina ended emergency UI benefits, shrinking the duration of UI back to 19 weeks. I’ve heard it said that it would be the prefect test of the theory that extended UI is damaging to the labor force dynamics, or paying people to not work. It’s probably too early to draw any definitive conclusion, as only 5 months of data available to examine. But I thought I take a look to see how it’s developing.
The charts below are of non-seasonally adjusted labor statistics for North Carolina from January 2012 to December of 2013 from the Bureau of Labor Statistics.
In an earlier post I discussed my opinion of withdrawing extended UI, and there is nothing here in this data that changes my mind. While the number of employed persons has increased modestly in North Carolina, by 26,570 persons over the period from July 2013 to December 2013, the labor force decreased by 32,656 persons over the same period. In the same period a year prior, employment increased by 36,792 persons, and the labor force increased by 25,523 persons, a trend we’d like to see repeated, but it was not to be in 2013.
I could be wrong, but so far the venture into cutting off UI doesn’t appear to be delivering the results expected, unless one subscribes to the findings in this report by Henry Faber and Robert Valletta.
Overall, our estimates suggest that extending unemployment insurance benefits in weak labor markets has virtually no effect on the rate of job find but that, on average, unemployment spells are somewhat longer as a subset of UI recipients remain nominally unemployed rather than exit the labor force. In addition to these limited implications for economic efficiency, we find only small impacts on the aggregate labor market. We estimate that extended UI increased the overall unemployment rate by only about 0.4 percentage points in the recent episode, which is small in comparison with the peak unemployment rate of 10 percent.
PS: An alternative analysis might be that, if the scaling back from 77 weeks happened throughout the year to arrive at 19 weeks by July, the numbers are even more revealing as employment increased net 27,876 in 2013 while the labor force decreased 60,426. I am glad that this experiment with 60k little white lab mice in making dysfunctional monetary policy hurt that much worse didn’t happen in my state. It’s way too hardcore for me to contemplate, and an egg that simply cannot be unbroken.
And here is Census Bureau data on NC showing population growth of about 100,000 from 2012 to 2013.