Last year North Carolina's conservative Republican legislature got tough. It sharply reduced the duration of unemployment benefits and made them much more difficult to collect. The changes took effect at the start of July, 2013. Their story was that unemployment insurance and other benefits discourage workers from seriously looking for jobs. If we take away this crutch of unemployment benefits, then workers will figure out how to find jobs. This both saves the government money and is better for the workers themselves since they will actually be making a living on their own.

We now have data for 10 months into the experiment (through May) and John Hood, the chairman and president of the John Locke Foundation, a North Carolina think tank, has a piece in the Wall Street Journal telling us that it is a resounding success. Hood tells readers:

"According to the U.S. Bureau of Labor Statistics, the number of payroll jobs in North Carolina rose by 1.5% in the second half of 2013, compared with a 0.8% rise for the nation as a whole. Total unemployment in the state dropped by 17%, compared with the national average drop of 12%. The state's official unemployment rate fell to 6.9% in December 2013 from 8.3% in June, while the nationwide rate fell by eight-tenths of a point to 6.7%."

Okay, let's take these in turn. North Carolina did have more rapid job growth than the rest of the nation in the period since it cut benefits, but it also has had more rapid job growth than the rest of the nation for the last four decades, before many of the benefit cutters were even born. This because it is in the South, which has been growing more rapidly than the Northeast and Midwest for quite some time. (My explanation is air-conditioning, but you're welcome to throw in other items.)

If we look at North Carolina's labor market over the last year (May 2013 to May 2014) we find that the number of jobs, as measured by the Labor Department's establishment survey, grew at 1.92 percent rate. This beats the 1.86 percent rate for the rest of the South Atlantic region, but the difference certainly is not enough to employ all the people who were cut off from the unemployment rolls. (The South Atlantic region is a grouping of states from Florida to Maryland. It has been used by government agencies for many decades.) If the argument is that the ending of benefits put the fear of God in the unemployed and made them finally get serious about working, these numbers don't do much to support the case.

The situation gets even worse if we pull out the Charlotte-Gastonia-Rock Hill area. The reason for pulling out this relatively fast growing region is that it straddles the border with South Carolina. Many of the workers who have gotten jobs with companies in North Carolina actually live in South Carolina. If unemployed workers' past employment experience had been in South Carolina, they will not have any additional motivation to find work as a result of North Carolina cutting benefits.

We can't know how many of the new workers the Charlotte metropolitan area are from South Carolina, but it is striking that if we pull out this area, North Carolina's job growth slightly lags the rest of the South Atlantic region. Excluding the Charlotte area, job growth in the state was 1.76 percent over the last year, roughly a tenth of a percentage point less than the average for the rest of the region. This means that outside of the Charlotte area, it doesn't seem that the cut in benefits did anything to increase incentives to work. As a practical matter, the differences in both directions are small, but the point is that there is no evidence that cutting benefits did anything to increase employment growth in North Carolina compared with comparable states. 

Dean Baker
Al Jazeera America, July 8, 2014

The following reports on labor market policy were recently released:

Mark WeisbrotÚltimas Noticias, 6 de julio 2014

Dean Baker
Truthout, July 7, 2014

Lew Daly has an interesting, but unfortunately misdirected, critique of the measurement of the public sector's contribution to GDP. He notes several areas, such as infrastructure and education spending, where the government contributes to our well-being, but which are not directly picked up in GDP as contributions from the government. While the point is true, the piece fundamentally mistakes what GDP is and also grossly understates the government's role in the economy.

First, GDP is a measure of economic activity. It is not a comprehensive measure of societal well-being and anyone who tries to use it as such is showing off their ignorance. GDP can be thought as being comparable to weight. It is difficult to imagine a doctor doing a medical exam and not wanting to know the patient's weight. It is useful and important information. If a person is 50 percent above or below their ideal weight, it likely means they have a serious health issue. On the other hand, someone could be right at the ideal weight for their body type and still be dying of cancer. Any doctor who ended their check-up with writing down what the scale shows has done some serious malpractice.

Similarly, GDP is telling us the value of goods and services the economy produced. It is not telling us whether the pollution that results is killing us, whether it all went to produce weapons and prisons, or whether Bill Gates and his kids pocket it all. We need other measures to evaluate such things, and we have them, but they are not GDP.

On the other point, the problem of assessing the government's role in the economy goes much deeper than Daly suggests. A huge amount of economic activity is undertaken through the incentives of patent, copyright, and trademark monopolies. Pharmaceuticals alone account for more than $380 billion a year in sales (2.2 percent of GDP). The bulk of these expenditures are higher prices that drug companies can charge because the government will arrest any competitors.

Eileen AppelbaumNJ.com, July 7, 2014

Floyd Norris had an interesting piece on the impact of investor purchased homes on prices at the lower end of the housing market. His takeaway is that investor purchased homes have made housing less affordable for many low and moderate income households.

While this is partly true, by focusing only on the last couple of years the piece misses much of the picture. While investor purchases have pushed prices to unusual levels in many markets, in some cases they essentially put a floor on the market, helping to stabilize prices at levels that are consistent with longer term trends. The chart below shows house prices in the Case-Shiller indices for the bottom third of the market for five cities. (This is the same series used for the charts in the article.) 

There are several features of this chart worth noting. First, it is possible to see a rise in house prices (most pronounced in Minneapolis) in the middle of 2009. This was the result of the first-time homebuyers tax credit. This policy currently ranks #1 as most boneheaded policy of the century. It encouraged millions of people to buy into a market that was still inflated by the housing bubble.

July 3, 2014 (Jobs Byte)

Mark WeisbrotTruthout, July 2, 2014

The World Bank’s updated estimates of GDP based on purchasing power parity (PPP) show a sharp upward revision to the numbers for China. As a result of these revisions, the Chinese economy is now larger than the U.S. economy by this measure. 

John Schmitt and Mark LevinsonDissent, Summer 2014

Dean Baker and Jared Bernstein
Dissent, Summer 2014

Mark Weisbrot
Página/12, 1 de julio, 2014
U.S. News and World Report, 24 de junio, 2014

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