The Fantastic Furloughed

Has it come to this?...

A Florida unemployment agency is in hot water for allegedly spending over $14,000 of taxpayer money for 6,000 superhero capes it distributed to the jobless as part of its "Cape-A-Bility Challenge" public relations event. The program even had a villain, Dr. Evil Unemployment, whom the agency's clientele were asked to vanquish. The state unemployment director has asked for a full investigation.

Maybe he should send up the Bat-Signal.

Unemployment Insurance Break Even Point Discussion

Started my morning off catching up on last night's The Conservative Wahoo Live. The discussion about extension of unemployment benefits reminded me of this recent post by Keith Hennessey on the subject that makes a lot sense to me. As CW knows, I have a pretty dim view of people in general. Nevertheless, I can't bring myself to believe that the extension of this benefit is going to compel that many people to slough off finding a job to spend it trying to look like Dr. Jeff Life or otherwise. Mr. Hennessey suggests that at the current level of unemployment, while there are surely people snowbirding it, there are still enough people who truly need it to make the extension warranted. He does go on to say that below a certain percentage - in his mind 8% - the tradeoff probably no longer makes sense.

There are negative supply-side effects from providing unemployment insurance (UI) benefits. The best estimates I have seen suggest the current 9.5% unemployment rate is 0.5 – 1.0 percentage points higher than it would otherwise be because of previously-enacted expanded and extended UI benefits. I will start by using the bottom end of that range (0.5).

I use 5.0% to represent full employment. We are 4.5 percentage points above that. If we did not have expanded UI we would be 4.0 percentage points above full employment. That means for every 9 people out of work, one is being discouraged from taking a new job because of the expanded benefits (0.5 / 4.5). Said another way, eight people who would like a job but cannot find one are getting more generous UI benefits for each person who is getting those same benefits and choosing not to take a new job. We have to make a tradeoff between our desire to help those who want a job but cannot find one and those who would choose to stay unemployed while they have extra benefits.

The judgment call for policymakers: does an 8:1 ratio make a UI extension good policy? I say yes. If, however, the supply-side disincentive is a full percentage point, then we have a 3.5:1 ratio. That is a tougher call, but I would still say yes. Given the range of possible supply-side disincentives, I would recommend extending UI benefits when the unemployment rate is 9.5%.

I assume that most everyone would agree that at full employment it is foolish to provide more generous UI benefits. So somewhere between 5.0% and 9.5% there is a breakpoint at which the supply-side disincentive is not worth the compassion benefit of providing aid to others who want a job but cannot find one.

At a 7% rate our ratio is between 1:1 and 3:1. At an 8% rate it’s between 2:1 and 5:1. My breakpoint is around 8%. I would support a (paid for) UI extension as long as the rate is 8% or above. There is nothing magical about this judgment, and yours may differ.

Jobless Benefits Extended--Unemployment Persistent; Related?

Yesterday, the Congress passed and the President signed YET ANOTHER extension of unemployment benefits.

I know we are in a recession. I know we've fallen on tough times. But I can't help but feeling that the extended benefit regime encourages people to stay unemployed longer (or more to the point, hold out longer for a better situation).

I am not alone.

On the New Job Numbers

The incomparable Keith Hennessey on today's job numbers.

Some advice for conservatives in Congress:
1. These numbers are good news. Don't try to make them bad.
2. This is the time to LAUD American business for persevering in a rough economy in the face of staggering uncertainty--what costs will Cap and Trade impose? What new taxes will healthcare impose on them?
3. Responsibility should be placed on the President for allowing the unemployment rate to get this high in the first place--his stimulus didn't stimulate, and his policies have created doubt and slowed the recovery.