We don’t like to buy into shoddy post-hoc-ergo-propter-hoc arguments around here. But even worse than post-hoc arguments are the ones based on events that haven’t actually happened. I’m thinking specifically of the lamentations in the pundit class that North Carolina’s economy would implode when unemployment benefits were cut and shortened in length last July.
I wrote on this four weeks ago in my Washington Examiner column:
In July, North Carolina became the first state to end extended unemployment benefits altogether. As John Hood notes in the Carolina Journal, the number of employed in the state jumped by 39,000 between July 1 and Nov. 30, after standing still for the entire first half of the year. The state’s unemployment rate had taken more than two years to come down by 1.5 points to where it was in June (8.8 percent). Between July 1 and Nov. 30, it declined by roughly that amount (to 7.4 percent). During that same period, about 26 percent fewer workers were dropping out of the workforce each month than had been previously.
Today’s BLS numbers on state employment in December build upon this — and they should give lawmakers pause if President Obama asks them in the State of the Union address to restore emergency extended unemployment benefits. The new data do not prove to us that unemployment benefit cuts are good for job creation, but they demonstrate that they might be good and at least can’t be that bad.
The new payroll data show that North Carolina created another 11,100 jobs in December, which is 15 percent of what the nation as a whole added last month:
The data from BLS’s household survey of North Carolina (a different measurement, so note the different numbers) also looks at labor force and unemployment. It shows that about 19,000 of the 21,000 who left the ranks of the unemployed last month found new jobs. Only about 1,900 people dropped out of the labor force for whatever reason. This is better than in the past several months, but it’s consistent with the trend since benefits were cut — since July, fewer people have been dropping out of the labor force each month than were doing so before, and more people have been finding jobs. Together, these two phenomena have brought the state’s unemployment rate down rapidly. Here’s North Carolina’s unemployment rate over the last year:
In short, beginning in July, North Carolina has been having a much stronger recovery than the nation as a whole. It added a vastly disproportionate share of the net new jobs in the U.S. last month. It accounts for just a tiny fraction of those who dropped out of the labor force.
The data above do not demonstrate that the cut to benefits caused an employment boom, but it does establish that the state is having one. Those who fretted that it would cause the state’s economy to collapse due to weak demand were just wrong.
Now, this is not to say the cut to benefits doesn’t hurt individual households. But let’s put things into perspective here: Although it has been offered this way for the last six years, unemployment insurance is not intended to be a long-term substitute for government welfare programs or private charity. It is an insurance program intended to tide people over briefly while they look for new jobs. It’s extended in “emergencies” when it is expected that it will take more time for the job market to reorganize itself and for people to adjust expectations and re-enter the workforce. It’s been six and a half years since they were extended, so it’s probably at least safe to say that we’re as close to that point as we’re going to be as long as we have the current leader in the White House.
Not all states are like North Carolina, and even after Congress’ failure to extend “emergency” benefits into their seventh consecutive calendar year, most states will not be ratcheting down benefits by nearly as much. (North Carolina reduced the amount, not just the duration.) We can’t necessarily expect similar results, but we should not expect the sky to fall.
And in fact, we should not even be too surprised if, after half a decade of flops like the stimulus program and everything else President Obama has tried, we start to see people taking what jobs there are after benefits are cut.