Unemployment Benefits

Are Jobs Returning Because Extended Unemployment Benefits Ended?


MTA Photos/Foter

We're seeing a (somewhat) improving job market in 2014, with the official unemployment rate finally dipping below 6 percent last month for the first time since 2008. Is the economy finally improving? Or could it be that our own federal government kept hiring at an anemic level with its own policies, essentially taking a baseball bat to the kneecaps of the job market? Three economic analysts with the Federal Reserve Bank of New York argue that Emergency Unemployment Compensation, implemented as a temporary measure in 2008, extended several times by Congress, and finally expired at the end of 2013, deserves much of the blame for limping job prospects over the past few years. They say its expiration can be thanked for new "help wanted" listings.

As authors Fatih Karahan, Samuel Kapon, and Kaivan K. Sattar note in "Do Unemployment Benefits Expirations Help Explain the Surge in Job Openings?"

Preexisting legislation provided for up to twenty-six weeks of UI and, in states with a high unemployment rate, the Extended Benefits (EB) program provided twenty additional weeks. EUC started by allowing for an extra thirteen weeks of benefits to all states and was gradually expanded to four tiers, providing up to fifty-three additional weeks of federally financed benefits. This extension increased the maximum duration to an unprecedented ninety-nine weeks.

The very extended unemployment insurance was meant to provide a cushion for people thrown out of work by the Great Recession. That's an easy sell when the economy is lousy, and when job listings look awfully sparse. As that sparsity continued, it was easy to persuade lawmakers to renew extended benefits again, and again. But what happens when you do that, write Karahan, Kapon, and Sattar, is that "increases in UI generosity put upward pressure on wages since it becomes more expensive to lure people into work. As a consequence, firms anticipate lower profits and cut back job creation, which lowers the job finding rate and increases the unemployment rate."

So, you create a cycle of suckage as labor becomes too expensive for business to hire, even as it's not being put to use, and that kills job potential openings which…

This shouldn't have been a surprise, argue the authors, since the Nobel Prize in Economics was awarded in 2010 for the development of the Diamond-Mortensen-Pissarides model, predicting exactly such a perverse effect.

In our real world test for Diamond-Mortensen-Pissarides, the expiration of Emergency Unemployment Compensation at the end of 2013 finally provided an opening for the job market to recover. "EUC expiration raised the job openings rate by 0.6 percentage point to 3.4 percent," the authors argue, "remarkably close to the realized rate in the Job Openings and Labor Turnover Survey (JOLTS) report of 3.3 percent for June 2014."

Recovery was delayed until then, they say, by continuing debates in Congress over renewing EUC. Once the possibility died, the jobs revived.

You see, government programs really do help the economy. When they go away.

NEXT: Little Girl's Playset Is in Her Own Backyard, City Wants It Destroyed Anyway

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. If we’re having a conversation about the unemployment rate, the labor force participation rate matters. A lot.

    1. Racist.

      1. What is this I don’t even.

        Oh, yeah. I get it.

        1. Forgot the /sarc tag

          1. I always consider sarc as the default here.

    2. ^This.

      I would also add that Obamacare is going to drive up unemployment as more employers drop the hours of their staff to keep from having to take a hit on their bottom line.

      Then you add in the incentive from Obamacare to not work full time if you want fully subsidized healthcare and you will have double digit UE numbers in no time.

      1. Europe, here we come!

      2. It’s not unemployment. The administration’s policies simply helped millions of people realize their dreams by taking extended hiatuses from work.

        1. they call those “sabbaticals” in the edumacational environmentzes

          1. I thought it was called “summer” in the educational environment.

      3. I would also add that Obamacare is going to drive up unemployment as more employers drop the hours of their staff to keep from having to take a hit on their bottom line.

        Unfortunately, underemployment is not counted.

        “Do you have a job, sir… any job, even a few hours a week?”

        “Yeah, but…”

        “Thank you!” *checks box* “Next!”

      4. And then there’s this: The current welfare system provides such a high level of benefits that it acts as a disincentive for work. Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour.


    3. Not to the economy. That is a wing nut talking point. The LFP today is higher than it was in the great expansion of the 60s. Today more working age people are in school or retired.

      1. Heh. I knew you would show up in this thread and start lying your worthless fucking ass off.


        1. How did you know?

          Primal fear? Do you dream about my superior rationality?

          1. On a bender again?

            I notice you did not address my post downthread.

          2. Try the Shriek libsplaining!

            8% of the time it works every time!

      2. Today more working age people are in school or retired.

        And on permanent disability.

        That matters to the economy a lot.

        1. Yes. They game the system. Especially in KY and WV.

          1. You want to play the Team game huh?

            Over 1/3 of all welfare recipients are in California.

            1. Bullshit. The South is SNAP country. The word “welfare” has little meaning. Cite a specific program please. Most libertarians say that Social Security is welfare.

              1. Direct cash payments. You know, welfare.

              2. “Most libertarians say that Social Security is welfare.”

                If you’d said most libertarians call Social Security an entitlement, you’d have some wiggle room. Your statement is an outright fabrication, aka, a lie.

            2. To be fair to our state (which I agree is fucked up in many ways and PB’s team game is stupid), that’s if you only count TANF as welfare. Food stamps, for example, is a more expensive program, and California is underrepresented among food stamps use.

              1. I didn’t see the last two replies before making my comment. I think calling only TANF welfare is BS, and is far from the norm here. What does it matter if its a direct cash payment or not? Even if you define it as just direct cash payments, other programs, like SS or disability, are also direct cash payments.

      3. Today more working age people are in school or retired.

        Retirees aren’t counted in the LFP, moron.

      4. So it doesn’t matter to the economy that people have given up looking for work? That’s almost certainly the stupidest thing I’ve ever seen you write but others may disagree.
        Many working age people have gone to school to retrain themselves due to the absence of jobs in the lousy Obama economy. They are probably accumulating debt in hopes of finding a new line of work.
        Other people have given up and retired early. They have accepted that they’re never going to find decent work and are going to have a lower standard of living.
        Neither of these groups are producing anything. That holds down potential GDP.
        It’s elementary.
        It’s also elementary that extended unemployment benefits held down job creation. It was stated before the expiration and is now confirmed with data and research.

  2. Apparently some believe that only old people got the jobs.


  3. Why would ending unemployment benefits result in an increase in job openings?

    1. Theoretically, more people in the labor force drives down wages. Therefore, dump a bunch of people previously on welfare unemployment into the workforce, it drives down wages, I’m more likely to hire, cause I can do it more cheaply.


        1. Theoretically

    2. Employers want to see some motivation in their job applicants.

      “I broke with my boy friend 6 months ago. He was paying the rent. I don’t want be a hooker.”

      1. “He was paying the rent. I don’t want be a hooker.”


    3. Supply and demand.

      A low supply of labor raises the price, making it more expensive to hire. This gives employers little incentive to expand.

      Raise the supply of labor and the price goes down, making it less expensive to hire. This gives employers the money and incentive to expand.

    4. Juice, that’s the right question. Reducing benefits would increase the supply of labor and the demand for jobs, not the demand for labor and the supply of jobs). (Econ 101).

      Of course, if we apply game theory or rational expectations theory (Econ 301 maybe?), employers might rationally have given up hiring until they knew people would respond. Employers could rationally expect, or else learn over time, that the unemployed on benefits have a lower elasticity of supply of labor — less responsiveness to wages being offered — than do the unemployed when benefits stop).

      1. What about the idea that there is a competition between taking a job at 26K per year versus not having to work and getting 17K per year and having no taxes. (The numbers are just examples. I have no idea what they really are.)

    5. It helps if you read the article which says:
      it was easy to persuade lawmakers to renew extended benefits again, and again. But what happens when you do that, write Karahan, Kapon, and Sattar, is that “increases in UI generosity put upward pressure on wages since it becomes more expensive to lure people into work. As a consequence, firms anticipate lower profits and cut back job creation, which lowers the job finding rate and increases the unemployment rate.”

      This shouldn’t have been a surprise, argue the authors, since the Nobel Prize in Economics was awarded in 2010 for the development of the Diamond-Mortensen-Pissarides model, predicting exactly such a perverse effect.

  4. The official unemployment rate….from this administration? Well, from any administration really. It means two things and I bet everyone here knows what those two things are.

    I bet you all know what this means too:


    With a recovery like Obumbles’, who needs a recession?

    1. Damn, I posted too quickly.

      Note second chart down on that page. I wonder what happened in 2009 to cause such a sharp and sustained downturn? What could it have been?

      1. Racism.

        1. I have heard that argument made earnestly; that certain people and/or companies curtailed their own success in order to make Obumbles look bad because they are racists.

          No. Shit.

          There aint nuttin like a cult of personality.

      2. The 2008 Bushpig Financial Collapse. All charts refract from that nadir.

        1. First you say that the LFPR is higher than at any time since the stone age, but now it is Bush’s fault?

          There aint nuttin like a cult of personality.

        2. All charts refract from that nadir.

          Pink Floyd album covers aren’t economics textbooks.

          Also, I think your use of the word nadir is mistaken. It ain’t a nadir if it keeps getting worse.

          1. How is the collapse worse? GDP was -8.9% when the Bushpigs escaped. It is positive nearly every quarter since then.

            1. We are looking at Labor Force Participation Rate, Alaskan Dildo. Look at it. It’s a sickening slide.

              Go refract that up your nadir.

    2. 53 consecutive months of private sector job creation now – a record. Record US exports, inflation dead, sub $3 gasoline, record market highs, record business profits, a 30 year high in oil production and so on.

      What is not to like?

      1. Hey everyone! Captain 8% says everything is groovy and we should all be happy!

        That’s why President Not My Fault is setting approval records across the board!

        Everything is coming up roses!

        WHAT IS NOT TO LIKE?????

      2. A Senate about to be taken away from Harry Reid’s cold, pale blue hands.

        Hmmmm, I think you are on to something there PB.

        1. All economic expansions lead to conservative electoral wins. Then conservative electoral wins lead to financial collapses.

          1. It’s like you look at something dark and call it light.

            How can anyone be this insanely upside down about everything they think?

            Seek help man. The Christofags are not out to get you, and Obama didn’t really mean it when he said he’d call.

            When you first started trolling years ago there are so many things anyone can point to that you supported in this administration that turned out to be complete disasters.

            And you STILL don’t see it. It’s just sad at this point.

              1. God you are an insufferable demfag.

                It would be pathetic, if you were sentient.

      3. A massive credit bubble that is still less beneficial than the one the BushPigs finagled.

  5. OT a town near my home town made the facebook trending news for asshole police

    I couldn’t imagine the arrogance emanating from the police chiefs at one of these sitdowns post police abuse meetings

    1. “No charges have been filed”

      What about lawsuits against the neighbors and the cops?

    2. I am not entirely sure what rules apply here ( in theory of course) but how did the cops get inside the house? There is nothing in the story about that. Did they find a broken door or window? An unlocked door or window? They broke in?

      Can people just call the cops, report suspicious activity in a home or business and the cops race to the scene and break in?


      1. Good point. In the video, he says they tell him to put his hands on the door. So I would guess he answered the door. I can’t tell if they muscled their way inside or he invited them in. I do know that they did get into the living room because the story states that they cited family pictures on the mantle for not believing him.

        They probably thought they had one of those headline making dumb criminals on their hands that breaks into the house then drops a deuce or falls asleep. Something to tell the rest of the gang and get high fives and free drinks from.

        1. What is amazing to me is that the kid survived the encounter. He got the taser instead of the .40 cal.

          1. Not even the taser, only pepper spray. Which makes me think the police claim of “belligerence” was actually just insistence that the house was his.

            Belligerence towards the police is at least a taser.

        2. What kind of burglar answers a door while he’s burglarizing a home?

  6. Yeah, nothing says returning jobs like more and more part time workers.

  7. There are many who worked only for health benefits before the ACA market exchange became operational. Now the movement of labor is more market driven without the lead weight of being tied to your employed for benefits.

    1. Government mandated health insurance is a free market solution. Sure it is.

      Turdpolisher polishes furiously.

      1. The ACA defanged COBRA and freed labor from its reliance on employer benefits. That is pro-market. The vast majority of citizens want to make independent choices regarding health care.

        1. Unless that choice is no healthcare, catastrophic insurance, HSAs, or anything the administration doesn’t believe is comprehensive.

          You missed a spot or two on that turd.

          1. Right on “no insurance” and wrong on the other two.

            Yes. The individual mandate is onerous. For free riders, that is.

            1. And anyone who actually wants a choice.

    2. So, the best you can say about this is that its a solution to a government created problem, then?

      Because the whole ‘insurance tied to your employer’ is a direct result of tax code changes made by the government during the Great depression and never revoked.

    3. Completely to the contrary. Now employer-paid or goverment-subsidized benefits are a must. No low-cost insurance plans are available, and small businesses/entrepreneurs/self-employed pay 100% of the ridiculously-high premiums resulting from the ACA.

  8. Are Jobs Returning Because Extended Unemployment Benefits Ended?

    Are Libertarians claiming that the unemployed can sway the free market in a positive manner towards the worker?

    That the increase in job opportunities is due to the larger number of available workers (now that they’ve milked the system and extended unemployment ran out)?

    Question for you guys: Should we get rid of public unemployment insurance altogether?

    1. No, the unemployment insurance is just fine. Simply get rid of all the federal and state subsidies attached thereto.

      1. But if government doesn’t do it who will? Be specific! We need a central plan here! If central planning doesn’t do it, then what central plan will? I mean, since government grows and distributes all the food, and if government didn’t do it then no one would! If you don’t want all food coming from the government, then you don’t want anyone to eat! Wait a minute. Government doesn’t grow and distribute all the food? How do people eat? That doesn’t make any sense!

    2. Libertarians oppose coercion. If employers and employees want unemployment insurance enough, then they’ll pay for it. We don’t oppose unemployment insurance. We oppose being coerced into paying for unemployment insurance whether we want to or not, and having it funded in part by money coerced from society through taxation.

      1. Well put.

        1. Thanks.

      2. You would have to get rid of Welfare and taxes as well. Or else, people will just quit and go on welfare or come to us tax payers in many different ways.

        1. That ignores what I said.

    3. Yes, this is how the labor market works. This is why more immigration increases employment.

  9. Catholic League Criticizes Implied Anal Sex on Fox TV Show

    “Last night’s episode of “The Mindy Project,” a Fox show, opened with an implied sex scene involving Dr. Mindy Lahiri (played by Mindy Kaling) and Danny Castellano (played by Chris Messina); it was titled, “I Slipped!” The room is dark and there is moaning….Binge drinking, like anal sex, is potentially lethal, but Hollywood only has an interest in promoting the latter. That’s because of the large number of homosexual writers who work there. Catholics would appreciate it, however, if they would keep their dark secrets in the closet, where they belong.”


    1. I watched that with my wife last night. It was a real conversation starter.

      1. It’s hilarious that Donohue thinks anal sex must be a homosexual thing. Certainly no heterosexual would be interested in such a thing!

        1. Maybe he though Mindy Kaling was a man.

          1. “Maybe he though Mindy Kaling was a man”

            It’s not out of the realm of possibility

        2. It’s hilarious that Donohue thinks anal sex must be a homosexual thing.

          Most people think that. I did when I didn’t know any better. Then I actually met some homos and learned that most of them are cocksuckers who have no interest in sticking it up the poop chute.

          Anal sex is a dominance thing. Sexuality has nothing to do with it.

          1. If she asked for it fine, not really my thing though.

    2. Meh. It could have been implied *urethral* sex.

  10. What I here is while jobs are increasing yet not a fast as those who left the job market. Which begs the issue extended benefit or no expended befits is a lose lose situation for the worker: dependance on the left and under to no employment on the right. Mine runs out next moth, homeless by January. I do think Mc Donal’s will cut it. I have another way out.

  11. This article is the most bigoted bone-headed piece I have seen on the topic yet. The writer is so full of themselves and sounds so entitled to whatever little income he/she might have acquired through the paperwork corruption so rampant in America. The reason why jobs seem to have grown is because unemployed people have gotten tired of certifying for benefits that are unavailable. The reduced number of people certifying unemployment makes the racists think that withholding benefits forces people to get jobs. NONSENSE! Sorry, I have a PhD but racists took away my job; now they won’t give us benefits BECAUSE ACCORDING TO BOEHNER “unemployed people like to sit around!” KEEP THE INSULTS COMING BOEHNER AND COHORTS, yeah we like to sit around and sign papers given our qualifications and experience but racists took away our job opportunities. Keep on mocking people who are suffering for lack of income and RUB IN THE SALT TO BOOST YOUR RACIST EGO!

Please to post comments

Comments are closed.