The Center's work on 'Recession and Recovery' Issues

The Center examines the impact of changes in the economy on federal and state budgets, as well as the likely effectiveness of economic stimulus proposals. We also examine trends in employment and promote reforms to strengthen the unemployment insurance system.


The Unconvincing Claim That Unemployment Benefits Hurt Jobs

January 30, 2015 at 2:31 pm

Many conservatives, including the Wall Street Journal editorial page and House Ways and Means Chairman Paul Ryan, are touting new research claiming that the expiration of emergency federal unemployment insurance (UI) benefits at the end of 2013 led employers to create 1.8 million additional jobs in 2014.  The same researchers previously claimed that the existence of emergency federal jobless benefits explained most of the persistence of high unemployment in the recovery from the Great Recession.

These findings merit considerable skepticism.

Let’s start with the 1.8 million net new jobs.  The implication is that if lawmakers had renewed federal UI for 2014 instead of letting it expire, employers would have added fewer than 1.2 million jobs to their payrolls in 2014 instead of the nearly 3 million they did add.  That would have been about half the 2.3 million jobs added in 2013 (see chart); it’s also well below the pace earlier in the recovery in 2011 and 2012, when many more people were receiving federal UI benefits.  It’s hard to believe that continuing federal UI at 2013 levels would have so completely derailed the jobs recovery in 2014.

Dean Baker offers a further reason to doubt this finding.  It falls apart when one uses a different dataset that’s arguably superior for estimating job growth.

The study takes advantage of the fact that the maximum number of weeks of federal UI available in a state in 2013 depended on the state’s unemployment rate to infer the employment effect of losing more versus fewer weeks of benefits in 2014 after federal UI ended.  It relies on state and local data from the Labor Department’s Bureau of Labor Statistics (BLS), whose concepts and definitions BLS says “come from the Current Population Survey (CPS), the household survey that is the official measure of the labor force for the nation.”  Those data are necessary for examining unemployment and labor force participation, but labor market analysts usually rely on the BLS survey of employers when evaluating trends in job creation.

To illustrate their findings, the researchers divide states into two groups: those that lost a large number of weeks of federal UI and those that lost a smaller number.  They find that employment accelerated more in 2014 in the former than in the latter, implying that additional weeks of federal UI were a drag on job creation.

Baker did the same comparison using the survey of employers and found the opposite.  Job growth after the federal program expired was faster in the group of states that lost a smaller number of weeks.

The fact that using employer-based data reverses the key finding that UI kills jobs is hardly a testament to the claim’s robustness.

To be sure, the researchers’ conclusions on how UI affects job creation rest on more sophisticated analysis than the simple comparisons described here.  But, as I’ll explain in a follow-up post, their research has met with considerable skepticism from other labor market experts.  And the prevailing wisdom that any adverse employment effects from UI are small continues to, well, prevail.

School Jobs Up in December But Still Far From Recovered

January 9, 2015 at 2:17 pm


Local school districts added 2,000 jobs for teachers, principals, and other employees in December, today’s jobs report shows, continuing schools’ painfully slow recovery from the recession.

Yet schools still have a long way to go before they leave the recession behind.  School districts nationally employ 268,000 fewer workers than in the fall of 2008, the first full school year after the recession started — even as the number of students has risen by about 485,000. (See chart.)

Strong schools are a crucial building block of a healthy economy, and states and localities should make the investments necessary to rebuild and strengthen them.  Last month’s modest gain is good news but far from what’s needed.

Today’s Jobs Report in Pictures

January 9, 2015 at 9:54 am

Today’s jobs report shows a labor market that strengthened significantly in 2014, but one that still bears scars from the Great Recession and subsequent federal budget cuts and other austerity policies that perpetuated a severe jobs slump even as the economy and business profits began to recover.

Employers added an average of 246,000 jobs a month in 2014 and unemployment fell below 6 percent.  At the same time, too many people who want a job haven’t found one, especially among the long-term unemployed.

Click here for my statement with further analysis.






Our Big-Picture Look at Inequality

December 10, 2014 at 11:58 am

“The broad facts of income inequality over the past six decades are easily summarized,” our newly updated Guide to Statistics on Historical Trends in Income Inequality explains:

  • The years from the end of World War II into the 1970s were ones of substantial economic growth and broadly shared prosperity.
    • Incomes grew rapidly and at roughly the same rate up and down the income ladder, roughly doubling in inflation-adjusted terms between the late 1940s and early 1970s.
    • The income gap between those high up the income ladder and those on the middle and lower rungs — while substantial — did not change much during this period.
  • Beginning in the 1970s, economic growth slowed and the income gap widened.
    • Income growth for households in the middle and lower parts of the distribution slowed sharply, while incomes at the top continued to grow strongly. (See first graph below.)
    • The concentration of income at the very top of the distribution rose to levels last seen more than 80 years ago, during the “Roaring Twenties.” (See second graph below.)
  • Wealth — the value of a household’s property and financial assets, minus the value of its debts — is much more highly concentrated than income. The best survey data show that the top 3 percent of the distribution hold over half of all wealth.  Other research suggests that most of that is held by an even smaller percentage at the very top, whose share has been rising over the last three decades.

The guide describes common sources of income data and discusses their relative strengths and limitations in understanding income and inequality trends.  It also highlights the trends that those key data sources show and gives additional information on wealth (which helps measure how the richest Americans are doing) and poverty (which measures how the poorest Americans are doing).

Today’s Jobs Report in Pictures

December 5, 2014 at 9:51 am

Today’s solid jobs report shows a continuing labor market recovery, but one in which unemployment — especially long-term unemployment — remains high relative to recent recoveries.  With inflation running below its 2 percent target, the Federal Reserve faces little or no danger of igniting unacceptable inflation by keeping interest rates low to encourage further job market improvements.

Click here for my statement with further analysis.