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The Obama Boom: 165,000 jobs created in April, Unemployment falls to 7.5%

by Rodan ( 9 Comments › )
Filed under Economy, Headlines, unemployment at May 3rd, 2013 - 11:58 am

After a stagnant March jobs report, there was a bit of a bounce back in April. There were 165,000 jobs created in the moth of April. Under normal circumstances, this would be considered mediocre. Since we are in the age of god-king Obama, the media heralds this as great economic news.

Job creation accelerated in April, with the U.S. economy adding 165,000 new positions and the unemployment rate edging lower, quelling worries of a spring slowdown.

New figures from the Bureau of Labor Statistics indicated that a light March payrolls report may have been an aberration, as higher taxes and reduced spending due to the fiscal stalemate in Washington failed to deter growth.

The unemployment rate edged lower to 7.5 percent, due partly to the jobs gains and to a labor-force participation rate that remains at a 35-year low. An alternative rate that also counts those who have quit looking or are underemployed rose to 13.9 percent.

lf Unemployment was 4.5-5%, 165,000 jobs would be an OK number. But with officialunemployment at 7.5% and higher real unemployment, this is not  a good number. Reality does not matter, the media will continue to claim the economy is booming and times are good.

Sequester hits IRS, more than 89,000 employees furloughed

by Speranza ( 4 Comments › )
Filed under Headlines, unemployment at April 23rd, 2013 - 3:44 pm

Some good news – I guess.

by Alisa Wiersema
A little more than a month into the sequester and fresh out of tax season, the Internal Revenue Service has decided to issue furlough notices to all of its employees next week.

According to an internal memo issued by Acting IRS Commissioner Steve Miller, “Everyone is covered by this furlough, and that means everyone from the Acting Commissioner and executives to managers and employees.”

The first furlough days will include May 24, June 14, July 5, July 22 and August 30, with another two days possible in August or September.

On these days, all operations directed at the public, including toll-free help and Taxpayer Assistance Centers, will be closed.

According to the IRS Data Book, these furloughed services were used by more than 97 million taxpayers in the 2012 fiscal year. The agency processed more than 237 million tax returns and provided $373 billion in refunds to taxpayers, while collecting $2.5 trillion for the federal government.

IT and security personnel may be required to work though the agency-wide furlough days, but will still have to include alternative off days into their schedules.

Miller wrote that the chosen furlough dates were meant to ensure IRS employees would only lose one pay day within each pay period.

“We settled on having uniform furlough dates for everyone and closing down agency operations entirely,” he wrote. “This way, the IRS can gain additional cost savings on utilities and other services in our work locations.”

He continued, “We have also worked to stagger the dates further so that there are some pay periods during the summer with no furlough days.”

Like all federal employees, the IRS is also going into its third year of pay freezes, and the furlough does little to alleviate the organization’s problems. To minimize employees’ financial distress, the IRS plans to work with the National Treasury Employees Union to address the impact of the furlough on its staff of 89,551.

In a press release addressing the IRS furloughs and NTEU plans of action, NTEU President Colleen Kelley noted that although tax season is largely over and the cutbacks seem minimal, still “considerable tax-filing goes on throughout the year,” which includes small business filing, estates and government entities.

As a long-standing advocate for ending sequestration, Kelley was vocal in noting how the sequester would affect both IRS employees and the public.

“On these days, phones calls to the IRS will go unanswered and Taxpayer Assistance Centers across the country will have ‘closed’ signs in their windows,” Kelley said. “I believe this is an unprecedented event that leaves taxpayers out in the cold.”

Congressman Charles Boustany, chair of the House Ways and Means Subcommittee on Oversight, sent a letter to Miller last week expressing his concern about the furloughs and conferences IRS employees plan to attend, with travel expenses paid by NTEU but IRS paying the staff for their time there.

“IRS employees leaving their official duties to attend union training in Las Vegas on the taxpayer’s dime – while other employees are being furloughed – seems questionable at best,” Boustany, R-La., wrote.

 

The emotional ordeal of long-term unemployment

by Speranza ( 156 Comments › )
Filed under unemployment at April 16th, 2013 - 12:00 pm
Even a short period of unemployment can scar your soul for years. If you are in your  50′s and out of work, you face the reality of never having a meaningful job ever again. The blow to your self esteem is horrific and you will have a hard time sleeping and you will slip into depression with thoughts of utter hopelessness. If you even send out a resume you will consider it a moral victory to just get a boiler plate rejection letter.

by Matthew O’Brien

Close your eyes and picture the scariest thing you can think of. Maybe it’s a giant spider or a giant Stay Puft marshmallow man or something that’s not even giant at all. Well, whatever it is, I guarantee it’s not nearly as scary as the real scariest thing in the world. That’s long-term unemployment.

There are two labor markets nowadays. There’s the market for people who have been out of work for less than six months, and the market for people who have been out of work longer. The former is working pretty normally, and the latter is horribly dysfunctional. That was the conclusion of recent research I highlighted a few months ago by Rand Ghayad, a visiting scholar at the Boston Fed and a PhD candidate in economics at Northeastern University, and William Dickens, a professor of economics at Northeastern University, that looked at Beveridge curves for different ages, industries, and education levels to see who the recovery is leaving behind.

Okay, so what is a Beveridge curve? Well, it just shows the relationship between job openings and unemployment. There should be a pretty stable relationship between the two, assuming the labor market isn’t broken. The more openings there are, the less unemployment there should be. If that isn’t true, if the Beveridge curve “shifts up” as more openings don’t translate into less unemployment, then it might be a sign of “structural” unemployment. That is, the unemployed just might not have the right skills. [.......]

 

Help Wanted — If You’ve Been Out of Work for Less than Six Months

But just how bad is it for the long-term unemployed? Ghayad ran a follow-up field experiment to find out. In a new working paper, he sent out 4800 fictitious resumes to 600 job openings, with 3600 of them for fake unemployed people. Among those 3600, he varied how long they’d been out of work, how often they’d switched jobs, and whether they had any industry experience. Everything else was kept constant. The mocked-up resumes were all male, all had randomly-selected (and racially ambiguous) names, and all had similar education backgrounds. The question was which of them would get callbacks.

It turns out long-term unemployment is much scarier than you could possibly imagine.

The results are equal parts unsurprising and terrifying. Employers prefer applicants who haven’t been out of work for very long, applicants who have industry experience, and applicants who haven’t moved between jobs that much. But how long you’ve been out of work trumps those other factors. As you can see in the chart below from Ghayad’s paper, people with relevant experience (red) who had been out of work for six months or longer got called back less than people without relevant experience (blue) who’d been out of work shorter.

 

LongTermUnemploymentScary.png

Look at that again. As long as you’ve been out of work for less than six months, you can get called back even if you don’t have experience. But after you’ve been out of work for six months, it doesn’t matter what experience you have. Quite literally. There’s only a 2.12 percentage point difference in callback rates for the long-term unemployed with or without industry experience. That’s compared to a 7.13 and 8.95 percentage point difference for the short-and-medium-term unemployed. This is what screening out the long-term unemployed looks like. In other words, the first thing employers look at is how long you’ve been out of work, and that’s the only thing they look at if it’s been six months or longer.

 

[.......]

LongTermUnemploymentChurn.png

Long-term unemployment is a terrifying trap. Once you’ve been out of work for six months, there’s little you can do to find work. Employers put you at the back of the jobs line, regardless of how strong the rest of your resume is. After all, they usually don’t even look at it.

 

Let’s be clear. Ghayad’s field study shows employers discriminate against the long-term unemployed. All of the fake resumes he sent out were basically identical. But firms ignored the ones from people who’d been out of work for six months or longer — even when they had better credentials. Employers look at how long you’ve been unemployed as a better proxy for skills than anything else on your resume. In other words, more jobs-training probably won’t help the long-term unemployed all that much. [.........]

 

It’s time for the government to start hiring the long-term unemployed. Or, at the least, start giving employers tax incentives to hire the long-term unemployed. The worst possible outcome for all of us is if the long-term unemployed become unemployable. That would permanently reduce our productive capacity.

 

We can do better, and we need to start doing so now. We can’t afford long-term thinking in either the short or the long-term.

 

Read the rest – The terrifying reality of long-term unemployment

Unemployment rate for Americans under age 25, adjusting for decline in labor force since start of recession: 22.9%

by Speranza ( 176 Comments › )
Filed under Economy, unemployment at April 9th, 2013 - 8:00 am

As a reader posted “Young people think they are smarter then the rest of us. What they don’t realize is, they were used and are now discarded by their abuser. A man who laughs at them along with us. He laughs because he could, and we laugh because we see their stupidity.” Until we can correct their cognitive dissonance, Obama will get away with this.

by Ben Casselman

22.9%: The unemployment rate for Americans under age 25, adjusting for the decline in the labor force since the start of the recession.

Perhaps no group has been hit harder by the recession and grinding recovery than the young. The official unemployment rate for those under age 25 is 16.2%, more than double the rate for the population as a whole. In percentage terms, unemployment has fallen far more slowly for young people than for the wider population.

Those figures actually understate the severity of the problem, however. The government only considers people “unemployed” if they’re actively looking for work. People who stop looking—whether they’re retired, in school, raising a family or living on friends’ couches — are instead considered “not in the labor force,” even if they would prefer to work given the opportunity.

When the recession began in December, 2007, 59.2% of the under-25 population was in the labor force, meaning they were either working or looking for work. Today, that figure has fallen to 54.5%. That may not sound like a big drop, but it makes a huge difference. If the so-called participation rate had remained unchanged, there would be 1.8 million more young people in the labor force today than there actually are. Counting those people as unemployed, rather than out of the labor force, would push the unemployment rate up to 22.9%.  [........]

[........]

The decline accelerated during the recession, as many young people sought refuge in college or other forms of education or training. In a normal cycle, that might have worked out well, leaving a generation of highly educated workers ready to re-enter the job market when the economy recovered. Instead, they have been graduating into a labor market that remains deeply challenged, especially for those without much work experience. To make matters worse, many graduates are carrying hefty debt burdens, and those who can find work are often being forced to low-skill jobs.

The youth participation rate has largely flattened out over the past three years, but it fell again in March. Some 236,000 young people left the labor force last month, accounting for nearly half of all drop-outs. That helped push the overall participation rate to a more than 30-year low.

It isn’t clear exactly what drove the March decline. Raymond Stone, an economist with Stone & McCarthy Research Associates who dives deeply into the jobs numbers each month, notes that the number of young people saying they’re “discouraged” — meaning they aren’t looking for jobs because they don’t think they can find one — has been trending downward. The number who say they’re in school or training hasn’t fallen much, but it’s no longer rising.  [........]

Whatever the explanation, this much is clear: For young people, the aftershocks of the recession continue to reverberate.

The Obama Boom: 88,000 jobs created in March, but 496,000 leave the workforce

by Rodan ( 109 Comments › )
Filed under Barack Obama, Economy, Progressives, Socialism, unemployment at April 5th, 2013 - 11:30 am

The media has been trumpeting that the economy is running on all cylinders. Thanks to Ben Bernanke’s infusion of $80 billion a month into the financial sector the Stock Market is at record highs. The dirty little secret is that the actual value of the stock market is lower due to a devalued dollar. But it does not matter, the media is claiming we are back in the 90′s again and Obama is awesome. Reality is a starkly different story altogether.

March’s jobs numbers were very disappointing. Only 88,000 jobs were created for the month. The media will trumpet the drop in the unemployment rate to 7.6% as a positive. What they will not tell the public is that the drop is due to 496,000 people leaving the labor force. Want to bet the majority will be put on disability?

Nonfarm payroll employment edged up in March (+88,000), and the unemployment rate was little changed at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in professional and business services and in health care but declinedin retail trade.Both the number of unemployed persons, at 11.7 million, and the unemployment rate, at 7.6 percent, were little changed in March. (See table A-1.)

Among the major worker groups, the unemployment rates for adult men (6.9 percent), adult women (7.0 percent), teenagers (24.2 percent), whites (6.7 percent), blacks (13.3 percent), and Hispanics (9.2 percent) showed little or no change in March. The jobless rate for Asians was 5.0 percent (not seasonally adjusted), little changed from a year earlier. (See tables A-1, A-2, and A-3.)

In March, the number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 4.6 million. These individuals accounted for 39.6 percent of the unemployed. (See table A-12.)

The civilian labor force declined by 496,000 over the month, and the labor force participation rate decreased by 0.2 percentage point to 63.3 percent. The employment- population ratio, at 58.5 percent, changed little. (See table A-1.)

The jobs reports confirms the economy is not booming as the media claims it was. Zerohedge has an even darker and stark analysis of the numbers. The labor force participation rate is at 35 year low!

Things just keep getting worse for the American worker, and by implication US economy, where as we have shown many times before, it pays just as well to sit back and collect disability and various welfare and entitlement checks, than to work .The best manifestation of this: the number of people not in the labor force which in March soared by a massive 663,000 to a record 90 million Americans who are no longer even looking for work. This was the biggest monthly increase in people dropping out of the labor force since January 2012, when the BLS did its census recast of the labor numbers. And even worse, the labor force participation rate plunged from an already abysmal 63.5% to 63.3% – the lowest since 1979! But at least it helped with the now painfully grotesque propaganda that the US unemployment rate is “improving.”

Check out the charts Zerohedge has on this subject. It’s very frightening.

The economy is not roaring or on fire as the media has been claiming. Food stamps and disability claims continue to rise. This indicates an anemic recovery that is not benefiting American workers. Most of the job growth has been in low wage, part time jobs. The Obama Boom is the worse recovery on record.

None of this will matter to most Americans anyway. The media will continue to tell the American public that the economy is booming. OFA will send email talking points out and do Facebook postings extolling the Obama economy. The American public will continue to love Obama as their god-king. No bad news hurts this guy, even bad economic data.

Update: 81,000 people in March went on disability.

Almost as many people signed up with the federal government’s permanent worker disability program as got jobs in March, according to two sets of government data, continuing a troubling trend throughout the Obama recovery.

Last month, 81,804 workers left the workforce to join the Social Security Disability Insurance program. So far this year, nearly a quarter million workers have joined the program.

Over the past four years, 4 million left the workforce to go on disability. Even after accounting for those who dropped out of the program because of death or retirement, the ranks of the disabled have shot up more than 1.4 million under Obama.

This is where the people dropping off the rolls are going.

(Hat Tip: Iron Fist)

The brain drain in Spain

by Speranza ( 139 Comments › )
Filed under Spain, unemployment at April 3rd, 2013 - 7:00 am

The wages of Socialism are unemployment and do not think that America could not find itself one day in the same predicament. Nowadays if you are job hunting getting a form letter of rejection is a moral victory of sorts.

by Ashifa Kassam


Frustrated by a lack of opportunities at home, Spanish youth are leaving in droves. More than 280,000 left last year alone in the hope of finding jobs in countries such as Germany, Britain, Argentina and Venezuela.

It was a small sign tucked in the corner of a pizzeria in Barcelona that got David Garcia Jurado all excited. After months of job hunting, “help wanted” was exactly the kind of sign he was looking for. David, who speaks three languages and has a master’s degree in financial management, sent in his resume, anxiously hoping to hear back.

The call never came.

The waiter job became just another one of the more than 800 jobs David has applied for in the past year. “They don’t call you – they just don’t call you,” the 30-year-old said.  Sometimes he doubts that the companies actually intend to hire people.

Crushed dreams

Well-dressed and confident, David once dreamed of working in international relations. His face hardens as he explains that these days he would be willing to take any job to ease the monotony of unemployment.

“It’s frustrating. It’s boring when you wake up every morning and you don’t know what to do,” he said. “You try to study a little bit, study languages or try to learn how to use new IT programs, but you know that the next day is going to be the same.”

In the poster, two children discuss their dads’ work in terms of job loss vs. dignity

He says he has started to doubt himself, too, feeling “useless” and without the right skill set.

With 26 percent of Spaniards out of work, David is just one of millions of people across the country whose work week consists of sitting at home and scouring jobs ads.

Many of the unemployed share a similar profile: They are fresh out of school or university and send out resumes by the dozen, hoping an employer will take a chance on them.

“At first it was very difficult to imagine why they didn’t call me,” David said. “I have all the [necessary] qualifications and I’m very motivated to work hard.”

He realized after some months that – despite trying a great many things – “there is no way to do something or to work in Spain.”

That’s why David has decided to give up.

Going abroad

David Garcia Jurado is turning his back on Spain.

Come this spring, he’ll cram everything he owns into two suitcases, leave behind his girlfriend of six years and board a plane to Canada.

“This is a pity – for the country, for young people and for our parents, but this is the only possible solution,” David said. [......] According to him, young Spaniards nowadays only stand a chance when going abroad.

The trend has spawned dozens of blogs and online forums where people share personal experiences of going abroad.  [.....]

Spaniards took to the streets, voicing their anger over budget cuts and unemployment rates

These are the tools of a trend that shows no sign of slowing. A recent poll found that nearly 70 percent of young people in Spain are eyeing opportunities in other countries.

That view is echoed by Gayle Allard, an economist with the Instituto de Empresas in Madrid. “Almost every family you talk to, it seems like they’ve got a child abroad, somewhere,” she said.

As Spain’s politicians wrestle with record unemployment, corruption allegations and daily protests against austerity measures, she says creating jobs for youth has fallen off their to-do list.

“The key resource for a country is always its people. That’s the bottom line,” she said. Spain she feels, has failed to lay the groundwork for people’s careers – that despite educating its citizens well, the country hasn’t managed to provide any opportunities for the young. Instead, Spanish politicians have quietly stood by as many of the nation’s best and brightest leave with skills and talents that could help Spain fight the crisis.

Naturally, it’s those with a high level of skills who have a chance of making it abroad, Allard added.

Low-skilled Spaniards often return when they realize they have failed to make a living abroad. Allard recalls a Spanish TV show that follows Spaniards who go abroad. One episode discussed Norway’s employment market and how high salaries are.

[.......]

‘Brain train?’

But Allard and many others in the country are quick to point out that the youth migration, or “brain drain,” isn’t necessarily bad news.

“There’s a good side to that. Maybe instead of a brain drain we could think of it as sort of a brain train,” she said. If they love their country they might choose to return someday – and will have learned a language or two, in addition to lots of experience in companies abroad.

That’s the optimist’s view.

The flipside is that these young people may not come back at all. Instead, they might pledge their loyalty to the country that gave them their first break.

Most young people in Spain don’t even get the chance to prove themselves, David says

For those who remain in Spain, however, frustrations are mounting.

[.......]

As 30-year-old David reflects on his job search of the past year, one word comes up quite frequently: “opportunity.” It’s something he feels his home country has failed to give him.

“If you have an opportunity, in my case, you are lucky,” he said. “Just an opportunity, just to have a door open. I just want to have the opportunity to demonstrate my capacities, my skills, my hard work. But now there are no opportunities in Spain. This is the only thing that I want, an opportunity. And Canada, for me, means opportunities.”

Read the rest – Unemployed youth turn thier backs on Spain

Rodan Addendum: Many young Spaniards are moving to Latin America. Mexico, Chile, Colombia among the nations they are flocking too.

(Reuters) – After joining the euro in 1999, Spain’s economic boom made it the land of opportunity for millions of Latin American migrant workers.

But since the decade-long boom turned to bust roughly four years ago, many of those immigrants have returned, joined by a growing number of disillusioned Spaniards who hope that Latin America, with its developing economies and low cost of living, has more to offer.

 Spaniards are traditionally reluctant to emigrate and they are among the least likely in Europe to go abroad for work. But with the unemployment rate at 25 percent, more Spaniards are ready to leave behind the comforts of home.

“Europe has gone down the toilet,” said 45-year-old Xavi Berdala, a former photographer from Barcelona who moved to Mexico in July to open a pizza restaurant. “People now see Latin America with more respect, more possibilities.”

This could be the fate of America if he Democrats and OFA have their way. If opportunities do not improve for the young, then we may lose talent to Canada, Australia, Latin America, Asia and Russia.

 

The Obama Boom: Food Stamp increase despite “improved” economy

by Rodan ( 154 Comments › )
Filed under Economy, unemployment at March 28th, 2013 - 3:41 pm

The media has proclaimed America is in  anew golden age of economic growth. Obama is celebrated as a hero who has rescued America from the abyss. Article after article tells of a great economic growth, a booming stock market and an awesome job market. The 0.4% increase in GDP is overlooked and not mentioned. One would think this was the 80′s or 90′s again. But reality is different.

In a sign of the true state of the economy, food stamp usage is increasing.

The biggest factor behind the upward march of food stamps is a sluggish job market and a rising poverty rate. At the same time, many states have pushed to get more people to apply for SNAP, a program where the federal government picks up the tab.

But there is another driver, which has its origins in President Bill Clinton’s 1996 welfare overhaul. In recent years, the law has enabled states to ease asset and income tests for would-be participants, with the encouragement of the Obama administration, allowing into the program people with relatively higher incomes as well as savings.

The new rules were designed to encourage people to take advantage of the program before they became destitute. By expanding the pool of potential applicants, they are redrawing the landscape of government assistance. It is one reason why SNAP appears to have evolved from a program that rose and fell with the unemployment rate to a more permanent feature of the landscape.

Those of us in the real world know that the economy is stagnant. But reality trumps propaganda in the Obama Boom.

In another sign of bad economic times, the amount of workers going on disability has also increased.

The federal government spends more money each year on cash payments for disabled former workers than it spends on food stamps and welfare combined. Yet people relying on disability payments are often overlooked in discussions of the social safety net. People on federal disability do not work. Yet because they are not technically part of the labor force, they are not counted among the unemployed.

In other words, people on disability don’t show up in any of the places we usually look to see how the economy is doing. But the story of these programs — who goes on them, and why, and what happens after that — is, to a large extent, the story of the U.S. economy. It’s the story not only of an aging workforce, but also of a hidden, increasingly expensive safety net.

This is how they have managed to lower the unemployment rate. This is where people leaving the workforce are going.  None of this matters, the American people love Obama and his failures have done him no damage.

The Obama Boom: The low wage recovery

by Rodan ( 4 Comments › )
Filed under Economy, Headlines, unemployment at March 22nd, 2013 - 11:59 am

Going by the media, you would think America is an a economic golden age. A Federal Reserve Governor throws cold water on this alleged economic golden age. She points out most of the job growth has been in low wage or temp jobs.

Too much of the recent growth in employment has been concentrated in low-wage and temporary jobs, leaving the recovery on shaky ground, a top Federal Reserve official said Friday.

Sarah Raskin, a member of the Fed’s board of governors, said monetary policymakers are doing all they can to promote stronger economic growth and beef up hiring, and cited improving labor market conditions. But she added interest rates are a blunt tool that cannot help direct the types of jobs that are created, noting one-quarter of U.S. workers are now considered low-wage.

Pointing to a sharp post-recession rise in poverty, a subject not often the focus of speeches by Fed officials, Raskin also argued the rise of temporary employment, which she said is approaching a record, was further widening an already large gap between rich and poor Americans.

“Our country cannot achieve prosperity without addressing the powerful undertow created by flat wages and tenuous financial security for so many millions of Americans,” Raskin said in prepared remarks to the National Community Reinvestment Coalition’s annual conference.

Raskins’ commenst will not get much attention. The media narrative is that Obama is leading America to unprecednted propserity. Can’t let the truth get in the way of a good lie!

The real unemployment

by Speranza ( 94 Comments › )
Filed under Economy, unemployment at February 19th, 2013 - 7:00 am

Her comments on the debilitating effect of unemployment are spot-on.

by Megan McArdle

It’s easy to see why Barack Obama wants to raise the minimum wage.  It’s popular with his base.  It’s popular with unions, who dislike competition with low-wage labor.  And it doesn’t cost the government anything ecept the cost of printing some new posters telling people what the minimum wage is.

But is it a good policy idea?

The three main considerations are the same as for any economic policy: who does it help?  Who does it hurt?  And what is the effect on growth?

It’s obvious who benefits from a higher minimum wage: people who get minimum wage jobs.  In theory, it may also boost the incomes of people who are making near the minimum wage, as employers raise those wages to ensure that these are “better than minimum wage jobs”—though in this labor market, I wouldn’t bet on it.

But who are the people in minimum wage jobs?  This is primarily being sold as a poverty-fighting tool, so it would help to know how many of the people making it are poor.

The answer seems to be no; most of the people making the minimum wage are not living in households below the poverty line.  Over half the people earning minimum wage are below the age of 25; for them, this is not likely to be a permanent condition, but a first rung on the income ladder. Many are students or entry level workers who are part of established households with higher earners.

Older minimum wage workers are probably more likely to be poor, but on average, they’re not.  To be sure, they’re unlikely to be wealthy–this workforce will be predominantly drawn from near-poor and lower-middle-class households.  Undoubtedly, they have uses for the extra money.  But it will not specifically lift people out of poverty, because most of the people earning minimum wage aren’t in poverty now.

[......]

Ironically, minimum wage workers.  Or so argue conservatives.  When something becomes more expensive, people tend to use less of it.   Or as economists like to say, “demand curves slope downward”. Raise the minimum wage, and some of the people who now have a minimum wage job will be out of work–or see their hours cut back.

The empirical evidence for this proposition, however, is somewhat mixed.  David Card and Alan Krueger have done some pretty famous work showing no disemployment effects, and since Alan Krueger is now the head of the Council of Economic Advisors, it’s not surprising that Obama is embracing a higher minimum.  However, David Neumark and William Wascher have also done some pretty famous work showing that there are disemployment effects.  A recent paper by Jonathan Meer and Jeremy West suggests that the effect may show up, not in firings, but as a reduction in new hiring.

On balance, I think the evidence suggests that minimum wages do reduce employment–in part because I think that when you’re arguing that demand curves don’t slope downward, you need some extraordinary proof to back up your extraordinary claim.

Yes, there are all sorts of individual wrinkles; the economy is not a neat textbook model full of perfectly smooth curves.  Businesses have a fair amount of inertia, and a strong reluctance to fire people.  And businesses can make up for some of the loss by cutting worker amenities or forcing them to work harder. [........]

But I think that the evidence so far also suggests that the effect probably isn’t particularly large.  If it were big, there wouldn’t be much debate over whether minimum wages reduce employment: the effects would be pretty obvious in the data.

So what about economic growth?  I imagine there’s some effect, but I doubt it’s large enough to ever tease out of our noisy economic data.  Of course, when growth’s anemic, you hate to lose even a hundredth of a percentage point.  [.......]  So the debate boils down to this: should we hurt some unknown number of workers in order to help others?  Right now, I think the answer is no.

The thing about unemployment is that it’s much, much worse than having a crap low-wage job.  It’s worse than almost anything.  It’s one of those life events that people never really recover from.  Two years after a divorce or being widowed, people have adjusted, and are mostly about as happy as they were before the terrible event.  But after two years of unemployment, people are still miserable.  And even after they get another job, a prolonged spell of unemployment  often has permanent effects on future earning power, and risk for things like depression.  We should weight the losses of the people who are out of work much higher than the gains to the people who get an income boost.

In an ordinary economy, those losses probably aren’t that large.  But unemployment is still in the range of 8%, and the unemployment rate for young workers, and low-skilled workers, is considerably worse than that.

[........]

With this much slack in the labor market, I don’t think we should do anything that risks raising the unemployment rate. Especially since we are already handing employers a big new labor cost: Obamacare.

Starting in 2014, employers either have to provide full-time workers with insurance, or pay a penalty for failing to do so.  With the economy weak and this much slack in the labor markets, that means they already have strong incentives to reduce their workforce, or cut more of their workforce back to full time.  I don’t want to increase those incentives one iota.

If we think that low-wage workers should make more money, we should increase the Earned Income Tax Credit, not force a potentially job-killing wage boost on employers.  Of course, the Earned Income Tax Credit will get scored by the CBO as costing money, while a higher minimum wage won’t.  But the real costs of a minimum wage are potentially much worse.

Read the rest -  How to think about the minimum wage

The Obama Boom: Industrial Production falls .01%

by Rodan ( 2 Comments › )
Filed under Economy, Headlines, unemployment at February 15th, 2013 - 12:09 pm

Despite the happy talk from the media, which is causing consumer optimism to increase, nothing much has really changed. The economy is still limping along sluggishly and American living standards are in decline. Food and energy costs continue to increase, while incomes remain stagnant. Industrial production dropped 0.1% for the month in January.

U.S. industrial production unexpectedly fell in January, weighed down by weak manufacturing and mining, according to a report on Friday that was another sign of slow economic activity at the start of the year.

Industrial production dipped 0.1 percent last month after a revised 0.4 percent gain in December, the Federal Reserve said.

This news does not matter to most Americans. they are being told the economy is booming, despite the fact most are struggling. Perception is now reality in Obama’s America. facts no longer matter.