Behind the surge in jobs …

A lot of chatter over the weekend about how President Obama’s economic policies are – after 6 years — humming.

More than 250,000 more people were employed … but interestingly, the unemployment rate inched up as the labor force participation rate increased a bit.

What’s going on?

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A couple of economists at the NBER – the think tank that officially declares when recessions begin and end – just issued a study with an evidenced-based hypothesis …

 

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They conclude that the job market is hot “largely because of a cold-hearted Republican reform,”

Specifically, they say: “ Before the financial crisis, jobless workers in most states qualified only for 26 weeks of unemployment benefits.

In June 2008 that was extended, thanks to a new federal Emergency Unemployment Compensation (EUC) program. By the end of 2013 the average unemployed American could expect benefits to last 53 weeks; in three states they could get 73 weeks’ worth.”

The study looked at what happened after Congress refused to extend EUC in December 2013.

The average limit on benefits was broadly reset to 26 weeks

Republicans argued that this would push people back into work. Left-leaning economists economists disagreed.

So, NBER researchers looked at pairs of counties that adjoined but were in different states with different EUC benefits.

For example, “people in Fairfax County, Virginia made do with 40 weeks of benefits; those in nearby Montgomery County, Maryland could get 63. Since the reform limited benefits to 26 weeks in almost all states, it hit Montgomery County harder.”

The result?

Employment growth was higher in counties that saw bigger declines in the duration of benefits.

Why?

When benefits expired, workers were prepared to toil for less. Employers created more jobs to take advantage of lower wages. With vacancy notices popping up everywhere, more people who had given up looking for work decided to try again.:

In plain English: if you pay somebody to stay home, they stay home.

If they need a job, they find a job.

Hmm … who would have thunk it?

Sources: Economist Washington Post

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