Hannity falsely suggested Fed said unemployment benefit extension increased ranks of those without jobs
Sean Hannity claimed that the economic recovery act "actually raised unemployment," citing minutes from a January Federal Reserve meeting to falsely suggest that the extension of unemployment benefits in the recovery act increased the number of people who don't have jobs. In fact, the Federal Reserve minutes Hannity cited actually stated that the provision had the effect of raising the measured unemployment rate because people who lost their jobs sought to remain in the workforce in order to receive benefits rather than leaving the workforce and being counted as "discouraged workers" instead of "unemployed."
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Hannity misreads Federal Reserve minutes to misleadingly claim stimulus "actually raised unemployment"
From the February 22 broadcast of Fox News' Hannity:
HANNITY: And millions of unemployed Americans are still probably wondering what exactly President Obama's stimulus did to help the economy. Now, it's a tough question that even the Obama administration has a difficult time explaining. But an editorial in Investor's Business Daily sums up one of the stimulus's biggest achievements: It actually raised unemployment.
This is not a joke. Now, the article quotes minutes from the Federal Reserve's Open Market Committee's January meeting that read, quote, "several extensions of emergency unemployment insurance benefits appear to have been raised and raised the measured unemployment rate." Now, all things considered, the editorial estimates that the stimulus added 2 percentage points to the unemployment rate. Hey, congratulations, Mr. President.
Hannity was referring to a February 19 IBD editorial in which Alan Reynolds, a senior fellow at the Cato Institute, wrote:
The American Recovery and Reinvestment Act of 2009 had extended federally funded unemployment benefits by 53 weeks, and another bill in November added 20 more -- bringing the total up to 99 weeks in states with high unemployment.
As the Federal Reserve's Open Market Committee minutes for January noted: "The several extensions of emergency unemployment insurance benefits appeared to have raised the measured unemployment rate, relative to levels recorded in past downturns, by encouraging some who have lost their jobs to remain in the labor force. ... Some estimates suggested it could account for 1 percentage point or more of the increase in the unemployment rate during this recession."
My own estimate, in past articles available at cato.org, is that the stimulus act added about 2 percentage points to the unemployment rate.
Fed actually said provision increased "measured unemployment rate" by keeping people from leaving workforce
Federal Reserve: Extensions to unemployment insurance benefits are "encouraging some who have lost their jobs to remain in the labor force." From the minutes of the January 26-27 meeting of the Federal Reserve Open Market Committee, during a discussion on inflation:
Though participants agreed there was considerable slack in resource utilization, their judgments about the degree of slack varied. The several extensions of emergency unemployment insurance benefits appeared to have raised the measured unemployment rate, relative to levels recorded in past downturns, by encouraging some who have lost their jobs to remain in the labor force. If that effect were large -- some estimates suggested it could account for 1 percentage point or more of the increase in the unemployment rate during this recession -- then the reported unemployment rate might be overstating the amount of slack in resource utilization relative to past periods of high unemployment.
Several participants observed that the necessity of reallocating labor across sectors as the recovery proceeds, as well as the loss of skills caused by high levels of long-term unemployment and permanent separations, could reduce the economy's potential output, at least temporarily; historical experience following large adverse financial shocks suggests such an effect. On the other hand, if recent productivity gains were to be sustained, as some business contacts indicated they would be, potential output currently could be higher than standard measures suggested, and the high level of the unemployment rate could be a more accurate indication of slack in resource utilization than usual measures of the output gap.
Reuters MacroScope Blog: "[U]nintended consequence" of extending jobless benefits is that it delays when people leave the labor force and are no longer classified as "unemployed." A February 18 post on Reuters' MacroScope blog, referring to the Federal Reserve meeting, explained that in order to qualify for unemployment benefits, "you have to be looking for a job. You also have to be looking for a job in order to be counted among the unemployed. If you give up the search, you move over to the 'discouraged workers' category, which has grown rapidly in the past year."
That means that Hannity's conclusion is totally bogus, and the result of someone who doesn't have great reading comprehension. No surprise there!
Did you really just say that with a straight face? We don't even count people who gave up looking for jobs as unemployed. Perhaps you should there are less of them during normal times?
Do you get it now? The people who would have been dropped from the lists of the unemployed is kept smaller by the extensions. They stay in the unemployed category INSTEAD of being dropped. Therefore, the current unemployment numbers are artificially kept higher in the interests of helping those who are having difficulty finding work. It's humanitarianism at the expense of public relations.
During times of 'full employment', where jobs go begging for people to fill them, it sure might be a problem with people on unemployment who are lazy and like living off the public dole.
During times like we're in now, there are multiple people trying to fill every job opening. If one person on unemployment finds a job, that means another person doesn't get that job. There aren't excess jobs out there just waiting to be filled. If one person doesn't do their due diligence at finding a job, someone else will. The same number of people will still be unemployed.
You all seem to be assuming that if someone ran out of unemloyment benefits, that they would immediately quit looking for a job, hence they wouldn't be counted as unemployed anymore. But since they are still collecting, because of extensions, then that "artificially" raises the rates.
Quite the logic!
So, we now have more people collecting unemployment insurance because of the extension of benefits. But that doesn't mean that that benefit extension has CAUSED more people to be unemployed. It simply means that more of the unemployed (the long-term unemployed) are now being counted as unemployed.
We're not arguing 'semantics' here. We're arguing facts. People who used to not be counted are now counted because benefits have been extended. That makes the unemployment numbers* higher than they would be otherwise.
*Remember, unemployment numbers are not a measure of how many people are out of work. It's a measure of how many people who are out of work are eligible for and are collecting unemployment insurance benefits. That official number has always missed people who are eligible but don't apply and people who were eligible but have used up all their benefits and people who weren't eligible for whatever reason.
That is not what is being argued here.
Hannity claimed that the Fed said unemployment benefit extension increased the ranks of those without jobs. He framed the situation as though the Fed was saying that the unemployment benefit extension was adding to actual unemployment when, in fact, all they were stating is that it adds to measured unemployment. That is the key difference -- actual unemployment vs. measured unemployment.
People are going to be unemployed whether there are benefits or not. DellDolly explained this well in another post. "Unemployment" is a matter of a low supply of jobs being chased by laborers with high demand for those jobs. The number of jobs being finite and limited, as those jobs become filled there will necessarily be those without work. This is "actual unemployment" -- its numbers don't change regardless of whether unemployment benefits are extended. No one is arguing that people will stop seeking jobs if benefits are not offered.
What is being argued is that extended benefits increases "measured unemployment" -- the number of people we officially know to be unemployed yet seeking jobs. That is what the Fed was stating. Information is good, especially when that information pertains to negative things such as unemployment. It gives us a benchmark against which to formulate policies instead of burying our heads in the sand and pretending the problems don't exist in the first place. There is value in knowing that x% of Americans are unemployed and seeking jobs within a job market that is too small to accommodate them.
That, of course, is a side benefit of unemployment benefits, not the argument FOR them. The argument FOR them is that, in a civilized society, we don't let people starve and go homeless just because the economic cycle is such that there is no room within the job market for them. NO ONE, however, is assuming or arguing what you claim, namely that running out of unemployment benefits will cause people to immediately quit looking for a job and not be counted as unemployed anymore. What we are arguing is that unemployment benefits make unemployment a lot easier to measure.