Freedomnomics

Article published Wednesday, March 10, 2010, at Fox News.

The Truth About Unemployment

Had the stimulus not delayed the recovery, the unemployment rate would never have reached such a high rate in the first place.

By John R. Lott, Jr.

According to Friday's announcement by the Labor Department, the nationís unemployment rate remains unchanged from the previous month at 9.7 percent. The number was generally greeted as good news by the media. The Wall Street Journal's headline reported "Employment outlook brightens in U.S., state." The Los Angeles Times headline said: "Employment outlook brightens in U.S., state." But the cheeriness overlooks the fact that most of the new jobs are largely temporary, part-time jobs. And not the types of jobs workers held before the recession.

36,000 jobs were lost in February, according to the Labor Department's survey of businesses, up from the 26,000 lost in January. Nevertheless, the increase in job losses is viewed by some as good news because fewer jobs were lost than the 50,000 the 20 forecasters surveyed by Reuters had expected. Claims are made that jobs could very likely have been added if it wasn't for the snow storms on the East coast, but no empirical evidence is offered. Cutting down the number of work days may have delayed people being hired, but it might just as well delayed some employees from being laid off.

While the unemployment rate held steady at 9.7 percent in February, the percent of the workforce "employed part time for economic reasons" rose from 5.3 to 5.7 percent. They work between 1 and 34 hours per week, according to the Bureau of Labor Statistics, "because of an economic reason, such as their hours were cut back or they were unable to find full-time jobs."

Other survey evidence suggests that the number of underemployed workers might be even higher than the government's survey. A Gallup survey of 20,000 indicated that 19.9 percent of US workers are working part-time even though they want a full-time job The big area of job growth has been in "temporary help-services," adding 47,500 jobs in February. But many of these jobs are only part-time. They are hardly the great jobs most people are looking for, though these temporary jobs might eventually turn into full-time, permanent jobs.

While the overall total number of jobs fell, The Wall Street Journal emphasized the rosy job numbers that increased this way:

"The professional and business-services sector, a broad category that includes legal work and consulting, added 51,000 jobs. Another encouraging sign: The temporary-help services sector added 47,500 jobs and has added 284,000 since September 2009, a sign employers need workers and may eventually add permanent positions."

Alas, there is some double-counting here -- "temporary-help service" jobs is part of the total that goes into "professional and business-service" jobs. Consider "professional and business-service" jobs that are not "temporary-help service" jobs and the increase is only 3,500. In contrast, Federal government jobs continue to grow, to the tune of 40,000 since September.

All that said, there is still some bright news, though it comes from a different set of numbers than the Obama administration and media are citing. A big problem over the last year has been that about 3 million workers simply gave up looking for work and left the labor force, thus they are no longer counted as unemployed because they aren't looking for a job. Some of these discouraged workers are returning to the labor force, even if it frequently seems to be for part-time jobs. The positive news is that in February 176,000 workers rejoined the workforce, according to the Bureau of Labor Statistics Household survey, and that occurred without the unemployment rate rising.

The average length of time people are unemployed also declined slightly from 30.2 to 29.7 weeks. Much has been made in The New York Times and other places about how the record number of weeks that people are remaining unemployed justifies the record unemployment insurance and other benefits. Unemployment insurance now lasts up to 99 weeks. Just a little over a year and a half ago it was a mere 26 weeks. But what is left out of the discussion is how the largest unemployment benefits ever provided unemployed workers has itself increased how long workers remain unemployed. Economic studies have confirmed over and over again that extending unemployment insurance benefits just means more unemployment. Possibly one-and-half or more percentage points of the unemployment rate are due to these record benefits.

The economy is finally, if slowly, bottoming out, even if a lot of workers are moving from having dropped out of the labor force to taking part-time work. Having some job is better than no job. Still, had the stimulus not delayed the recovery, creating chaos by shifting around a trillion dollars and the jobs associated with that money, the unemployment rate would never have reached such a high rate in the first place.

*John Lott is the author of Freedomnomics.

Home

Johnlott.org (description of book, downloadable data sets, and discussions of previous controversies)

Academic papers:

Social Science Research Network

Book Reviews:

For a list of book reviews on The Bias Against Guns, click here.

---------------------------------
List of my Op-eds
---------------------------------

Posts by topic

Appalachian law school attack

Baghdad murder rate

Arming Pilots

Fraudulent website pretending to be run by me

The Merced Pitchfork Killings and Vin Suprynowicz's quote

Ayres and Donohue

Stanford Law Review

Mother Jones article

Links

Craig Newmark

Eric Rasmusen

William Sjostrom

Dr. T's EconLinks.com

Interview with National Review Online

Lyonette Louis-Jacques's page on Firearms Regulation Worldwide

The End of Myth: An Interview with Dr. John Lott

Cold Comfort, Economist John Lott discusses the benefits of guns--and the hazards of pointing them out.

An interview with John R. Lott, Jr. author of More Guns, Less Crime: Understanding Crime and Gun Control Laws

Some data not found at www.johnlott.org:

Updated Media Analysis of Appalachian Law School Attack

Since the first news search was done additional news stories have been added to Nexis:

There are thus now 218 unique stories, and a total of 294 stories counting duplicates (the stories in yellow were duplicates): Excel file for general overview and specific stories. Explicit mentions of defensive gun use increase from 2 to 3 now.

Journal of Legal Studies paper on spoiled ballots during the 2000 Presidential Election

Data set from USA Today, STATA 7.0 data set

"Do" File for some of the basic regressions from the paper