If the extension of long-term unemployment benefits is defeated in the Senate, it will represent an epic though predictable failure with many parents, not least the voting practices of the Senate, where majority rule is the exception. But the chart below shows another parent: the fact that the unemployment rate is significantly biased downward because of the decline in the labor force.þþSenator Charles Grassley, an Iowa Republican who voted against the extension on Tuesday (he was a “nay” on the cloture vote), was discussing the vote on the radio Wednesday morning. One rationale he stressed for his opposition was that the unemployment rate, at 6.7 percent, had fallen far and fast, signaling enough opportunities such that job seekers no longer needed extended jobless benefits.þþBut as I’ve previously argued — and this is widely agreed upon by economists of all stripes — continuing labor market weakness has led millions of potential workers to leave the labor force and thus not be counted in the unemployment rate. (You’re counted only if you’re looking for work.) There’s some disagreement about how much of the labor force decline is due to weak demand — rather than reflecting dropouts who probably would have left anyway, like retiring boomers — but I don’t know anyone who thinks 6.7 percent is representative of the amount of slack on the current job market.þþBased on numbers I’ve written about in greater detail, I think a more representative rate would be about 9 percent. Heidi Shierholz of the Economic Policy Institute points out that if all the missing workers by her count were looking for work — clearly an upper bound — the rate would be above 10 percent. Others argue that smaller shares of those leaving the labor force would come back if labor demand strengthened, but even these analysts agree with the general point that 6.7 percent is not representative of actual slack.þþOther indicators, like the flat employment rate trend or the high level of long-term unemployment also point toward the extension. But politicians who simply don’t want to go there can easily hold up the actual jobless rate as Exhibit A. The fact that it’s biased quite far down right now does not appear to be their concern. Nor are the more than one million long-term unemployed who’ve already lost jobless benefits, with millions more to come.þ
Source: NY Times
