10% Unemployment, Maybe Not?

Nate Silver thinks that unemployment won't hit 10%. I would agree with his conclusions based on his numbers. As a previous post stated the improvement in unemployment was very much helped by the number of people actively seeking work declined. I think this is the important passage in Silver's prediction:

"In order for unemployment to hit 10 percent, a net of roughly 1 million more people would need to become unemployed, assuming no change in the size of the labor force (which is a big assumption and one we’ll examine in a moment). This almost cetainly won't happen. Last month, 247,000 jobs were lost according to the payroll survey, and 155,000 more people became unemployed according to the household survey. (What’s the difference between these two numbers? We’ll discuss that too in a bit.) Given that the numbers are improving, it’s hard to see how you can squeeze another million or so job losses of 150-300K per month -– you’d need the employment picture to completely flatline for another 4-5 months, or for what now seems to be a fairly robust trend to actually reverse itself.

Note, however, what I stipulated earlier: assuming no change in the size of the labor force. Ordinarily, about 125,000 additional people each month enter the economy. So it’s not enough merely to break even on the job creation numbers; you have to be slightly into positive territory to avoid seeing the unemployment rate go up as a result of these new job-seekers."

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Massive Recession Creates Opportunities For Some

The Washington Post profiles The Five O'Clock Club, and a firm that consults firms on mass layoffs and counsel the recently unemployed. An interesting story. Will this firm layoff after the recovery? Sphere: Related Content

Unemployed and bad credit -- No new job for you!

The NY Times published an interesting article about credit inquiries and the unemployed. Here's the link: http://www.nytimes.com/2009/08/07/business/07credit.html

Should your credit score determine your employability? Sphere: Related Content

Yglesias On Unemployment

Matthew Yglesias writes, "Of course it’s hard to deny that, in isolation, the availability of unemployment benefits has some disemployment effect." He continues, "Amidst mass unemployment things probably look different." Sphere: Related Content

Malkin Is Correct About Unemployment Benefits Update/Clarification

Since a few people were upset by the previous Malkin post I should be more clear. In no way am I advocating that the congress not extend unemployment benefits. I was just expanding on Malkin's point which was a valid economic theory even though she did a poor job at explaining it. I was unclear as to my point. Perhaps I should have pointed out that Lawrence Katz, the economist to which Malkin referred, came out publicly that the theory that he proved in his research was not appropriate because on the current ratio of jobs to labor. Which is around 1 to 5.7. Sphere: Related Content

Malkin Is Correct About Unemployment Benefits

There is a fair amount of research, including the Katz paper Malkin mentions, that show the escape rate of unemployment insurance gets closer to 100% as the recipient gets nearer to benefit exhaustion. At the point of exhaustion the recipients expected utility will decrease. Therefore, an unemployed person at the end of benefits will likely reduce their reservation wage and accept a position that they would have passed on earlier in their benefits period.

The incentive to accept a job depends on at least two factors for the insurance recipient. First, the availability of jobs that pay more than the current unemployment benefit. Second, the number of weeks available from unemployment programs.

The last few weeks of benefits will likely be the time when the unemployed commit more time to finding a job. Because at the end of benefits the search costs for the unemployed became too high.

There is an intrinsic benefit to allowing time for job search that creates quality job matching. Placing the right person to the right job increases productivity. But I am not sure that should be the priority now. So maybe we should not extend the unemployment benefits?

P.S.
I did not think I would ever need to recall my thesis research. Title: "Exploring The Canada United States Unemployment Gap In Regards To Repetitive Use And The Duration of Unemployment Spells" Sexy title?
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