We find that the effect on exit from unemployment occurs primarily through a reduction in labor force exits rather than through exit to employment (job finding). This is important because it implies that extended benefits do not delay the time to re-employment substantially and so do not have first-order efficiency effects. The major effect of extended benefits is redistributive, providing income to job losers who would have exited the labor force otherwise (consistent with Card et al. 2007).
In other words, if a significant decline in unemployment benefits comes to pass, we may well see another bump downward in the labor force participation rate. Although a decline in LFP associated with the expiration of extended UI benefits would fall in Dunne and Terry’s nondemographic category, the Farber and Valletta results suggest that we should interpret any such decline as structural. And structural in this case means not directly amenable to correction by policies aimed at stimulating spending.
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My guess is that once the Fed realized the effect on headline U-3 from the cancellation of extended benefits that was when we saw them back away from the 6.5% UE target for cessation of easing. The rest of the article is d4ense "fedspeak" but interesting.
19 comments:
Fed action is exclusively to save the banks that finance this Banana Republic.
Dual mandate is a total sham.
The Former Idealist
FI,
You are so right.
"What we have here is a failure to enumerate..."
A combination of tapered QE3 and "other tools" will continue pumping liquidity into the banking sector for at least another 6 quarters. QE3 mat officially wind up in calendar year 2014 but not the liquidity injections.
The Former Idealist
Grab yerself a handle and join in! Good ta C'ya!
The Fed may get the UE3 rate down to 6.5% or even 6%, but it will by a pyrrhic victory, as there will fewer people working despite the pretty statistic.
Maybe after the mid-term elections this year, they will get interest rates up to the point where the economy can function on its own. But there still seems to be a lot of stupid around, so we'll probably just get another bubble, but faster than last time.
The Fed really painted themselves into a corner, didn't they?
Looks like an easy way to throw people off the back of the bus. With no UE checks people either look for cash paying jobs, find a low paying crappy job or apply for disability. Some just give up.
But as long as the UE rate goes down - it's all good.
Without the UI safety net, wage pressure will be non existent. Sounds deflationary to me.
Sporkfed
Big misses on auto sales but still good numbers. There is also an expiring tax distortion on commercial vehicles. More when I get enough announcements.
I've been kidnapped for culture. Headed to the Getty so new posts are unlikely today. Sorry. New vehicle commercial class sales were disappointing but decent.
Which distortion on commercial vehicles? I haven't bought my light truck yet!
Also:
Philly Fed's Plosser warns of rapid rate rise
And Robert, re the discussion about speakers, Fry's has the JBL ES-80s on sale for $288/pair today.
You don't get a tax break for a light truck. Must be big business or construction to get those deals.
http://www.passfail.com/news/dallas-morning-news/expiring-tax-deduction-will-likely-spur-sales-of-commercial-vehicles/expiring-tax-deduction-will-likely-spur-sales-of-commercial-vehicles-12515991.htm
Dianne Feinstein says: “All vets are mentally ill in some way and government should prevent them from owning firearms”
Frigid Air Threatens Coldest U.S. Weather in Two Decades
A definite concern for some of us...
Sorry for the delay. I'll get some new posts up when I get back to the office.
74° now headed to 78° or so.
Rob Dawg said... 74° now headed to 78° or so.
:P
Warmed up today 19 degrees last night -15. Plus wind.
NYT Op-Ed: Abolish the Corporate Income Tax
I've advocated this, but I'd replace the revenue with a VAT.
While we're waiting for Robert to get back to the office:
Cheerleaders Slideshow 2013
Are You a Sociopath?
Yet another review of M. E. Thomas' book Confessions of a Sociopath but worth revisiting...
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