A "Help Wanted" sign is posted in the window of an automotive service shop on March 8, 2013 in El Cerrito, California.
Justin Sullivan/Getty

Correlation, causation, and job creation

Updated
It’s been about six months since congressional Republicans cut off extended unemployment benefits for 1.3 million jobless Americans – a number that has since grown to over 3 million. Senators reached a bipartisan compromise to restore aid, which House Republicans killed. Senators then struck another bipartisan deal, which House Republicans also killed.
 
GOP officials have come up with a variety of rationales to defend their position – up to and including the claim that it’s “immoral” to extend jobless aid to “long-term unemployments [sic]” – but perhaps the most striking is the claim that it’s good for the economy to cut struggling families off.
 
Economists and the Congressional Budget Office warned Republicans about the opposite consequences: scrapping benefits would mean millions of Americans withdrawing from the economy, unable to pay bills and buy stuff, which in turns hurts job creation. But with the job market improving quickly in recent months, Republicans are patting themselves on the back, insisting their callousness forced Americans off the public dole and into the workforce.
Responding to good news about the economy last week, influential conservative columnist Charles Krauthammer declared conservatives had won the debate over long-term unemployment insurance.
 
Congressional Republicans have stifled opportunities to renew the benefits, which expired in December. On Fox News’ “Special Report,” Krauthammer said he thinks it’s been the right call.
 
The past six months saw “the largest six-month decline in the length of unemployment ever measured,” he said. “The debate on that extension is over, and the conservatives were right.”
House Speaker John Boehner’s (R-Ohio) office echoed the sentiment, as did an analysis from GOP staff on the House Ways and Means Committee, as well as a National Review article last week.
 
And at a certain level, I can appreciate why the right might be impressed. After Republicans deliberately cut off aid to struggling families, the job market improved. Ergo, at least in their minds, the GOP boosted the economy by sticking it to the unemployed.
 
It’s a nice story, which clearly makes conservatives feel better about themselves, but it’s also at odds with some basic facts.
 
Danny Vinik took a look at the evidence that “shows how wrong they are.”
The only way for the end of federal UI to boost job growth would be if it caused the long-term unemployed to accept jobs at a higher rate. As I noted above, we don’t know if that’s happening, but on top of that, long-term unemployment isn’t even falling at a faster rate. In fact, the ranks of the long-term unemployed have been falling at a consistent pace for years.
 
In other words, the evidence suggests that the end of unemployment benefits had little effect on long-term unemployment. That’s the exact opposite of what Krauthammer and Wolking declared.
FiveThirtyEight’s Ben Casselman added that many of the long-term unemployed are dropping out of the labor force altogether – cutting them off hasn’t helped at all in getting these folks back into the workforce – which is also the exact opposite of what Krauthammer and his cohorts declared.
 
In other words, when Krauthammer boasted to a national television audience, “The debate on that extension is over, and the conservatives were right,” he had it backwards. I haven’t seen any evidence of him correcting this, but I’ll update this post accordingly if he sets the record straight.
 

Charles Krauthammer and Unemployment

Correlation, causation, and job creation

Updated