South By North Strategies, Ltd.

Unemployment Claims in NC: Week of 10/31

For the benefit week ending on October 31st, 18,795 North Carolinians filed initial claims for unemployment insurance, and 180,051 individuals applied for continuing insurance benefits. Compared to the prior week, there were more initial and continuing claims. These figures come from data released today by the U.S. Department of Labor.

Averaging new and continuing claims over a four-week period — a process that helps adjust for seasonal fluctuations and better illustrates trends — shows that an average of 17,715 initial claims were filed over the last four weeks, along with an average of 179,943 continuing claims. Compared to the previous four-week period, initial claims were slightly higher and continuing claims were slightly lower.

One year ago, the four-week average for initial claims stood at   18,613 and the four-week average of continuing claims equaled 118,839.

The graph shows the changes in unemployment insurance claims (as a share of covered employment) in North Carolina since the recession’s start in December 2007.

Although new and continuing claims appear to have peaked for this cycle, the claims levels remain elevated and point to a labor market that remains extremely weak.

Bleak Budget Outlook

The newest economic and revenue report prepared by the staff of the NC General Assembly suggests that joblessness and budget shortfalls will trouble North Carolina well into the foreseeable future.

Among the report’s disturbing findings are the following:

• As of October, state tax collections are running $95 million (or 1.5 percent) below target. After adjusting for changes in the tax code, revenues are down four percent compared to the previous year.
• Sales tax collections continue to plunge and are down 11.7 percent compared to the prior year.
• Withholding tax collections also are declining but are moving in line with projections.
• An employment rebound is essential to any long-term economic and revenue recovery; unfortunately, few signs point to such growth and “a robust expansionary recovery is still a year or two away.”

Around the Dial – Nov. 18

Economic policy reports, blog postings, and media stories of interest:

• The Triangle Business Journal looks at changes in metro housing prices.
• At Project Syndicate, Nouriel Roubini assesses the US’s economic weaknesses.
• The NY Times’ Paul Krugman wonders about “the madness of inflation hawks.”
• The Wall Street Journal looks at the FCC’s ideas for expanding broadband access.

October Producer Prices

The seasonally-adjusted prices received by producers of finished goods rose by 0.3 percent in October, according to data recently released by the U.S. Bureau of Labor Statistics. That same month, the prices received by sellers of intermediate goods rose slightly (+0.3 percent), and the prices received by sellers of crude goods advanced by 5.4 percent.

At each stage of the production process, price increases were attributable to rises in food and energy prices. When energy and food prices are excluded, producer prices for finished goods actually fell by 0.6 percent in October. Absent energy and food costs, producer prices fell for intermediate goods and rose slightly for crude ones.

Over the past year, producer prices have fallen. Unadjusted prices for finished goods have declined by 1.9 percent, and producer prices for intermediate and crude goods have dropped by 7.5 percent and 14.1 percent, respectively.

The new data offer two insights into the state of the American economy. First, the findings suggest that demand for good and services remains weak, though not quite as weak as in recent months.  Second, the report indicates that inflation is not currently a threat to the larger economy.

Lessons in Congestion Pricing

Metropolitan areas across the globe are struggling with issues of traffic congestion and are experimenting with various “carrots” and “sticks” intended to persuade commuters to make better use of mass transit systems.

One, albeit controversial, strategy used in some large metros (including New York City) is congestion pricing. Simply put, congestion pricing is a charge levied on motorists who drive an automobile into congested areas at certain peak travel times.

In a recent policy brief, the German Marshall Fund of the United States analyzes the adoption of successful congestion pricing schemes in London and Stockholm and the failure of such a system in Manchester (U.K.) and identifies lessons from Europe that are relevant to American metro areas.

According to the brief, perhaps the most important factor needed to engender public support of transportation policies like congestion pricing is “vision.” Says the author:

The underlying story in both London and Stockholm, however, is the role of “vision” in advancing large-scale change. In using the term “vision,” I am not referring to a single document or plan with a mission statement and lofty goals. Rather, I have come to see a vision as something much bigger. It is an underlying consensus that is shared between leaders and the public. It is widely understood, even if it is not always articulated. And in some way, a vision must be “visual.”

Editor’s Note

Between November 5 and November 17, Policy Points will be updated on a reduced schedule. During that time, the blog will be updated once per weekday at approximately 8 AM. Posting will return to a three-per-weekday schedule on November 18.

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Subprime Student Loans

The economic dislocations caused by the recession have led thousands of working-age adults to pursue higher education. Many students have enrolled in for-profit proprietary schools, and to afford the high tuition costs, many have turned too — or a have been steered towards — private student loans.

In the current issue of The Washington Monthly writer Stephen Burd describes the factors that sparked the surge in private borrowing and explains why this trend is harmful for working-class and low-income students. Argues Burd:

In the last decade alone, it [private loan borrowing] has grown an astounding 674 percent at colleges overall, when adjusted for inflation. The growth has been most dramatic at for-profit colleges, where the percentage of students taking out private loans jumped from 16 percent to 43 percent between 2004 and 2008, according to Department of Education data.
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The spike in private loan borrowing is dismal news for students. Unlike traditional student loans, which have low, fixed interest rates, private educational loans generally have uncapped variable rates that can climb as high as 20 percent—on par with the most predatory credit cards. Private loans also come with much less flexible repayment options. Borrowers can’t defer payments if they suffer economic hardship, for instance, and the size of their payment is not tied to income, as it sometimes is in the federal program. Private loans also lack basic consumer protections available to federal loan borrowers. With a traditional federal student loan, for example, if a borrower dies or becomes permanently disabled, the debt is forgiven, meaning they or their kin are no longer responsible for paying it off. The same goes if the school unexpectedly shuts down before a student graduates. But none of this is true of private loans. Also, because it is so difficult to discharge private student loans in bankruptcy, when students take them out to attend schools that provide no meaningful training or skills they can find themselves trapped in a spiral of debt that they have little prospect of escaping.

Community Colleges and Upward Mobility

Americans long have viewed higher education as an engine of upward economic mobility. Typically, discussions of higher education revolve around the outcomes associated with attending four-year institutions and pay scant attention to the benefits of two-year schools.

To correct that shortcoming, the Economic Mobility Project of the Pew Charitable Trusts recently conducted a study of the educational and employment outcomes of 84,000 student in Florida who were in the 12th grade in 2000. Specifically, the study looked at students who enrolled in college transfer and technical education programs offered at two-year colleges.

Concludes the study:

Community colleges already make major contributions to economic mobility by enabling students to transfer to four-year colleges, and by teaching work-enhancing skills. The primary beneficiaries of the transfer function are low-income students who perform well in high school and college. The primary beneficiaries of the career-enhancing function are low-income students who did not perform especially well in high school, but take a wide range of high-return courses while attending community college,especially courses in health care.
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The largest factor limiting the ability of community colleges to raise the earnings of their students through the transfer function is students’ poor academic preparation in high school and the difficulty of quickly boosting their performance through developmental programs. The Florida cohort analysis clearly demonstrates that students need to have a B or better high school grade point average to have a reasonable chance of attaining AA degrees, transferring to four-year colleges, and attaining BA degrees. But lack of supportive services also appears to be of considerable importance, especially in explaining why more high-performing low-income students do not transfer to four-year colleges. The Florida study also shows that among A and B+ students, those from low-income families are 5 percentage points less likely to attend college and 1 percentage point less likely to attain AA degrees, but over 11 percentage points less likely to transfer to four-year colleges and attain BA degrees.