South By North Strategies, Ltd.

NC Unemployment Claims: Week of 11/19/11

For the benefit week ending on November 19, 2011,  some 9,377 North Carolinians filed initial claims for state unemployment insurance benefits, and 106,527 individuals applied for state-funded continuing benefits. Compared to the prior week, there were fewer initial and more continuing claims. (Note that the filing week was shorter than normal due to the Thanksgiving holiday.) These figures come from data released 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 11,557 initial claims were filed over the previous four weeks, along with an average of 106,981 continuing claims. Compared to the previous four-week period, the average number of initial claims was lower and the number of continuing claims was higher.

One year ago, the four-week average for initial claims stood at 13,581  and the four-week average of continuing claims equaled 117,334.

In recent weeks covered employment has increased slightly and has returned to the 3.73 million level recorded a year ago. Nevertheless, there are still fewer covered workers than there were in January 2008, which means that payrolls are smaller today than they were almost three years ago.

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.

Both new and continuing claims appear to have peaked for this cycle, and the four-week averages of new and continuing claims have fallen considerably.  Yet continuing claims remain at an elevated level, which suggests that unemployed individuals are finding it difficult to find new positions.

Why Not?

Suzanne Mettler asks why tax expenditures are not part of the debate about deficit reduction.

When viewed with even a small dose of historical perspective, the unquestioned immunity of tax expenditures to reductions is incredible given what’s at stake. Moreover, it demonstrates how dramatically our politics have changed in a space of less than two decades. From the Reagan era through Bowles-Simpson, bipartisan commissions charged with finding means of reducing spending have agreed that such policies should be scaled back as a means to increase federal revenues. Fiscal conservatives of yesteryear criticized tax expenditures for interfering with market forces. Far from epitomizing laissez faire economics, such policies actively involve government in altering market forces, subsidizing some industries to the exclusion of others. As a result, they promote the consumption of goods and services in some areas, such as health care and housing, generating artificial increases in prices.

Around The Dial – December 7, 2011

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

• Random Samplings analyzes use of the national TANF program.
• Kenneth Rogoff worries about the sustainability of modern capitalism.
• Nick Hanauer challenges the current discourse about “job creators.”
• Economix looks at older workers and joblessness.
• TaxVox argues that the payroll tax cut is better than inaction.

Explaining The Bank Bailout

Interfluidity debunks the claim that large banks didn’t get bailed out because they repaid their TARP loans. and other forms of aid.

Cash is not king in financial markets. Risk is. The government bailed out major banks by assuming the downside risk of major banks when those risks were very large, for minimal compensation. In particular, the government 1) offered regulatory forbearance and tolerated generous valuations; 2) lent to financial institutions at or near risk-free interest rates against sketchy collateral (directly or via guarantee); 3) purchased preferred shares at modest dividend rates under TARP; 4) publicly certified the banks with stress tests and stated “no new Lehmans”. By these actions, the state assumed substantially all of the downside risk of the banking system. The market value of this risk-assumption by the government was more than the entire value of the major banks to their “private shareholders”. On commercial terms, the government paid for and ought to have owned several large banks lock, stock, and barrel. Instead, officials carefully engineered deals to avoid ownership and control.

The post continues.

After assuming the banking system’s downside risk, the US government engineered a wide variety of favorable circumstances that helped banks “earn” their way back to quasi-health. The government provided famous and obvious transfers like paying unwinding AIG swaps at 100¢ on the dollar. It forced short-term yields to zero and created an environment in which medium-term interest rates would be capped for several years, granting banks a near-risk-free arbitrage for a while. It emitted trillions in excess reserves on which it continues to pay interest. It forewent investigations and prosecutions that by law it should actively pursue, and settled what enforcement it could not avoid for token fees. Then there are the things conspiracy theorists and cranks like me suspect but cannot prove: that the government and the Fed have been less than aggressive in minimizing their costs when they or entities they controls (AIG, Fannie, Freddie) transact with large banks, that they have left money on the table where doing so could be hidden in arcane accounts or justified as ordinary transaction expenses and trading losses. Large banks have enjoyed some rather extraordinary results for allegedly efficient markets, quarters with large trading profits and no or very few losing days. Government housing policy is pretty overtly subject to a constraint that interventions must not provoke loss realizations for banks carrying bad loans at inflated values, or interfere with servicing revenues. …

Long-Term Unemployment Remains Elevated

A recent report from the Pew Fiscal Analysis Initiative found that 31.8 percent of the individuals unemployed in the third quarter of 2011 had been unemployed for at least a year. The share of unemployed workers jobless for at least a year remains near the highest level recorded since 1967.