Reducing Benefits did not put people back to work

North Dakota and the rest of the country is in a labor crunch situation and there are all sorts of guesses as to cause and solution (or solutions). One suggestion was enhanced benefits kept more people on the unemployment rolls instead of looking for work. The data just do not bear this out. Many places, including ND ended participation with the extra benefits program, and the labor issues continue. Let’s look at the continuing claims data because this would be the indicator of people staying on unemployment insurance instead of looking for new employment.

I plot the average value for continuing claims by month from the beginning of 2019 to the present. (This is originally in weekly format so I averaged all the weekly observations in a given month). What do we observe? There was a clear COVID spike in the continuing claims filings but it actually comes down in a reasonable timeframe. What is interesting is the decline clearly started much earlier than even the debate around the extra unemployment benefits. The announcement of the change in May and the eventual end of enhanced benefits in June do not alter the trajectory for the decline in any significant fashion.

We also need to maintain some sense of scale. You could argue that the July 2021 value is more than 30% higher than the July 2019 value. That is true, but we are talking about average continuing claims of 2958 for July 2021 and 2228 for July 2019. Compared to national levels these are small, and while any addition to existing labor supply is important for ND business and the ND economy this is not going to be enough to make a significant dent in the openings.

We need to move on to an accurate policy narrative. Higher unemployment benefits did not keep people out of work once the COVID adjustments started to become better understood. The deeper question of labor supply needs to find answers in other places.

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