Today is the day that 1.3 million workers will drop off the unemployment rolls because extended unemployment benefits will end. Luckily, or unluckily, we already have a microcosm of what will happen thanks to North Carolina, who decided to end unemployment benefits in July.
How did the unemployment rate in the Tar Heel state go from 2% above the average to average? The Wall Street Journal has a good analysis of the reason, but the bottom line is that people are simply not tracked any more. Also, there is no incentive to actually look for a job anymore since benefits are no longer tied to “looking” for work.
In other words, more people will have been unemployed for so long, that they will simply become discouraged and marginalized.
Full employment has typically been measured at 5% unemployment or below. The Wall Street Journal projects that ending benefits will put the unemployment rate at 6.5%. I project more like 6%. Happy days are here again! At least for those who refuse to admit that only 63% of the people who can work are actually working.
Because of all of the above, economists will need to adjust how they measure “full employment,” to 3% or below. Meanwhile, the Fed is going to use the 6% unemployment rate to easy monetary policy, when far more than 6% are actually unemployed.
1.3 Million people today, and far more tomorrow, the next day, and the next day. It’s not only going to completely skew the economic picture. It’s not only going to lead to a recession, but it may actually kill people, who will undoubtedly become homeless, go hungry (especially with the recent food stamp cuts), and become depressed in wide-spread social trauma.
At least they will all have “affordable” health care though, right? I have a suspicion, that while affordable health care is a very real concern, so is homeless and hunger, which is about to be inflamed.