For Whom the Austerity Bell Tolls

In conversations and debates around the recent deceleration in job growth, when I've pointed out that we here in the U.S. have our own austerity programs going, I'm often met with disbelief. After all, we've got these huge federal budget deficits, right?!

Right, but what matters in terms of foot-on-the-accelerator is the change in the budget deficit, and the fact is we've been letting up right as the economy appears to have a slowed a bit. Add state fiscal drag and the growing unemployment insurance cuts and you get the picture.

On the first point, the figure compares the budget deficit so far this fiscal year with the one from the same months of last FY. Last year's was $150 billion more negative. Annualized, that's enough to drive the unemployment rate a half-point higher than it would otherwise be.

Source: Treasury Dept.

Then there are all the state job losses, which are also keeping the unemployment rate elevated, as I show here.

Finally, as my CBPP colleague and unemployment insurance expert Hannah Shaw points out, over 400,000 long-term unemployed persons in 25 high-unemployment states have lost UI benefits so far this year as the extended benefits program is ending in states across the land.

Just look at those unemployment rates in the table below -- 10.9% in CA, 9.1% in IL, 8.8% in MI, 9.9% in NC. These are areas where labor demand is still way below the level needed to provide anything like a welcoming job market. Yet we're kicking folks off the roles.

So, next time someone asks you for whom the austerity bell tolls, tell them it ain't just the EU.

This post originally appeared at Jared Bernstein's On The Economy blog.