An economic analyst for JP Morgan Bank by the name of Michael Feroli, has released an analysis that concludes that unemployment benefits are causing more and longer unemployment.
JP Morgan Bank is the actual inventor of the "credit derivative." Through its own greed, incompetence and arrogance, this particular institution played a significant role in creating the credit crisis that helped send America into its worst recession in 70 years. For them to imply that eliminating jobless benefits would be good for the country is beyond the pale. Oh, but there's so much more that is outrageous about this theory, how it was reached, and about what it implies.
Outrage #1
Go ahead, Michael Feroli, please share your great economic wisdom with us:
"Jobless benefits have the potential to increase the unemployment rate through two channels. First, by softening the blow of losing a job, they allow unemployed persons to become more selective in what job offer they accept, thereby raising the average duration of unemployment and increasing the unemployment rate."
Oh, yes, the economy is creating so many employment opportunities that people are in a position to be "selective?" What planet is this wanker living on? There are several hundred, in some cases, several thousand, applicants per job opening. JP Morgan's resident economic genius apparently thinks it's the other way around and that there are hundreds of job offers for every unemployed person.
Outrage #2
Let's now go to the other leg of his hypothesis:
"Second, they [jobless benefits] may encourage people who would otherwise drop out of the labor force to be counted as jobseekers and therefore in the labor force."
In his breathlessly illogical construct, Mr. Feroli is saying that because in order to receive jobless bennies you have to show you are looking for work, you are counted as a member of the job force and that makes the nation's official unemployment rate higher. Note to Feroli: If you drop out of the labor force you are still jobless. It's just that you're now considered a "discouraged" worker and are no longer counted in the official unemployment statistic. But you are still without income and banks, like the institution you work for, are still foreclosing on your home.
So on one hand he says jobless benefits cause people to be "selective" and not take jobs, yet, by looking for work at all, they are contributing to a higher unemployment rate. There is no way to win with this guy.
Outrage #3
Damien Hoffman, at Wall St. Cheat Sheet, pokes great big, gigantic holes in FerolI's twisted theory. The biggest one being if you made $1,000 a week when you were employed, how is making $400 a week in jobless benefits any kind of incentive to not find work?
"There are many macro forces which have caused one of the worst recessions this century. Therefore, I don't buy the overly simplistic conclusion that unemployment benefit extensions are the cause of longer than average unemployment. I think the busted credit bubble played a major role.
In the entire report, there was not one mention of how much money people receive on unemployment. More importantly, there is no metric showing unemployment income compared with former income. There is also no metric showing unemployment income compared with personal/household expenses.
As of February 2009, the average weekly unemployment check in the U.S. was $293. How many people do you know who can manage on less than $300 a week? How about living in Manhattan on $405 a week? If you've ever visited, you know that' a joke.
I'm not sure if Michael Feroli at JPMorgan has been at his desk for over 100 hours a week, but he needs to get out more."
Thank you, Damien Hoffman, you're my new hero.
Outrage #4
Do you realize how many people have been laid off by JP Morgan Bank? Since November of 2008, more than 17,000. I know many of them because I met them at a career transition service called BDM back when I was unemployed just a few short months ago.
In Feroli's intellectual masturbation exercise, he is talking about his own laid off co-workers. Apparently, he doesn't understand how close he's come to being laid off himself. And, frankly, after seeing the quality of his analytical work, I would not lay him off. I would fire him for cause and he therefore would be denied unemployment benefits which should be just fine with him, because according to his theory, that would help the nation's overall unemployment situation.
Because he would not be receiving jobless benefits, by his own conclusions, this would motivate him to try and find work faster.
Summing Up the Outrages
- JP Morgan Bank is paying a man to research and publish analysis about statistics that have nothing to do with real people, their real lives and the real pressures they face.
How do you sleep at night, Michael Feroli?