Network News

X My Profile
View More Activity

The view from Nevada

A readers writes in:

I moved to Nevada 2 years ago and had a job waiting for me here finding jobs for others as a recruiter in IT and engineering. Since there are really only three sectors of work here in Nevada -- Department of Defense, Department of Energy, and tourism: DOD is Nellis and the Air Force, Energy are California companies going green and most of the Strip jobs are general labor that pay very light wages, but workers do get tips. I was laid off two months ago and if they stop unemployment this state will never recover.

There are so many people living with other people just to survive. Most are under water as far as homes and there just aren't any jobs to go after. Lots of folks are working 40-hour weeks on commission just to have a chance at making a buck and aren't. Nevada isn't in a recession, Ezra. We are in a depression and there isn't an end in sight as far as I can see.

I'm not sure that last line is hyperbole. As I noted yesterday, Nevada leads the nation in unemployment. If the national unemployment rate were 14 percent, would we be calling this a recession or a depression?

By Ezra Klein  |  July 1, 2010; 12:16 PM ET
 
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Research desk is open
Next: Lunch break

Comments

"If the national unemployment rate were 14 percent, would we be calling this a recession or a depression?"

And, what's more, if trends hold, we will get to find out if I'm right.

The Democrats would call it a jobless recovery, and the Republicans would call it Obama's Great Depression.

"I was laid off two months ago and if they stop unemployment this state will never recover."

If that was strictly true, then no state would have ever recovered from any economic downturn before the establishment of unemployment insurance. Which they clearly have. That being said, he does understand that they will still be receiving more in the way of unemployment benefits than any group of unemployed people have before (in this country)? It's not like they are going to "stop" unemployment benefits and folks who were laid off two months ago are going to stop getting their checks.

Posted by: Kevin_Willis | July 1, 2010 12:34 PM | Report abuse

Well if our elected idiots didn't spend a year doing HCR they could have helped the economy. How many more people don't have health insurance because the dems didn't do anything to help?

Posted by: obrier2 | July 1, 2010 12:57 PM | Report abuse

It's funny because Obama has been trying to pass additional jobs packages and stimulus bills but Republicans (and a handful of toolish Dems) have him every step of the way, just like they did with the first stimulus package which they're now arguing was too little.

It's almost as if Republicans have no actual interest in governing this country.

Posted by: lol-lol | July 1, 2010 1:06 PM | Report abuse

Obama went the G20 arguing that it was too soon to stop stimulating the economy. He needs to make that same argument (forcefully) here at home.

FDR was not limited to a single experiment in stimulus and job creation to pull us out of the Great Depression. It was (and is) crazy to expect that one package (of tax cuts as well as spending measures) would be all that it would take this time in order to solve the huge decrease in demand and revitalize the badly damaged economy.

It needs to a sustained, ongoing effort, with many facets.

Posted by: Patrick_M | July 1, 2010 1:07 PM | Report abuse

It's funny because Obama has been trying to pass additional jobs packages and stimulus bills but Republicans (and a handful of toolish Dems) have him every step of the way, just like they did with the first stimulus package which they're now arguing was too little.

It's almost as if Republicans have no actual interest in governing this country.

Posted by: lol-lol | July 1, 2010 1:09 PM | Report abuse

So how long should unemployment benefits last? 1yr? 2yrs? 10 yrs? Forever? Currently, they can last 99 weeks depending on the state. If you cannot find work in 99 weeks, it is because unfortunately you have to take substantially lower wages. Adding benefits into perpetuity just delays the inevitable.

Posted by: sgaliger | July 1, 2010 1:23 PM | Report abuse

I would resist determining recession vs. depression based on a single number, even unemployment, because a single number at a single point and time doesn't give an adequate picture of what is going on. I am no expert on the Nevadan economy, but I suspect the commenter, while somewhat hyperbolic, is right. The state experienced huge population and economic growth -- but almost all of it was bubble related. There is very little undergirding a rather tenuous settlement in the middle of a desert. So, with unemployment benefits running out for many, spending will fall, the state is in terrible fiscal state and can't cushion it, so more people will lose their jobs, not be able to pay their mortgage/rent, etc.

To address a previous commenter -- I don't think that the comment was just referring to his/her benefits, but what happens with benefits run out for many people at the same time, and possibly for him/her eventually. And you commit a rather glaring logical fallacy that because states have recovered before without unemployment benefits, Nevada should be able to... First, some regions have not (fully) recovered from previous economic downturns, even with unemployment insurance (i.e. Rust Belt states that have struggled since the 1980s). Second, it does not take into account what barriers there are to mobility in the modern economy -- home ownership, education requirements, etc. Third, it does not take into account the unique circumstances of Nevada's boom and bust -- there are a lot of cookie-cutter houses and business based on people having a lot of cheap and easy money and not much in the way of base economic activity (agriculture, manufacturing, etc.) You add to that a state that will increasing struggle with water issues and you are not in a good position for a recovery...

Posted by: kcar1 | July 1, 2010 1:26 PM | Report abuse

@kcar1: "And you commit a rather glaring logical fallacy"

By raising a perfectly rational argument, acknowledged by the compulsion to label it a glaring fallacy, rather than merely refuting it.

"Second, it does not take into account what barriers there are to mobility in the modern economy -- home ownership, education requirements, etc."

We have as much mobility now as we have ever had, if not more--if for no other reason that there are more businesses generally, more houses and apartment buildings, and more places to live and work in this country than there were even twenty years ago, much less 60 years ago.

"Third, it does not take into account the unique circumstances of Nevada's boom and bust -- there are a lot of cookie-cutter houses and business based on people having a lot of cheap and easy money and not much in the way of base economic activity"

Well, Nevada has both legalized gambling and prostitution (admittedly, heavily regulated and constrained, but still). They are actually in a unique position to enjoy a financial recovery, if the president can stop singling out Las Vegas as an exemplar of corporate excess and a sinful travel destination for corporate fat cats.

Just sort of kidding about that last part. Tongue in cheek, as they say.

That being said, the argument still remains. There is precious evidence that more and longer unemployment benefits will do anything to make the state recover, or that a lack of unemployment benefits will prevent it.

For full disclosure, I've collected unemployment three times in my life, and every time it could have lasted longer (and the checks could have been fatter, too) and I wouldn't have complained a whit. I'm really not down on unemployment benefits, I just think there importance to the overall performance of the economy (nationally or locally) is over-stated.

Posted by: Kevin_Willis | July 1, 2010 1:41 PM | Report abuse

As you also noted yesterday, North Dakota's unemployment rate is 3.8%.

http://voices.washingtonpost.com/ezra-klein/2010/06/angle_vs_reid_--_and_nevada_--.html

One question is how much the rest of the country should subsidize unemployment benefits in Nevada, or should the labor market re-balance by some Nevadians moving elsewhere to find work?

Much of the Nevada economy in the 2000's was pure bubble, and to find jobs for all those unemployed in Nevada without some of them relocating would require re-inflating that same bubble.

One major problem with Nevadians moving is the housing crisis with all the underwater mortgages that they are stuck with. The Obama administration's mortgage modification programs have not been successful in addressing the scope of the problem. Passing bankruptcy modification (aka cram-down) legislation would go a long way towards addressing this and allowing the housing market to start to clear and thus free up the labor market to be more mobile. To paraphrase U2, right now we seem to be stuck in a moment that we can't get out of.

Posted by: jnc4p | July 1, 2010 1:47 PM | Report abuse

"That being said, the argument still remains. There is precious evidence that more and longer unemployment benefits will do anything to make the state recover, or that a lack of unemployment benefits will prevent it.

For full disclosure, I've collected unemployment three times in my life, and every time it could have lasted longer (and the checks could have been fatter, too) and I wouldn't have complained a whit. I'm really not down on unemployment benefits, I just think there importance to the overall performance of the economy (nationally or locally) is over-stated."

Kevin_Willis,

I assume you meant to say "precious little evidence."

I think even if the benefits have no stumulative effect (and I think they do), it makes sense to continue them in a period of high unemployment, because the resulting costs of ending them will just end up costing states and localities in other ways, as people lean harder on other parts of the safety net programs.

Second, I don't think anyone knows whether having an ever-increasing number of long-term unemployed losing their benefits will not have an anti-stimulative effect. Until there is robust job growth again, I don't think this a gamble we ought to take.

Lastly, I think the first and best argument is not the stimulus argument, it is the humanitarian argument. Hard-working people, especially older workers, are having a rough time. If our budget can afford two wars, and subsidize all kinds of businesses, and in the grand scheme of things we can make a huge positive difference for a huge number of struggling families with a relatively cheap expenditure.

It is appalling that we choose otherwise.

Maybe we should tell Ben Nelson we'll pay for the UI extension by reducing agricultural subsidies to Nebraska. High fructose corn syrup need not be quite so cheap.

Posted by: Patrick_M | July 1, 2010 1:57 PM | Report abuse

Kevin_Willis writes
"Nevada has both legalized gambling and prostitution (admittedly, heavily regulated and constrained, but still). They are actually in a unique position to enjoy a financial recovery, if the president can stop singling out Las Vegas as an exemplar of corporate excess and a sinful travel destination for corporate fat cats."


Nevada's tourism economy relies on one thing: disposable income. There won't be widespread surplusses in disposable income until 1) jobs are created / the unemployment rate goes down; and 2) housing prices start appreciating or enough time passes that the 'underwater' homeowners reach the break-even point & the rate of foreclosures drops to normal territory. Neither of those things is likely to come to pass any time soon. If I were unemployed in Nevada, in a house I couldn't afford & couldn't sell, I'd think seriously about leaving it all behind & starting over where the prospects of finding a job are better.

Posted by: bsimon1 | July 1, 2010 1:58 PM | Report abuse

"One major problem with Nevadians moving is the housing crisis with all the underwater mortgages that they are stuck with."

Worse still, according to an NYT article a couple-three weeks ago, there is new construction going on in Nevada. Buyers apparently don't want the 'old' houses that are in foreclosure, they want fresh, new houses. So there's already a housing surplus in the LV area, where people are trapped in their underwater homes, yet somehow there's still demand for new construction. I think there must be something in the dust out there that disconnects people from reality.

Posted by: bsimon1 | July 1, 2010 2:03 PM | Report abuse

@Patrick_M:

"I assume you meant to say 'precious little evidence.'"

You presume correctly, although I kind of like the phrase "precious evidence".

All good points, btw. And, as you may have noted, I'm all over getting rid of agricultural subsidies. UI would be a better use of the money.

Posted by: Kevin_Willis | July 1, 2010 2:06 PM | Report abuse

"All good points, btw. And, as you may have noted, I'm all over getting rid of agricultural subsidies. UI would be a better use of the money."

Who says bipartisanship is dead?

;-)

Posted by: Patrick_M | July 1, 2010 2:27 PM | Report abuse

"First, some regions have not (fully) recovered from previous economic downturns, even with unemployment insurance (i.e. Rust Belt states that have struggled since the 1980s)."

The rust belt states all did recover. During the 1991-2001 expansion, Michigan's unemployment fell to 3.3%. Ohio hit 3.8%. Indiana was as low as 2.8%. I'd cite more but you get the picture.

In any case, if unemployment is persistent in a particular region, but not the country as a whole, then move!!! Things like unemployment insurance tend to dull these type of market signals.

As Kevin notes, the country has never failed to recover from a downturn.

I'd rather unemployment insurance be linked to a personal savings account, which you would tap into first. This would minimize the negative effect on job search. For those who deplete their savings accounts, they start receiving unemployment benefits. Once a new job is found, these benefits have to be paid back (at 0% interest) before new funds are added to the savings account. Any funds left over in the account are yours in retirement, and any deficit is forgiven at retirement. Obviously people would be less than thrilled if this started now, but something to consider.

Posted by: justin84 | July 1, 2010 2:41 PM | Report abuse

NV had among the highest population and income growth rates in the US after its gaming fortunes recovered from the crash in the '90s. Old casinos were demolished as bigger, more lavish ones went up. Construction labor had to be imported from other states. The bigger the boom, the bigger the bust.

HI, another tourism dependent state, had a similar experience in the late 80's. Income growth soared as the Japanese took advantage of the strong yet and poured money into the state fueling massive resort development. After the real estate bubble burst in Japan during the early 90's, the new money dried up and HI's economy went into the tank. The state economy paralleled the Japanese economy's 'lost decade.'

Coincidentally, HI also relies heavily on federal gov't expenditures as a key driver for the state economy. If NV loses Harry Reid as its source of its federal dollars, the state will be even worse off than it is now. In HI's case, it's senior Senator happens to be the chair of the Senate Appropriations Committee.

Posted by: tuber | July 1, 2010 3:26 PM | Report abuse

"I'd rather unemployment insurance be linked to a personal savings account, which you would tap into first. This would minimize the negative effect on job search. For those who deplete their savings accounts, they start receiving unemployment benefits. Once a new job is found, these benefits have to be paid back (at 0% interest) before new funds are added to the savings account. Any funds left over in the account are yours in retirement, and any deficit is forgiven at retirement."

Conservative zealot suggests that every working person be made to pay directly for their own unemployment. Hmmm.

Since UI is funded in large measure by taxes that working people pay, most of us think about those taxes as largely akin to a "personal saving account" that supports a system that will be there for us as individuals if and when it is ever needed.

Kind of strange to require that benefits be repaid that are being continuously funded by tax revenues to start with.

Also said idea will discourage people from accepting lower-paying work, knowing that they have start to paying back their unemployment benefits, which will only magnify the income hit associated with accepting a lower-paying position.

Here's a different idea. Instead of forcing the victims of the recession to pay for their own unemployment, let's raise money for the victims of the great recession by taxing Wall Street and the excessive compensation of the Wall Street executives who are responsible for the downturn that put the people out of work.


"Obviously people would be less than thrilled if this started now, but something to consider."

Yeah, obviously.

Posted by: Patrick_M | July 1, 2010 3:37 PM | Report abuse

Kind of hard to move when you can't sell your house.

Posted by: lol-lol | July 1, 2010 4:14 PM | Report abuse

Greetings from RENO!
I am a Paralegal; I have my wife and teen Daughter living with me in a one bedroom apartment.
I have been out of work for 18 months, and my unemployment will end next week... I will be homeless.

The National average was 11.5% in the 30's.
They did not count agriculture labor, or immigrants.
As the majority of Farms are now corporate owned, and they employ illegals, that number still needs waving.

So here we are at 14.8%; I have a CDL License to drive the big trucks as well.
The Trucking Companies (I am told) cannot keep drivers.
The drivers are picking up loads at the ports, and then driving to Dallas, Atlanta, Ohio to drop the Chinese imports.
They cannot get back hauls home as there is no more manufacturing in those area's.

my friends in Construction, that used to sub-contract the finishing aspects of building (Finishing, Drywall, Roofing)are going belly up after decades in business.
The reason being???
Low new home sales for sure! But more so is the input of "Home Depot, Lowes" and others underbidding them with supply discounts, and a parking lot labor force of Illegals...

I will be homeless soon, and with $2.80 going into the economy, for every dollar issued in unemployment, 1,700,000 unemployed?... 280 X 1,700,000 checks =???

Why is this bad?

Posted by: CousinVinny | July 1, 2010 4:24 PM | Report abuse

(sarcasm mode on)
The easiest way to solve Nevada's high unemployment rate is to require all employers to provide health care benefits to workers who work more than 25 hours per week.

Most of the workers in small businesses will be reduced to part time status (24 hours per week) but for purposes of the unemployment statistics, everyone is counted as employed. Just work two (or more) jobs to get the same wages as one full time job. Without benefits of course. (sarcasm mode off)

Posted by: tuber | July 1, 2010 5:27 PM | Report abuse

"Conservative zealot suggests that every working person be made to pay directly for their own unemployment. Hmmm."

I finally got called a conservative zealot! Yay! By the way (as you seem to understand), people already do pay for their unemployment. But by routing it through the government and then sending it back, incentives are corrupted. I actually know several people who have been on unemployment and turned down low paying jobs, because, as they reasoned 'I'd basically be working for extra $1/hr!' I cannot fault their reasoning, although I do note that both they and their community is poorer for it (in that their absolute income is lower and we don't get their labor services).

See pg 14, paragraph 3. The Fed has cited studies that unemployment insurance extensions could account for "1 percentage point or more of the increase in the unemployment rate during this recession." Not just unemployment insurance, but the extension of it, could have added 1%+ to the unemployment rate - 1,500,000 jobs. Call it the anti-stimulus. Of course, I'll admit you'd have to rely on stupid models here, but the economic logic is right.
http://federalreserve.gov/newsevents/press/monetary/fomcminutes20100127.pdf#14

So here's the deal. You put 2% and your employer puts 2% of your salary into an unemployment savings account. If someone works for 40 years at $30k/yr, that is $36,000 of principal. The account will earn interest.

If all goes well, this person will have about $90k extra in their retirement account if they manage to earn a 3% real return.

If you are unemployed, you can dip into that account by 80% of your existing monthly salary. Once the funds in this account are depleted, the government continues to pay you 80% of your former salary (or $461.54/wk in this case, maxing out at a fairly low amount like $800/wk) for a year. After a year, the benefit continues at $250/wk, and continues until a person is re-employed or retires. There is no 99 week cut off.

If a person retires with a large deficit - say, $20,000 - the government says well they must have had a tough time and just forgives it.

Most people though will end up with retirement funds, the job seeking incentives are stronger, and the protection for the very weakest is stronger because these benefits don't run out and deficits don't have to be paid back. And it costs the government far less.

"Also said idea will discourage people from accepting lower-paying work, knowing that they have start to paying back their unemployment benefits, which will only magnify the income hit associated with accepting a lower-paying position."

Really, more than being given a free lunch for 2 years? Paying $33/mo in back unemployment benefits on a $20k/yr job - knowing you'll have to start paying them back at somepoint anyway - is more discouraging that getting $300/wk (75% of what you'd make at that job) that you don't have to pay back?

Posted by: justin84 | July 1, 2010 8:54 PM | Report abuse

"Really, more than being given a free lunch for 2 years?"

You are earning your stripes as a conservative zealot, as shown the tone deaf reference to UI in this economy as "free lunch."

"Paying $33/mo in back unemployment benefits on a $20k/yr job..."

Ditto. $33 per month is actually a lot of money to, and a huge penalty to impose upon, someone scraping along on a $20k salary in 2010.

I could go on, but why bother? As you admitted at the outset, this chargeback-the-worker-for-unemployment-insurance scheme is a complete non-starter in the real world. Amusing as it would be to see the Republicans try to push such a concept, even they would not touch it with a ten foot pole.

Have a good evening.

Posted by: Patrick_M | July 1, 2010 9:26 PM | Report abuse

"You are earning your stripes as a conservative zealot, as shown the tone deaf reference to UI in this economy as "free lunch."

I'm hardly a conservative zealot. I just believe incentives matter.

Free lunch here means simply that it is someone else's money. It isn't intended to convey any judgment beyond that.

If you are getting $400/wk in UI and you're sitting on week 22, your motivation to get a job paying $400/wk is quite small, unless you really enjoy working. Even a job paying $500/wk doesn't seem worth it, since you'll only make an extra $100/wk - $2.50/hr - by working (less given things like FICA).

If the $400/wk you're getting paid is actually a loan, not a gift, you'd be more inclined to take the job and pay back your $30 which is out of ~$1,700/mo.

I don't think most people on UI are just free riding. I don't envy their situation nor think they are lazy. Most of them. Given Fed estimates and other research, perhaps 10% are avoiding jobs for one reason or another. I want to nudge these people into open roles (and by working at these jobs they create wealth, rather than spend money which just transfers wealth).

People who do well will have more resources to draw on in retirement. People trying to take the rest of the summer off get pushed into a job. Even if that job sucks, they can always go on monster.com and interview. People who are in awful positions and getting cut off completely wouldn't be cut off completely under my plan if the congressional horsetrading didn't go well, and if they ran up a huge bill, any remaining fund balances would be forgiven upon retirement age.

Since we're all paying into this system, and since net UI spending would go down under such a plan, the average American would be better off. Most people would have extra retirement money, some people wouldn't have any, and others would have debts but they'd be forgiven upon retirement.

I wouldn't start this now because the currently unemployed wouldn't be thrilled about starting at zero and already going into deficit mode. I would wait until unemployment was back to 5% or so for something like this.

Why wouldn't Republicans touch this, other than the fact that it doesn't have benefits ever expire? It promotes personal responsibility, saving, reduces government spending and helps only the neediest - the ones who had to blow through their retirement kitty.

'Night.

Posted by: justin84 | July 2, 2010 1:14 AM | Report abuse

As long as GDP stayed the same we'd still call it a recession...that is just how the term "recession" is defined.

Posted by: zosima | July 2, 2010 2:33 AM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company