Employers Add 165k Jobs in April: Previous Estimates Also Increased

According to today's report from the Bureau of Labor Statistics, employers added 165,000 more jobs last month. Industries that added jobs included professional and business services, food services and drinking places, retail trade, and health care. The unemployment rate fell slightly, to 7.5 percent, a four year low.

Job creation estimates for February and March were increased by a total of 114,000, a reassuring development as job growth had been seen as particularly weak in March.


Some interesting points about today's jobs report from around the web:

• Dean Baker at the Center for Economic and Policy Research: "One issue worth emphasizing from this and past reports is that there is zero evidence that the prolonged period of high unemployment is due to a lack of skills of the workforce."
• Chad Stone at the Center on Budget and Policy Priorities: "The Fed has recognized that unemployment is too high and there is no immediate threat of inflation.  It’s time for lawmakers to recognize that unemployment is too high and there is no looming debt crisis...Despite 38 months of private-sector job growth there were still 2.6 million fewer jobs on nonfarm payrolls and 2.0 million fewer jobs on private payrolls in April than when the recession began in December 2007."
• Michael Greenstone and Adam Looney of The Hamilton Project at the Brookings Institution: "As of April, our nation faces a jobs gap of 10 million jobs." They also have a neat calculator where you can input your own job creation rate and see how long it will take the United States to close the jobs gap at that rate.
• By definition, the official unemployment rate does not count those workers who have given up and stopped looking for work, nor does it take into account those who are underemployed. For those figures, you have to look at the alternative measures of unemployment. By the most inclusive measure, unemployment stands at 13.9 percent (that's still significantly below the 17.1 percent it was in late 2009).
• The big problem is still long-term unemployment, according to the New York Times, among many others.

Film tax credits are ineffective

Image: Wpclipart.com

Legislators are considering a bill that would more than triple the state's film production tax credit cap to $25 million in fiscal year 2014. The bill would also extend authorization of credits up to the current level of $7.5 million through fiscal year 2016. Productions have to spend at least half a million dollars in Maryland to qualify. The credit was created in 2011.

Maryland, and Baltimore in particular, has received significant attention for the recent filming of HBO's Veep and House of Cards, the first production by Netflix. Supporters of the state film production tax credit argue that these high profile productions create jobs and improve the economy in ways that offset lost revenues. These benefits would be forfeited to states with better incentive programs if the credit is allowed to expire, they argue.

However, film production tax credits are problematic for a variety of reasons. The Center on Budget and Policy Priorities handily summarized the issue thus:

• State film subsidies are costly to states and generous to movie producers. ...Over the course of state fiscal year 2010 (FY2010), [forty three] states committed about $1.5 billion to subsidizing film and TV production...money that they otherwise could have spent on public services like education, health care, public safety, and infrastructure
• Subsidies reward companies for production that they might have done anyway. Some makers of movie and TV shows have close, long-standing relationships with particular states. Had those states not introduced or expanded film subsidies, most such producers would have continued to work in the state anyway. But there is no practical way for a state to limit subsidies only to productions that otherwise would not have happened.
• The best jobs go to non-residents. The work force at most sites outside of Los Angeles and New York City lacks the specialized skills producers need to shoot a film. Consequently, producers import scarce, highly paid talent from other states. Jobs for in-state residents tend to be spotty, part-time, and relatively low-paying work — hair dressing, security, carpentry, sanitation, moving, storage, and catering — that is unlikely to build the foundations of strong economic development in the long term.
• Subsidies don’t pay for themselves . The revenue generated by economic activity induced by film subsidies falls far short of the subsidies’ direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies’ positive economic impact.
• No state can “win” the film subsidy war . Film subsidies are sometimes described as an “investment” that will pay off by creating a long-lasting industry. This strategy is dubious at best. Even Louisiana and New Mexico — the two states most often cited as exemplars of successful industry-building strategies — are finding it hard to hold on to the production that they have lured. The film industry is inherently risky and therefore dependent on subsidies. Consequently, the competition from other states is fierce, which suggests that states might better spend their money in other ways.
• Supporters of subsidies rely on flawed studies. The film industry and some state film offices have undertaken or commissioned biased studies concluding that film subsidies are highly cost-effective drivers of economic activity. The most careful, objective studies find just the opposite.

Even the Tax Foundation agrees that film subsidies make little policy sense. Maryland should let the state film production tax credit expire at the end of this fiscal year, as scheduled.

Sequestration still coming March 1st

Our friends at the Center on Budget and Policy Priorities (CBPP) blogged recently about the effects of the sequestration cuts now scheduled for March 1st. These automatic budget cuts may have a significant effect on Maryland-something not lost on Governor O'Malley, who included contingency funds in his proposed FY 2014 budget. According to CBPP:

The [so-called “fiscal cliff” budget deal] sliced the scheduled 2013 sequestration by $24 billion, from $109.3 billion to $85.3 billion.  This reduces the percentage cuts in full-year funding for most eligible programs (those that the law does not exempt from the automatic cuts).  The Medicare percentage does not drop, however, because Medicare cuts were and are still capped at 2 percent, and the across-the-board cut that applies to other non-defense programs remains larger than 2 percent.

[CBPP] also adjusted the figures to reflect the extension of Emergency Unemployment Compensation in the fiscal cliff deal and the likely enactment of additional disaster funding in response to Hurricane Sandy.  Both sources of extra funding are subject to sequestration, which spreads the scheduled cuts more broadly.

Growing income inequality in Maryland

Our friends at the Center on Budget and Policy Priorities and the Economic Policy Institute have released a new report looking at the growth in income inequality between the top, middle, and bottom of the income spectrum. They've created a great infographic about how inequality in Maryland has widened in recent decades:

Click to enlarge

This prolonged growth in income inequality undermines the basic American belief that hard work should pay off. Continued growth in income inequality would harm our state’s future economy. Policies that narrow rather than widen income inequality will help Maryland recover from the downturn and grow our economy into the future. Policies such as:

• Promoting access to education and job training for tomorrow's labor market.
• Continued growth in investments in transit, childcare, and other programs that help workers connect with employers and keep jobs once they're hired.
• Other protections for low-wage worker incomes such as paid sick leave.

Growing income inequality is bad for Maryland and policymakers should pursue policies that narrow – not widen – income gaps.