Here's the answer, of sorts, from Heritage's Bill Beach:
Beach says it is an unusual bug of the model at use: The unemployment rate remains fairly independent from other variables. "The normal way of doing unemployment statistics or rates is to take the civilian labor force and find out the number of people who are working—then to calculate the unemployment rate from there. That's the way the BLS does it," he says. But the Heritage model calculates it differently.So there's your answer: in the Heritage economic model, total employment is not related to unemployment rate.
The model derives the unemployment rate from two variables: a wage-price variable (essentially, how much workers cost) and the full-employment unemployment rate (essentially, the lowest the unemployment rate can get without spurring inflation). Beach says he felt that latter variable had been set too low. He set it higher, re-ran the whole shebang, and came out with new, higher unemployment rates—with no impact on the rest of the model. Total employment, public employment, and private employment were never affected, he says.
Let me try that again: the number of people with jobs is not related to the percentage of people with jobs.
Is there any way at all to reconcile that?
I'm pretty sure there isn't. It is possible, however, that the unemployment percentage figure is merely an ornament; that is, the projection does all its work using the employment figures, and then entirely separately spits out an unemployment percentage number that has no further effect on anything.
Remember, this matters because fewer people with jobs means fewer people paying taxes, which means that revenues are lower. So, normally, a significant change in unemployment is going to be associated with a significant drop in federal tax revenues (and, since there are also costs to the federal government when people are out of work, there should be an increase in spending, also).
So I guess the next question is: how many other parts of the Heritage "forecast" are just ornaments that could be arbitrarily changed without any effect on the rest of the model?
Of course, that's still not as important a question as why Paul Ryan is taken seriously even though he went shopping for his own economic forecasts instead of using CBO and the Joint Committee on Taxation like everyone else (that is, every Democrat) does, or the question of why anyone should believe supply-side voodoo about deficits when it failed so spectacularly in the 1980s and 2000s.