North Carolina’s unemployment rate is now 11% according to Economic Security Commission data released today. Less people looked for work last month, and there were also less jobs, 5000 of them.
The rate has hovered around 11% for 4 months now. It is down just 0.1% over May figures. While the rate remains steady, job loss continues apace in manufacturing, while hospitality saw job loss in June, a sure sign that the quickly contracted and now further softening in consumer spending is not over.
Based on the recessions of 2001 and 1990, it is likely that recovery will be slow and take years rather than months. Industries will take some time to re-adjust and this will slow business service growth. Manufacturing outlook is bleak on many fronts. Much more than labor intensive work is cheaper elsewhere. As hard as this may be to believe to an American worker without health benefits or a retirement fund, Asian and Mexican workers usually don’t have them either and work for less.
The future of credit markets is still murky. All losses still remain to be counted, and new regulations are more likely than not (or so we hope). Confidence is low, preference for liquidity, high.
Consumer spending is sluggish, and why shouldn’t it be? Job loss, falling housing values, shrinking retirements: who needs to spend?
There are two areas of the North Carolina economy that are continuing to add jobs: government (including local and education), and health. It is therefore ironic, that even as mental health is set to get devastated by state budget cuts, that some House and Senate legislators, Democrats included, want to step away from a modest commitment to tax reform and enhanced revenues.
Legislators need to become more wary of the future revenue picture, not just the next biennium. Without stimulus money and tax reform that raises around a billion per year, the 2011-2013 budget looks very bleak.
Supporters of tempororary taxes should be aware that it is far more likely than not that the North Carolina economy will remain sluggish for up to a handful of years. Genuine reform that expands the base of taxes and closes loopholes to promote revenue stability (and raises extra money in the process) may be a smarter bet than having to wrestle with the extension of a temporary tax.
Demand for assistance from the state will increase during the slump. State education and health services will take the brunt of the hard revenue shock. In many respects, we will see the effect most keenly on poor children, be they in school or pre-school, or in need of medical services. It makes the case for more revenue compelling.