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Manufacturing, unemployment, and the Sputtering Recovery in North Carolina’s Metros

Posted By Allan Freyer On June 4, 2012 @ 2:45 pm In NC Budget and Tax Center | Comments Disabled

Throughout much of the Twentieth Century, North Carolina’s employment base rested largely on the state’s legacy manufacturing industries of textile, tobacco, and furniture.  But given the vulnerability of these industries to offshoring, plant closures, and mass layoffs, did over-reliance on these industries prior to the Great Recession actually leave North Carolina’s metro areas susceptible to high unemployment after the recession?

See last week’s ProsperityWatch (here [1] or below the fold) for a discussion of the role played by pre-recession manufacturing specialization in explaining the different experiences of the state’s metro areas during the post-recession recovery.

Prosperity Watch Issue 13, Number 4—Pre-Recession Specialization in Manufacturing Jobs Leads to Higher Post-Recession Unemployment across North Carolina’s Metro Areas

Although North Carolina’s seasonally adjusted unemployment rate continued to fall last month—down from 10.2 percent in January to 9.4 percent in April—some regions of the state are experiencing recovery in the labor market more quickly than others.  According to data released by the Division of Employment Security on Friday, all but one of the state’s 14 metropolitan areas (Wilmington) saw an in increase in the number of employed workers over the last year, but the overall jobless picture in these metros varies widely, from a 12.1-percent unemployment rate in the Rocky Mount Metro Area and a 10.5-percent rate in Hickory-Morganton on the high end to a 7.1 percent jobless rate in Durham-Chapel Hill and 7.4 percent in the Raleigh-Cary Metro Area on the low end.  As with all regions below the state level, the unemployment rates for these metros are not statistically adjusted to reflect seasonal hiring patterns.

Given the historic importance of legacy industries like textiles, tobacco, and furniture manufacturing for the state’s employment base, North Carolina’s manufacturing sector can be especially relevant for explaining the variation across metros’ labor markets.  At the outset of the Great Recession, the manufacturing sector comprised 12 percent of the state’s total employment, but by this April, accounted for 37 percent of the state’s total job losses to date.  Although about a third of the state’s manufacturing base existed in rural areas, these job losses also filtered down to the state’s metro areas, hitting especially hard those metros with significant specialization in manufacturing when compared to the state average.  In other words, those metros with a larger percentage of their workers employed in manufacturing than were similarly employed in the state as a whole—those that were specialized in manufacturingtook a proportionately greater hit to their employment base during the recession than those metros that were less specialized in this sector.

As a result, those metro areas overly-specialized in manufacturing have had a harder time replacing the jobs lost to the recession and, thus, have higher unemployment rates. As seen in the chart below, nine metro areas were not so specialized in December of 2007, and taken together their average unemployment rate in April 2012 is 8.5 percent, well below both the 9.9 percent combined jobless rate of the four metros that were highly specialized in this sector and the overall (unadjusted) state unemployment rate of 9.1 percent.  Although Raleigh-Durham is one of the most specialized metros in the state, its high-skill and high-wage manufacturing industries make it an outlier when compared to the state as a whole and the remaining specialized metro areas.

[2]

Similarly, the “specialized” metros accounted for 36 percent of the state’s manufacturing base in 2007 prior to the recession, but comprised almost 40 percent of the state’s total job losses in the sector to date.  This suggests that the metros overly-specialized in the over-all manufacturing sector were also over-concentrated in the specific manufacturing industries—the legacy industries of textiles, tobacco, and furniture—that traditionally required unskilled or low-skill labor, and as a result, were most susceptible to offshoring, layoffs, and plant closures. Given that jobs in high-skill manufacturing industries typically pay commensurately higher wages than lower-skill manufacturing jobs, recent wage data from 2011 reinforces this conclusion: the average manufacturing wage of the non-specialized metro area paid $1086 per week, $70 above the state average, while manufacturing workers in specialized metros earned only $841 per week, almost $150 below the average state wage.  This suggests that specialized metros were overly-concentrated in low-wage, low-skill manufacturing industries, precisely those industries most vulnerable to the ravages of the Great Recession.

Although clearly not the only factor involved, pre-recession specialization in manufacturing provides an important explanation for the variation in joblessness across the state’s metro areas.


Article printed from The Progressive Pulse: http://pulse.ncpolicywatch.org

URL to article: http://pulse.ncpolicywatch.org/2012/06/04/manufacturing-unemployment-and-the-sputtering-recovery-in-north-carolinas-metros/

URLs in this post:

[1] here: http://www.ncjustice.org/?q=node/880

[2] Image: http://pulse.ncpolicywatch.org/wp-content/uploads/2012/06/PW-13-4-metro-manufacturing-final2.png

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