North Carolina’s unemployment rate dropped to 8.7 percent in August, according to the latest jobs report from the Division of Employment Security, but this “improvement” is largely the result of a mathematical quirk, and masks deeper, long-term problems in the state’s labor market—most notably, the lack of available jobs for unemployed workers.
While the number of unemployed people dropped last month, this is only because jobless workers gave up on their job search and dropped out of the labor force, not because they actually found jobs. In August, the labor force—the pool of prime-aged workers who are employed or looking for a job—dropped by 12,300, to the lowest levels since December 2011. At the same time, the number employed persons also dropped by 3,500—to lowest levels since August 2011. If the workforce continues to shrink, it is unlikely that the state will be able to completely replace the 328,000 jobs lost during the Great Recession or meet the needs of a growing population.
Job creation also appears to be moving in the wrong direction. Total nonfarm employment—as measured by the survey of establishments—actually fell by 1,700 jobs last month, and just 66,700 jobs over the last year. At this rate of annual job creation, it will take another 21 months for North Carolina to generate enough new jobs to get back to pre-recession employment levels.
An additional cause for concern is the fact that the state’s fastest growing industry pays the lowest wages. Over the last year, Leisure and Hospitality Services grew by 18,700 jobs, accounting for almost a quarter of the total employment growth in the state. Unfortunately, this industry pays $8.30 an hour, more than $12 below the statewide average—suggesting that the state’s growth opportunities are in ultra-low wage jobs. And just as these ultra-low-wage jobs are exploding, opportunities for higher-wage jobs are diminishing. Government jobs, which pay on average $21 an hour, have dropped by 12,000 over the last year.
Given that the majority of all job creation is occurring in industries that don’t pay a living wage, it’s hard to see how the state’s economy can continue to improve without significant income growth to support consumer spending at local businesses.