NC Budget and Tax Center

Falling labor force continues to drive drop in unemployment rate

North Carolina’s falling labor force continues to drive reductions in the state’s unemployment rate, according to the February jobs report released by Division of Employment Security this morning. Over the last year, just 4 in 10 formerly unemployed workers actually found jobs, while the rest dropped out of the labor force.

Despite falling to 6.4 percent since February 2013, the unemployment rate masks the true plight of joblessness in the state.  Since the unemployment rate is calculated by dividing the number of unemployed people by the number of people in the labor force, the unemployment rate can also go down if the labor force shrinks, even if genuine joblessness remains high.  And that’s what happened from February 2013 to February 2014—only 48,000 jobless workers moved into employment over the last year. The rest—another 64,000 workers—just gave up and dropped out of the labor force, continuing a historically unprecedented contraction in the state’s workforce.

If North Carolina is going to see a healthy long-term recovery in employment growth, we need to see all jobless workers moving into jobs, rather than out of the labor force. And we’re not seeing that because job creation remains anemic. In fact, North Carolina created just 46,000 payroll jobs over the last year, according to preliminary estimates released today. This is significantly less than the 69,000 jobs created in 2012, and the 62,000 jobs created in 2011.

Five years into the recovery from the Great Recession, we would expect North Carolina to see a steadily accelerating rate of employment growth each year, yet the numbers released today paint a different picture. While these numbers will certainly be revised in the next year, it is clear that the state’s employment growth is not living up to expectations, and more importantly, is failing to meet the needs of the state’s unemployed.

For the state to make true progress on bringing down unemployment, the state needs to create jobs at a significantly faster rate than the national average. But we’re not. Over the past year, North Carolina actually saw slower job creation than the national average, growing employment by 1.2 percent, compared to the 1.6 percent growth rate for the nation as a whole. This suggests that much of the growth the state is experiencing is simply due to the steady overall improvements in the national economy, rather than something special happening in North Carolina.

Given the depth of job loss experienced by North Carolina during the recession, the state needs to create jobs at a much faster rate than the national average and its own recent historical performance.  Along with creating more jobs, the state needs to create more better jobs—jobs that pay enough to allow workers and their families to make ends meet. This is the only way to generate a true Carolina Comeback.

7 Comments


  1. Amy

    March 28, 2014 at 6:21 pm

    Well with the way our state government is gutting and destroying the education system, why would employers seek our state out for a well rounded and educated workforce. They need to reverse the law that taxes the lower earning more, but cut taxes for wealthy and big corporations, it didn’t work for Kansas.

  2. Alex

    March 29, 2014 at 12:03 pm

    With Obamacare, folks are now able to pursue their dreams which doesn’t include work. Nancy Pelosi and her crew have set us free from such menial tasks.

  3. Joe Blow

    March 29, 2014 at 2:58 pm

    “Since the unemployment rate is calculated by dividing the number of unemployed people by the number of people in the labor force, the unemployment rate can also go down if the labor force shrinks”

    Wrong. If the work force gets “smaller” then the rate goes up. The unemployment rate should be inversely proportional to the number of people in the work force (assuming the number of unemployed stays the same, for the sake of this example).

    rate of unemployment = number of unemployed / number of working-bodied people

  4. Alan

    March 29, 2014 at 5:57 pm

    I LUV Obamacare.

  5. Doug Gibson

    March 31, 2014 at 9:47 am

    Joe,

    From Wikipedia:

    The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force.

    And this is from the article on labor force?

    The unemployment rate is calculated by dividing the number of unemployed persons by the size of the workforce and multiplying that number by 100, where an unemployed person is defined as a person not currently employed but actively seeking work. The size of the workforce is defined as those employed plus those unemployed.

    So, to recap:

    If you’re employed, you’re employed.

    If you’re unemployed but actively seeking work, you’re unemployed but still part of the workforce.

    If you’re unemployed but no longer seeking work for whatever reason, you are not part of the workforce.

    If more people leave the job market than enter it, the workforce shrinks.

    If the workforce shrinks, the unemployment rate can fall even if the number of employed doesn’t change.

  6. LayintheSmakDown

    April 1, 2014 at 7:17 pm

    All those people out there now pursuing their dreams. Great times in America!

  7. LayintheSmakDown

    April 1, 2014 at 10:40 pm

    And the “problem” is only going to get worse as the huge percentage of baby boomers retire in droves…for that better life you know. It is not like this has not been a demographic situation that was not foreseen, and it is not the Republicans fault…or even the fault of the democrat party for that matter.

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