The State of Working North Carolina

Each year on Labor Day our State of Working North Carolina report details the economic conditions and trends that face North Carolina’s workers.  This year, in addition to focusing on these conditions and trends today, we also delved deeper how the current lack of jobs and the growth of low-wage jobs will impact the state’s economic future, particularly given demographic trends in the state.

This week’s Prosperity Watch takes a look in particular at the resiliency in the African-American labor force in the context of a shrinking of the state’s labor force and a significant number of North Carolinians who remain missing from the labor force.  Both trends are primarily driven by the lack of jobs and together are holding back the state’s full recovery.  Within these broader trends, however, and despite higher unemployment rates, African-American workers have remained in the labor force at a greater rate than other workers.  From Prosperity Watch:

In the face of high unemployment and labor market outcomes that are pushing African-Americans in particular further behind, an interesting trend has emerged.  In the nation as whole and North Carolina, African-American workers have demonstrated resiliency in their connection to the labor force. The unemployment rate for African-Americans remains much higher relative to whites, growing by 4.6 percentage points from 2007 to 2013 compared to a 2.7 percentage point change over the same period for whites. And yet, African-Americans have been much less likely to leave the labor force altogether despite weak job prospects.  The labor force participation rate changed from 2007 to 2013 for African-Americans by 2.6 percentage points while dropping far more for whites by 4.2 percentage points.

The labor force resiliency of African-American workers is contributing to the persistent difference in unemployment rates between African-Americans and whites.  But on the positive side, when jobs return, it could also position African-American workers for faster re-employment.

Back to School Series, NC Budget and Tax Center

Cross-posted on the Prosperity Watch platform.

As North Carolina’s young people head back to school this week, it is their increased educational attainment that has the greatest potential to not only generate improved earnings and provide some protection against the worst employment outcomes their lifetime but also strengthen the state’s overall economic recovery and economy.

States with higher educational attainment not only have higher productivity but higher median wages. The increases in production of goods and services benefit the median worker in these states.

PW_Higher Educational AttainmentThat is a welcome outcome in light of national trends and what is happening in North Carolina. For the past thirty years, as the economy has become more productive, wages for the average worker have actually stagnated. In North Carolina, particularly in the most recent post-recession period, wages have actually fallen despite productivity growth.

Jobs without good wages, increased productivity without wage growth are not the markers of a successful economy. States have a unique opportunity to pursue an economic development strategy through education that is focused on increasing the wages of the median worker in the state and thus improving their well-being. Read More

Missing Workers, NC Budget and Tax Center

Yesterday’s release of the latest labor market numbers for July 2014 continues to show a slow recovery of jobs in North Carolina. Job growth, while occurring, is insufficient to ensure that the state’s growing working age population has employment opportunities. North Carolina has still not replaced the nearly 300,000 jobs lost during the Great Recession. In fact, the state’s job creation over the year (2.1 percent) is not significantly different than that for the nation (1.9 percent) over the same period. The state’s jobs deficit also remains high at 470,000, and at the current annual rate of job creation will require five years to close.

In this context, here is the missing workers update for July 2014: there still remain more than 256,000 North Carolinians who are missing from the labor force.  These are folks who would be seeking employment if job opportunities were stronger. If these workers were counted in the unemployment rate, that rate would be 12 percent rather than the official unemployment rate for July 2014 of 6.5 percent.

BTC - Missing Workers July 2014

NC Budget and Tax Center, Uncategorized

One of the fundamental claims made about North Carolina’s cuts to unemployment insurance payments was that such a policy change would create a greater incentive for jobless workers to take available jobs and employment in the state would rise as a result.

The Economic Policy InstituEPI Cuts to Unemployment Insurance Benefitste (EPI) posted a great graphic once again demonstrating that there is no evidence to suggest such a causal effect on employment from unemployment insurance cuts.  In this case, researchers at EPI compare North Carolina’s employment levels to our neighbors who are likely to have experienced similar macro-economic conditions. Their finding:

As the graph shows, North Carolina’s prime-age EPOP (employment to population ratio) began rising rapidly in the months prior to the duration cutback, began falling steadily just two months after the duration cutback, and differed very little in behavior after the cutback from prime-age EPOPs in surrounding states.

Bottom-line: North Carolina’s labor market has not improved as a result of unemployment insurance cuts.

NC Budget and Tax Center

Over the course of the past three days, nearly 10,000 North Carolinians signed a petition calling on legislators to address the rising cost of the tax cuts that passed last year.  Tax cuts that primarily benefit wealthy taxpayers and profitable corporations.  The petition was delivered yesterday to legislators and yet early this morning the Senate approved a budget that fails to stop future tax cuts or address the growing gap between the priorities of the state and the adequacy of our revenue system.

PetitionDelivery

As the House debates the budget today, it is time to turn to the Governor for leadership on this issue.  He had early in 2013 committed to revenue neutral tax reform but as is increasingly clear the plan passed last year is not revenue neutral and is growing in cost.  The income tax cuts alone are projected to cost more than $5 billion over five years.  And it is quite possible, as we have written before, that the revenue shortfall for this fiscal year could be as high as $600 million.  That would mean the total tax plan would lose the state $1 billion in revenue each fiscal year.

Without those dollars it will be difficult for policymakers to meet the priorities of North Carolinians, sustain their plans for a teacher pay raise or ensure that North Carolina is on competitive ground and delivering a high quality of life to all.  Let’s hope the House rethinks the budget and if not that the Governor will lead the state down a more fiscally responsible path.