NC Budget and Tax Center

Partial privatization of the N.C. Department of Commerce took another step closer to reality yesterday when the Economic Development and Global Oversight Committee (or EDGE Committee) reported out updated enabling legislation that authorizes the establishment of a nonprofit corporation to conduct significant pieces of the state’s business development activities. Using last year’s SB 127 as a template, the new version of the bill includes important changes—some for the better, some for the worse, and some that make us go “huh?”

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Yesterday, the Budget & Tax Center released a report on the number of North Carolinians who would have been working or seeking work if the Great Recession had never happened and job opportunities had remained strong over the last five years.  The report highlights using this new measure the troubling trend of too few jobs and workers leaving the labor force.  In addition, it pulls together compelling national research finding that most or all of the labor force decline is driven by a weak labor market.  Among the key findings:

  • 250,000 North Carolinians are missing from the labor force
  • If those missing workers were counted as unemployed, the unemployment rate would be nearly double the official rate for February 2014.

The report comes as national economists gathered this week to push for a full employment agenda, one that would seek to expand job opportunities and bring more folks into the labor market to support a stronger economic growth trajectory.  As attention nationally turns to the issue of persistent joblessness and the harm it is creating for workers and the economy, it is important for North Carolina’s policymakers to focus on good quality job creation and policies that support strong connections to the labor force for workers in a weak labor market.

This morning the Center on Budget and Policy Priorities in collaboration with leaders in the field of economics launched a push for a full employment agenda in America.  At the current moment when five years into the recovery there are still too few jobs for those who want to work, this effort couldn’t be more critical for the country and our own state of North Carolina.

So what would it mean to set as a goal full employment?  Full employment is generally described as the situation where the number of people seeking jobs and the number of employers seeking workers is closely matched.  The traditional trade-off economists focus on in discussions of full employment is the negative relationship with inflation.  But in practice, it is difficult to accurately pin down a level of unemployment that leads to rising inflation and there are tools available to allow the Federal Reserve to address inflation if it begins to tick up.

The benefits of full employment are too great to ignore.  A tight labor market pushes for more equitable distribution of growth, improves the connection to the labor market of workers and improves career trajectories.  Full employment is also connected to higher hourly wages and more work hours which is especially important as involuntary part-time work has grown.  It also has been demonstrated to improve fiscal accounts as revenues increase and expenditures on some safety net programs decline.

A full employment agenda requires federal and state policy action.  Among the policies that will be explored during today’s symposium are:

  • Stimulative fiscal policy
  • Lowering the trade deficit
  • Direct job creation
  • Worksharing
  • Manufacturing jobs
  • Apprenticeships and On-the-Job Training
  • Job quality

These concrete ideas for our economy, based in the best available evidence, provide an important re-orientation at a time when we are all seeking to improve the opportunities for working North Carolinians and Americans and grow our economy better into the future.

You can watch the launch of this event live here.

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.

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What’s the deal in Kansas these days? That’s a question Governor McCrory and North Carolina’s state leaders should be asking themselves.

After passing huge tax cuts in recent years, the subsequent unimpressive economic performance and continued disinvestment in core public investments in Kansas serve as a cautionary tale for North Carolina.

A recently released report by the Center on Budget and Policy Priorities (CBPP) highlights how Kansas’ economic performance has failed to live up to the promises made by Governor Brownback and his legislative allies. Kansas passed huge income tax cuts in 2012 that reduced annual revenue for public investments by more than $800 million for FY 2014. Proponents claimed the tax cuts would boost the state’s economy.

Last year North Carolina followed Kansas’ lead when state leaders passed and Governor McCrory signed into law a tax plan that includes huge income tax rate cuts and reduces annual revenue by more than $650 million once all tax changes take effect. Here too, the governor and proponents claimed that cutting taxes will boost North Carolina’s economy.

So how is Kansas faring these days?

Kansas hasn’t experienced anything close to an economic surge in the wake of the huge tax cuts. Massive revenue loss has meant continued state funding cuts to core public investments – public schools, colleges and universities, and healthcare services, for example. Read More