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Veteran Raleigh journalist Seth Effron included the following fascinating chart in his daily “Quick Clips” this morning about the comparative success of Governors McCrory and Perdue in the field of job recruitment.

Commerce chart

 

In addition to in your email box, you can read Effron’s daily clips at Blue NC.

Commentary

mc-1Governor Pat McCrory emerged from his much-publicized meeting with a handful of other governors and President Obama at the White House  Tuesday breathlessly declaring that Obama is open to considering waivers to allow North Carolina to crafts its own version of Medicaid expansion under the Affordable Care Act.

But that shouldn’t be news to McCrory or anybody else.  Nine states, most of them with Republican governors, have already expanded Medicaid with waivers from the feds or have been in discussions with the Obama Administration about waivers for their own versions of the program.

Neighboring Tennessee is the latest state with Republican leadership to move forward, with Governor Bill Haslam unveiling a proposal for Medicaid expansion last month. 

Apparently McCrory had to fly to Washington to figure out that the Obama Administration was willing to work with state officials who are developing their own Medicaid plan.  Or maybe he just wanted us to know he was talking tough with Obama.

I presented a very strong argument for more flexibility if we even consider Medicaid expansion, so we can have a North Carolina plan instead of a Washington plan, and especially a plan that would encourage more people to get a job or get training before we expand another government program,” McCrory said after the meeting.

While it’s too bad it took McCrory much longer than many Republican governors to realize the Obama Administration was willing to work with the states to provide health care for people who need it, at least he seems to finally understand it.

There’s also the head-scratching logic that more people will have to get a job before Medicaid is expanded, as if only people who are working need to be able to see a doctor, not to mention the people with chronic illnesses whose lack of access to treatment prevents them from working in the first place.

But maybe now McCrory can get on with what he should have done already, following the lead of his Republican colleagues across the country by expanding Medicaid in North Carolina and providing health care coverage for several hundred thousand low-income people and creating thousands of jobs in the process. It is past time.

NC Budget and Tax Center

The 13th Annual Economic Forecast Forum, sponsored by the North Carolina Chamber of Commerce and North Carolina Bankers Association was held on Monday, January 5th. The event raised a range of issues, but a few are particularly relevant to the upcoming legislative session and the economic prospects of North Carolinians.

More cash for incentives is Governor McCrory’s first legislative priority: In his remarks, Governor McCrory launched an impassioned plea for a new economic development fund to lure large businesses to North Carolina. Saying that he is negotiating with companies that are considering investing in North Carolina, the Governor said that his first legislative priority is creating a new incentive fund. North Carolina already gives away millions of dollars a year in incentives, but being even more generous with large companies is the Governor’s first order of business for the new legislative session.

Regardless of what you think about incentives generally, it is rather odd to see the Governor making the creation of a new fund his top priority. First, incentives often go to companies that locate in parts of the state that already enjoy robust economic growth, so doubling down on this approach to economic development will likely do little to help areas that are struggling the most. Second, the program that the Governor described would only help very large corporations, which would ignore the vital role that small and medium sized companies play in creating new jobs. Third, we are heading into a legislative session where funds are already stretched thin for vital state services, so it is unclear what would have to be cut in order to free up funds to pay out to large mobile companies. If this policy is passed early in the legislative session, as the Governor insists is necessary, the real cost will only become clear when it comes time to produce a balanced budget several months later.

Head of Blue Cross Blue Shield of North Carolina touts Medicaid expansion: Brad Wilson, President and CEO of Blue Cross Blue Shield argued that state leaders should change course and opt to expand Medicaid, a move that would cover hundreds of thousands of people, with the bill being largely paid by the federal government. Wilson pointed out that the failure to expand Medicaid has left more than half a million North Carolinians without health coverage and has cost the state $1.1 billion in federal funding. Not expanding Medicaid results in North Carolina taxpayers subsidizing health care costs in other states with none of those funds returning to serve the residents of our state. Moreover, because people who would otherwise be covered by expanding Medicaid are forced to seek medical care through emergency rooms, and often lack the resources to pay for that care, health insurers are forced to increase premiums on North Carolina rate payers to cover the costs of covering the uninsured. The result is that North Carolinians end of paying twice for not expanding Medicaid, once when we file our federal taxes and again when we pay our health insurance bill.

Mr. Wilson referenced a new economic report showing that all counties would benefit from expanding Medicaid. In contrast to most economic development grants, Medicaid expansion would inject capital and create jobs in virtually every community across North Carolina, while also improving the health and productivity of the workforce in the process.  Wilson’s statements are important in and of themselves, but they are also part of a larger trend. More Republican governors, like Florida’s Rick Scott, who initially wanted nothing to do with anything connected to Obamacare, have come to support expanding Medicaid. Beyond the moral dimension, expanding Medicaid has significant economic upside for the state, and it is telling that this event featured a prominent member of the business community making just that case.

Wells Fargo economist projects robust growth in coming years: Wells Fargo Managing Director and Chief Economist Mark Vitner is bullish about North Carolina’s economic prospects in the next few years. Saying that we have finally hit the “sweet spot” of the current expansion, Vitner expects 3-4% growth per year for 2015 and 2016. Vitner noted that all sectors except government saw employment growth in the last year, and expects to see the same this year. Even the residential housing market is starting to recover, having digested the glut of housing left by the recession, and North Carolina’s growing population creating more long-term demand for homes and apartments.

Current growth does appear to be strengthening but the recovery to date has been too reliant on low-wage jobs, has been largely concentrated in urban areas and frankly employment growth has been insufficient to keep up with the state’s growing population. So while North Carolina is poised to follow the national trend of an improving economy, we need to keep an eye on whether growth translates into decent pay and jobs for everyone in the state who wants to work.  State policy decisions over the next year will influence whether the recovery comes home across North Carolina. Policymakers will have opportunities to address the uneven recovery and ensure that people can find good jobs, affordable healthcare, quality education, and economically vibrant local communities.

Concerns about a “barbell economy”: A morning panel on the role of technology in North Carolina’s economic future repeatedly addressed the disappearance of mid-wage jobs. The term “barbell economy” was used to describe the rapid growth in low-wage and high-wage jobs in recent years, coupled with meager job opportunities in the middle of the wage scale. Panelists expressed concern that as technology replaces human labor in many industries, we could be looking at a long-term decline in the number of middle-income jobs. This may be the most troubling long-term trend facing North Carolina. The hollowing-out of the labor market, with more and more of the wealth generated by the economy going to a smaller and smaller group of people, makes it more difficult to sustain the middle class economic activities—buying goods and services, purchasing homes, sending kids to college– that support robust growth.

The forecast presented at the Chamber forum was generally sunny, with solid growth over the next few years across most industries, but there are deeper questions about the long-term structure of the labor market, and whether solid growth will continue to create enough medium-wage jobs to support a middle-class. This is not just a North Carolina story, but it is something that we can do something about, and it was heartening to see this issue highlighted at this event.

NC Budget and Tax Center

While swinging from one crisis to the next for the last several years, we have often lost sight of some long-term trends that we can’t ignore forever. For the last several decades, the United States has been growing apart, not together. The middle class has been contracting, rising out of poverty remains difficult, and parents doubt whether they can provide a better life for their children than they had. The American Dream, an organizing article of faith that helped to build the most diverse and wealthy nation in human history, is in trouble.

2014 End of Year Charts_wage growth

Over the last 35 years, median wages have hardly moved while people at the top of the income distribution have enjoyed significant income growth. As can be seen in the chart above, after adjusting for inflation the top 20% of wage earners have seen their income grow by more than $5 per hour since 1980, while folks at the median have seen less than half of that growth. This means that less and less of the prosperity generated by the North Carolina economy is going to the middle class. It has been a slow process, and one with many causes, but the trend is clear, increasingly present, and dangerous. If the middle class slowly disappears, the American Dream will go with it.

The long-term trends do not just spell trouble for the middle class. As can be seen below, the last decade has seen an explosion in the number of North Carolina counties that are home to high levels of inequality and poverty. The share of counties with this troubling paring of high-inequality and high-poverty has doubled since 2000, going from roughly 30% to over 60%. This means that in more than half of the counties in our state, income growth is doing little to lift people out of poverty. Again, the sort of trend that saps energy out of the American Dream.

2014 End of Year Charts_inequality and poverty

The potency of the American Dream relies on hard work being rewarded, talent being recognized, and people sharing in the wealth they create. If poor and working North Carolinians’ piece of the pie created keeps getting smaller, we will lose the source of our greatest competitive advantage in the modern economy, the American dream.

Looking back a year end and ahead into the future, the Budget and Tax Center compiled a 2014 Chartbook, which looks at a range of critical economic issues facing North Carolina. The bottom line is that we still have a long way to go and the growth that we are seeing is not exceptional but rather in line with the improving national picture.  The recovery has been built on low-wage jobs resulting in the persistence of elevated poverty levels despite improvements overall. State policy choices, namely the decision to cut taxes for the wealthy few and profitable corporations, have made it impossible to strengthen the infrastructure of opportunity in the state.  The result is that the recovery is bypassing many North Carolinians and communities and contributing to the growing divide in experience of opportunity and prosperity.

Commentary, NC Budget and Tax Center

Talking about a single North Carolina “economy” doesn’t make very much sense. Whenever new labor market data comes out, there is talk about how the North Carolina economy , or the US economy, or the global economy, are doing. The macroeconomic perspective is important, and talking in broad terms is convenient, but the economy is not some monolithic abstraction, a disembodied thing that we can’t really see. Even in an interconnected global market, the day-to-day economies that human beings experience are local. The economies we see impacting our neighborhood, our circle of friends, our family, and our wallet, those are the economies that we live in.

2014 was a very mixed economic bag for local economies in North Carolina. As will be shown below, parts of North Carolina are growing quite nicely, but it is still very tough sledding in a lot of communities across the State.

2014 End of Year Charts_uneven recovery

Location, location, location warns the old business adage. That’s great if you’re in a hot spot, but as the map above shows, most of North Carolina is not booming. While the November data (see here for the latest county data) are not updated for this map, the fundamental story has not changed. On the one end, counties that are in or around metro centers have largely surpassed pre-recession levels of employment, with some counties posting 10% or greater gains. That sounds like healthy growth, and it is. On the other end, however, many counties have not experienced what anyone would consider a return to robust economic performance. Sixty of North Carolina’s 100 counties have not gotten back to their pre-recession levels of employment, and in fifteen counties current employment is more than 10 percent lower than it was in 2007.

One could argue that some of the shifts seen here are simply the result of increasing urbanization, a trend that goes back well before the Great Recession. As more and more working age people move toward urban centers, the employment level in many rural areas should naturally drop. However, the losses in employment that many counties have experience cannot be entirely explained by urban migration. Based on data from the North Carolina State Demographer, there are only 23 counties in North Carolina where the change in employment between 2007 and 2014 outpaced the change working age residents. Put another way, the growth of employment has not kept up with working age population in more than three-quarters of the counties in North Carolina.

2014 End of Year Charts_barriers for communities of color

Geography is not the only knife dicing up the North Carolina economy. As can be seen above, the recovery is less complete in communities of color around the state. Unemployment remains higher than it was before the recession for all ethnic groups, so there’s still cause for concern across the board. However, unemployment remains even more elevated for black and Hispanic North Carolinians. The unemployment rate for African-Americans remains 2.2 percentage points above pre-recession levels and for Latinos   1.7 percentage points compared to 2.7 and 1.3 percentage points nationally for both groups respectively.  While African-Americans in North Carolina are doing better than the national average, the change in the unemployment rate for this group is nearly twice that for whites in the state who saw their unemployment rate increase by just 1.4 percentage points above pre-recession levels.

Of course this is hardly an exhaustive analysis of the geographic and social lines that shape the economic landscape of North Carolina. But when we start to look more closely at specific local economies, we see very different stories about different parts of our state. While we celebrate the economic bright spots, we can’t let struggling North Carolina communities fall into shadow.