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Missing Workers, NC Budget and Tax Center

This is the season of absolutes, a time for reflecting and rendering judgment. Has it been a year to remember or a year to forget? Are we on the right path, or hopelessly lost? The truth is usually somewhere in the middle, but that doesn’t make provocative copy, and so it is often ignored. While some voices in North Carolina would have you believe that we have finally put the Great Recession in the rear-view mirror, the economic damage lingers. As the two charts below show, a year of generally positive economic performance has not erased the imprint that the Recession left on North Carolina.

2014 End of Year Charts_stll not enough jobs

There is still a larger percentage of North Carolinians without employment than before the Great Recession. From the start of the millennium through 2007, more than 62% of North Carolinians had participated in the workforce each year. That rate dropped precipitously in 2008, and kept sliding until it hit a low of roughly 58% in 2011. While there have been modest gains in the last few years, the labor market in North Carolina still has not recovered sufficiently to return employment levels to where they were before the financial crisis.

2014 End of Year Charts_real unemployment high

Proponents of the “Carolina Comeback” story point to the fact that North Carolina’s headline unemployment rate has come down over the last year, so what’s the worry? The problem is that many people have such a hard time finding work that they don’t appear as “unemployed” in the official figures. A BTC analysis of labor data indicates that the real unemployment rate is twice the official level once we consider all of the people who are not currently looking for work because job opportunities are too few. To be clear, this is not a tally of people who have retired or gone back to school, but rather an estimate of what the unemployment rate would be if we include all of the people who would otherwise be expected to be in the labor force based on historic figures. Including these missing workers pushes North Carolina’s real unemployment rate to almost 13%, twice the official estimate.

The central point here is that we cannot lose sight of the work that still remains to be done. While there has been a good deal of encouraging economic news this year, there are still far too many North Carolinians for whom the recovery remains a promise unfulfilled.

Stay tuned over the next several days for a series of BTC posts that illuminate the 2014 economic landscape and the challenges that need to be addressed in 2015.

NC Budget and Tax Center

Yesterday, the Labor and Economic Division released October labor market data for all 100 counties.  The headline of the release was that the unemployment rate had dropped in 98 counties, or nearly all, in the past month.  It sounds like good news, and it is, but the new data also show that many parts of the state are still struggling mightily. As the Budget and Tax Center has noted before, you have to look deeper than the headline unemployment number to know whether employment prospects are actually improving.

Such a look behind the unemployment rate does show signs of labor markets improving year-over-year, primarily along the lines seen at the state and national level.  The number of unemployed people has declined since October 2013 in all counties and a majority of counties have seen gains in employment.

But it is not “mission accomplished” time yet. The October county data contain worrying signs that should not be glossed over.

The majority of counties have not caught up to pre-recession levels of employment. Employment prospects are still slow to emerge in many counties, particularly in the rural parts of the state. Sixty six counties have more unemployed people in October 2014 than they did in December 2007.

Even more concerning, roughly one-third of the counties registered declines in employment from October 2013 through October of this year. Beyond not having caught up to pre-recession employment, many parts of our state have taken a step back over the last year. Again, this troubling trend is most concentrated in rural counties. Read More

Commentary

Pat McCrory press eventGovernor Pat McCrory is reportedly considering calling the General Assembly into special session to put more money into one of the state’s primary business incentive schemes, the Job Development Incentive Grant program, or JDIG.

Commerce Secretary Sharon Decker says the state is pursuing several big economic development projects and is bumping up against the $22.5 million cap on JDIG grants.

If all this sounds familiar, it should. Decker was openly calling for special session two months ago. Here’s what she told the N.C. Economic Development Board in August.

Decker told board members that money in the popular JDIG incentives fund would run out by late October without legislative action to increase the cap. The state, she said, is pursuing a large project that would take 80 percent of the fund’s balance, leaving little cash for about 30 other projects – and roughly 10,000 jobs – that are “in the pipeline.”

“We won’t get all of those jobs even with the Job Development Investment Grant, but I can assure you we will get fewer of them if we don’t have it,” Decker said.

….Decker wants a special session to be called soon. “Several folks have said to me, ‘Can you wait until the (2015) long session?’ We can’t, in my opinion,” she said.

Read More

NC Budget and Tax Center

North Carolina officials will soon have spent all available financial incentives the state offers to businesses that are considering locating or expanding in the state. Each year the state awards millions of dollars in subsidies to businesses through its Jobs Development Investment Grant (JDIG) program.

The state is now one project announcement away from spending all of the $22.5 million in funding allocated to JDIG for the current year, accordingly to state Commerce Secretary Sharon Decker. Governor McCrory is being urged by proponents to call a special legislative session before January 2015 to increase funding for the JDIG program. Yet, this is coming at a time when state revenue collections are $62 million below projections for the first quarter of the current fiscal year as the cost of the tax plan passed last year continues to increase. The reality is that absent additional revenue, increasing funding for the JDIG program means cuts in other areas of the state budget to pay for the additional spending.

Secretary Decker states that “Tax reform has helped us because we are no longer the highest in the Southeast, and that is great” and goes on to assert “But, we will not be competitive for those jobs without JDIG.” Yet, it is tax reform that was supposed to spur job creation and boost the economy, but is nevertheless hindering our ability to invest in JDIG and core public services that are stronger determinants of sustainable job creation and economic growth. State revenue collections are $62 million below projections for the first quarter of the current fiscal year and as we have written elsewhere, the cost of the tax plan for the current fiscal year could be more than $1 billion. The tax plan passed last year, sold as a job-creation package, reduced the state’s personal and corporate income tax rates to largely benefit the wealthy and profitable corporations. Still, more corporate subsidies are being asked for in the name of job creation.

Read More

Commentary

In case you missed it over the weekend, Patrick Conway, the head of the economics Department at UNC Chapel Hill had an important op-ed in Raleigh’s News & Observer about the true state of the North Carolina economy. As Conway explains, the recent rosy claims of state officials and their apologists in the right-wing think tanks  are ignoring a huge, under-reported issue: 300,000 “missing” workers who have simply evaporated from the workforce. Here’s Conway:

There’s a large disconnect in perceptions of the current state of North Carolina’s labor market.

Gov. Pat McCrory stated a positive view in a recent address in Chapel Hill: “We’ve had one of the largest drops in unemployment [rates] in the country.” His more general contention was that the state’s labor-market difficulties are “being resolved” by tough choices made by his administration.

A contrary view was voiced by a recent letter-writer who said we’re still in the midst of a terrible recession.

These views seem contradictory, but it is easy to reconcile the two. McCrory ignores the 300,000 working-age adults who have dropped out of the labor force since 2010. If we assert that they’re gone, our unemployment rate is a high but acceptable 6.8 percent. If we recognize that these are productive residents who have temporarily stopped looking for work, then our unemployment rate is a terrifying 12.4 percent.

Conway goes on to say that simply ignoring these missing workers will not solve the problem: Read More