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North Carolina’s economic development efforts took a turn for the worse last night, when the Senate passed a bill that privatizes the state’s business recruitment, retention, and development activities. A similar proposal will likely pass the House today, and while the lower chamber’s privatization plan is marginally better than the Senate’s scheme, both leave a lot to be desired in terms of ensuring more effective job creation and protecting taxpayer dollars.

Privatizing job creation efforts is hardly a new idea, although it’s proven to generate more scandals than results in the sixteen states that have experimented with this approach. According to the General Assembly’s own Fiscal Research Division, the kinds of economic development public private partnerships envisioned in the House and Senate bills haven’t proven themselves any more effective at boosting job creation in the states that adopted them than in those states that simply kept their job recruiting efforts inside agencies of state government.   At the same time, FRD and other researchers have found that these privatization schemes have been marked by financial mismanagement (Wisconsin), conflicts of interest and pay-to-play incentive-granting (Texas and Florida), and the inability to raise private funds, leaving taxpayers on the hook (Missouri).

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This is the 6th post of a Budget and Tax Center blog series on public services and programs that face cuts in the budget process or have been underfunded in past years. See the other posts here.

If the Senate budget passes this year, rural communities are going to be living through a nightmare. Despite promises by the McCrory administration to support economic development in rural North Carolina, the budget passed by the state Senate last week continues long-term disinvestment in the very initiatives that rural communities need in order to create jobs and grow their local economies.

For most of the past 30 years, the state’s primary actor in promoting economic development in the state’s 85 rural counties was the N.C. Rural Economic Development Center. Incorporated as a state-charted nonprofit in the late 1980s, the Rural Center used a mix of state funding and private fundraising to support a range of rural development work—everything from small town revitalization efforts and building rehabilitation grants, to small business lending and workforce training programs.

Over the past three years, however, the legislature has significantly reduced state investment in these important activities, undermining the state’s ability to promote job creation and economic revitalization in rural communities, many of which are still grappling with long-term decline in manufacturing. Even in the darkest period of the Great Recession in FY 2009, the state strongly supported these efforts by funding the Rural Center at $24 million. Unfortunately, the new legislative majority in 2011 significantly reduced support for rural development, cutting the Rural Center’s budget down to $16 million.

Then, in last year’s budget, the General Assembly eliminated all state funding for the Rural Center, instead opting to move some of these operations into a newly-created Division of Rural Economic Development in the N.C. Department of Commerce. As part of this move, the legislature reduced state funding for rural development even further, from $16 million in FY 2012-13 for the old Rural Center down to just $13.8 million in FY 2013-14 for the new Rural Development Division, of which $2.5 million was dedicated to a newly created Limited Resource Communities grant program intended to support economic development specifically in designated low-resource communities (e.g., the poorest 40 counties in the state). And the damage to rural development extends beyond the dollar reductions—the new division simply doesn’t carry out many of the specialized initiatives once conducted by the Rural Center: the state no longer supports small business lending in rural areas, targeted rural workforce development, or small town revitalization efforts.

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An important measure of a positive jobs report is whether progress is being made in creating enough jobs to recover all the jobs that were lost during the Great Recession. By this measure, however, today’s jobs report from the Division of Employment Security reveals that too many of the state’s metro areas are falling behind.

Despite falling unemployment rates, most of North Carolina’s metro areas are not creating jobs fast enough to fill this jobs hole. Five years into the current recovery, ten out of the state’s 14 metro areas have yet to reclaim the jobs lost during the recession, and it will take six of them more than a decade to create enough jobs to return to pre-recession levels at the current rate of employment growth. In one metro—Rocky Mount—it will take almost a century to get back to pre-recession employment levels at the current pace of job creation.

As long as some metros continue to lag behind, the state’s overall economic recovery will continue to struggle, despite a falling unemployment rate.

Follow me below the fold for a summary of each metro’s job creation record over the last year:

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Last week, the folks at five thirty eight, a non-partisan website dedicated to statistically robust analyses of social, political and economic phenomena led by Nate Silver, released an analysis of claims that unemployment insurance cuts at the national level have been good for the country’s economy and jobless workers.

The claims sound eerily familiar to those in North Carolina of a Carolina Comeback. But similar to those claims, the folks at five thirty eight find these national claims to lack support from available evidence.

First from their findings specific to those who have lost unemployment benefits: “Of the roughly 1.3 million Americans whose benefits disappeared with the end of the program, only about a quarter had found jobs as of March, about the same success rate as when the program was still in effect; roughly another quarter had given up searching.”

Second, jobless workers, particularly the long-term unemployed, are not moving to employment. From the article: “Only about 10 percent of the long-term unemployed find jobs each month, a metric known as the job-finding rate. Among those unemployed six months or less, the finding rate is nearly 25 percent….”

Cutting off unemployment benefits have not delivered improved job prospects for the hundreds of thousands still seeking work across the country and in North Carolina. A different approach is needed.

The April employment numbers released Friday show that North Carolina’s unemployment rate is continuing to drop, with 6.2 percent of the state’s residents out of work and looking for jobs.

The drop is a full 2.2 percentage points lower than what it was last April, when 8.4 percent of the state’s labor force was looking for work.

Republican Gov. Pat McCrory, in a written statement, hailed the unemployment drop as a success, but said more progress is still needed.

“We continue to see encouraging signs in North Carolina’s economy with each month that passes,” McCrory said.

Today’s job numbers (click here to read the whole report) show that the state added 14,000 from March to April, and that the overall labor pool (which includes those on the job and those actively looking for work) also grew by about 10,000 from the previous month.

Here’s a quick glimpse of the number’s released today by state commerce department’s labor and economics division:

jobsnumbersapril

Source: N.C. Commerce Department

 

The larger meaning of jobs report data have become heated topics in policy and political circles, with sometimes competing theories about what the steady drop of unemployment in the state means.

The state’s labor pool is significantly lower (by 33,005 people) than it was a year ago, a circumstance that has led some, including the N.C. Justice Center’s Budget and Tax Center, to point out that many of the state’s long-term unemployed stopped looking for work and are not being accounted for in federal labor data. That comes after the state slashed both the length and amount of unemployment people can collect as part of an extensive overhaul of the unemployment system last year.

The state is also seeing huge disparity in different regions when it comes to unemployment, with areas surrounding the economic powerhouses of the Triangle and Charlotte showing low unemployment while more troubled areas still have counties with unemployment topping 10 percent.

Dare, Edgecombe, Graham, Hyde  Scotland and Swain counties all had unemployment rates over 10 percent in March. (Note, these numbers are not seasonally-adjusted, unlike the statewide numbers released today.)

Supporters of that unemployment reform policy, including McCrory and other Republican leaders, say the drop in benefits may have spurred many of the jobless to accept jobs they wouldn’t otherwise have looked at.

The Washington Post had this national perspective on the shrinking labor pool last year, finding that the contracting stems from a combination of the baby-boom generation entering into retirement, younger workers headed back to school and the long-term jobless throwing up their hands.

Here’s a great explainer from the New York Times earlier this month about how federal jobs data (which is released every month and is based on surveys) can fit a number of different narratives (economy better, economy worse, more jobs, less jobs) and all be right.

From the aptly-tilted article, “How Not to be Mislead by the Jobs Report“:

We obsess far too much on the Labor Department’s monthly jobs report.

Think about it this way: It’s the first Friday of the month, and the Labor Department has bad news. The economy has added a mere 64,000 jobs last month, a steep slowdown from 220,000 the month before. From Wall Street to Twitter, the reaction is swift and negative.

The price of oil falls, as do the prices of blue-chip stocks like General Electric. The Federal Reserve faces calls to push interest rates lower. The lead headlines in the next day’s papers talk of faltering job growth.

But what if all the worries were based on nothing more than random statistical noise? What if the apparent decline in job growth came from the inherent volatility of surveys that rely on samples, like the survey that produces the Labor Department’s monthly employment estimate?

 

You can read more here.