Most analysts are describing today’s national jobs numbers report “decent,” as it provided some largely positive news mixed in with some less positive trends. Here’s the good, the bad, and the ugly in the national unemployment numbers for May:
A pathway to poverty: 3 reasons why Tennessee is a bad role model for North Carolina’s economic future
In the current debate over tax reform, legislative leaders frequently hold up Tennessee as a role model for improving North Carolina’s economic competitiveness and ensuring future prosperity. But as a new Budget and Tax Center brief reveals, once we look below the surface, the Volunteer State has exactly the wrong kind of economy to emulate—Tennessee models a pathway to poverty, not a pathway to prosperity.
Here are 3 reasons why Tennessee is a bad role model for North Carolina’s economic future:
1. Tennessee’s economy is not performing as competitively as advertised.
Despite a couple years of post-recession job growth that surpassed North Carolina’s, Tennessee’s economy has not performed as competitively as advertised over the long-term. The Volunteer State had by far the slowest employment growth rate (4.4 percent) of any neighboring state from 2001 to 2011 (the most recent complete for which data is available), including North Carolina (which saw 8.3 percent employment growth). In the years of recession and sluggish recovery since 2006, North Carolina has actually seen 0.2 percent nonfarm employment growth, while nonfarm employment in the Volunteer State contracted by 2 percent. Only over the last two years has Tennessee begun to (slightly) outpace North Carolina in employment growth (2 percent to the Tarheel State’s 1.8 percent), but this does not represent a significant economic or competitive advantage.
2. Tennessee’s economy is generating low-wage jobs that pay poverty-level wages.
What job growth Tennessee has experienced has mostly occurred in low-skill industries that are paying workers too little to keep families out of poverty. Over the past decade, private employment growth in industries paying below the state’s $30,202 median wage grew an average of 3 percent, while dropping by almost 5 percent in industries paying above this threshold. Even more troubling, this trend appears to be accelerating. Since 2006, Tennessee’s employment in higher-wage sectors has dropped by 7 percent.
Last night, the DREAMers did it again. They took a hopeful message and their own personal stories to a new audience, asking members of the Winston-Salem City Council to support a resolution on in-state tuition for North Carolina high school graduates, regardless of immigration status. The DREAMers keep insisting that our public policies must reflect our deepest values of fairness and equal opportunity, showing that the power of people is stronger than inhumane laws and a broken immigration system. Read More…
Yesterday’s announcement that North Carolina’s unemployment rate had dropped to 8.9 percent last month was met with considerable acclamation in a number of media reports today. Unfortunately, much of this positive commentary was misplaced—despite demonstrating some superficial improvement, the new jobs report is far worse than it first looks.
In fact, the dip in the state’s unemployment rate is due almost entirely to a contracting workforce, rather than genuine new job creation. Specifically, almost 20,000 workers dropped out of the labor force the pool of prime age workers who either have a job or want one—last month, including 15,000 jobless workers who were unable to find employment and gave up searching.
Given that the labor force contracted by 20,000 and the total number of employed workers also dropped by 4,000 at the same time, it appears that the 14,000 drop in the number of unemployed workers is largely the result of jobless workers becoming discouraged—giving up on looking for work and dropping out of the labor force altogether.
As a result of these changes, the labor force—is now at the lowest level since July 2012, erasing almost 9 months worth of gains. Even more troubling, the total number of employed people in North Carolina also dropped to the lowest levels since October 2012, suggesting that North Carolina’s economy is continuing to struggle in generating long-term sustainable job creation.
In other words, unemployed workers moved out of the labor force altogether, rather than moving into new jobs.
Another key justification for tax cuts bites the dust: NC economy is already competitive with neighboring states
Throughout the ongoing tax reform debate, we’ve been hearing the same tired claims that North Carolina’s economy is failing to compete with our neighboring states. And during yesterday’s preview of the Senate tax reform plan, we heard it again as justification for a billion dollar tax cut.
There’s just one problem—these claims are simply not true.
As a report released last week found, it’s clear that North Carolina’s economy is performing competitively with surrounding states across every major indicator of economic health, with the exception of the unemployment rate.
And North Carolina has higher unemployment than neighboring states today because the Tarheel State has historically relied to greater extent on a handful of manufacturing industries that have proved much more vulnerable to offshoring, outsourcing, and global cost pressures. In 2000, more than 16 percent of North Carolina’s employment was concentrated in manufacturing, the most of any surrounding states. North Carolina lost almost 42 percent of its manufacturing employment between 2000 and 2011, greater than the loss experienced by any other neighboring state.
In fact, if North Carolina’s share of total employment in durable and non-durable goods manufacturing had resembled that of the nation as a whole, the Tarheel State would have 108,000 more jobs today than currently exist, and the state’s unemployment rate would likely be similar to neighboring states.
As a result, North Carolina’s unemployment problem is due to declining competitiveness in specific industries—not to lack of competitiveness in the overall business climate or tax policy. Faced with these very specific challenges, investing in job training and infrastructure to attract and grow the competitive industries of the future is a far better approach to reducing unemployment than the tax cuts currently discussed by the legislature.