Archives

Commentary, NC Budget and Tax Center

Economists and politicians both talk about job numbers a lot. Of course the number of jobs is a vital indicator of how well the economy is working, but simply knowing how many jobs there are does not tell the whole story. Understanding the health of the labor market also requires knowing how many of the new jobs can pay for the necessities of life, support a family, and provide the basis for a long-term career. One of the most distressing aspects of the last few years is how many of the middle-class positions lost during the recession were replaced with low-wage employment, part time work, and jobs with few opportunities for career advancement.

2014 End of Year Charts_recovery based on low wage jobs

Probably the most glaring problem with the current recovery is how few decent-paying jobs have been created. As can be seen in the chart above, the majority of jobs created since the start of the recession do not pay a living wage. There are both long and short term trends that are at play here. Many industries that supported middle class wages in North Carolina, most notably manufacturing, use more machines and fewer people, eliminating lots of jobs in the process. Many of the jobs created since the recession are in service sectors that generally pay much lower wages than the blue color jobs that have been lost. This shift toward low-wage jobs is undermining the economic stability that many families in North Carolina had built over the preceding decades.

2014 End of Year Charts_recovery has not reduced poverty

This concern is bolstered by the fact that the current recovery has not done anything yet to reduce poverty, as can be seen above. Even as total employment grew over the past few years, the amount of poverty in North Carolina has actually increased, a sure sign that there are many working people who do not earn enough to escape poverty.  This runs counter to prior recessions when economic recoveries not only resulted in growth but also reduced hardship at the same time.

As noted above, we have both short-term and long-term issues to address. We still need more total jobs because wages remain depressed, in part, because there are still so many people looking for work that there is little upward pressure on wages in many industries. We can do more to ensure that North Carolina’s economic development programs are tied to wage standards so that the jobs we do attract will actually support a family. We still need to help mid-career people whose jobs disappeared during the recession, and are not likely coming back, also need help in transitioning into new occupations and careers. And certainly, long-term we need to prepare North Carolina’s children to negotiate an increasingly dynamic and competitive job market.

Anyone who is willing to work hard should not have to live in poverty, but that basic American promise isn’t going to keep itself. Public policy helped to build the middle class, and a lack of public policy vision can destroy it. If we don’t honestly look at what policy changes are needed to ensure that hard work pays, the economic damage of the recession will become a permanent reality for many North Carolinians.

NC Budget and Tax Center, Poverty and Policy Matters

When the Wall Street house of risk came crashing down in 2007, it wrecked local economies across North Carolina. Business finance dried up, people and businesses bought less, home values took a hit, and so employment dropped, sharply. Along with the rest of the U.S., we have seen the worst days of the recession pass and some stability and growth return. Business credit is still tight, consumer spending looks to be getting stronger, and the housing market is definitely on the rise again, but employment has been very slow to grow.

We’ve heard a lot about the “Carolina Comeback” recently, and expect to hear even more during 2015. The story generally goes that slashing state taxes and spending has resurrected an economy that was broken by federal policy, not to mention a century of democratic rule in the legislature. The problem with this story is that the comeback is a national one, most of which has nothing to do with changes to North Carolina policy.  A far better explanation, as can be seen in the charts below, is that the current recovery is neither robust nor unique to North Carolina, but instead follows the national and regional trajectory.

2014 End of Year Charts_slowest recovery in generations

Compared to the previous three major recessions, the current recovery has been stubbornly sluggish. It took more than five years for our state to get the jobs that were lost during the recession back, where the damage from the previous three recessions was repaired in less than half that time.

If the first chart looks familiar, it should. National employment trends over the last several recessions look very similar to what we have seen in North Carolina. This brings us to the second problem with the Carolina Comeback myth, it is not a Carolina story.

2014 End of Year Charts_regional job growth

As can be seen below, North Carolina employment has generally followed the same trend as other states in the southeast. From 2000 on, the share of working age people who have employment has declined, with a particularly sharp drop in 2008 and 2009 as the Great Recession hit. Over the last few years, employment growth in North Carolina has been modestly stronger than most states in the Southeast, but even after these comparatively strong years, North Carolina remains decidedly middle of the pack.

All told, there just isn’t much real evidence of a distinctly Carolina Comeback. The recovery has been agonizingly slow in North Carolina as it has been across the country. Credit and blame do not have a home address, they knock on many doors and visit many living rooms. We have a lot to do as a state and as a country to adapt to the 21st century economic system. Moving into 2015, we should focus on what can be done to address the problems that remain, rather than trying to wish them away with nice sounding phrases.

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