Making good on predictions issued earlier this year, House of Raeford Farms has given notice to the state Department of Commerce under the Worker Adjustment and Retraining Act (aka the “WARN Act”) that it will be closing its slaughter plant and two support facilities in Raeford as early as July 13. The closures will result in the loss of 1,060 jobs in the small Hoke County community (population 4,600). Click here to read the letter sent by House of Raeford on May 10 as well as a May 13 memo from Commerce Assistant Secretary Roger Shackleford on the subject. Read More…
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.
A new report from the Budget and Tax Center explodes two persistent myths about North Carolina’s economy that are often used to justify cutting taxes. First, the report dispenses with the false claim that North Carolina’s overall economy is uncompetitive compared to our neighboring states. Turns out that our state is leading or in the middle of the pack in every major indicator of economic health—except for the unemployment rate.
Leaving aside Virginia—an anomaly in the South due to the rapid, federally-fueled growth of its DC suburbs—North Carolina has the lowest poverty rate in the region, median household income second only to Georgia’s, and annual per capita economic growth second only to Tennessee’s over the past decade. That last measure probably would have topped Tennessee’s if not for North Carolina’s rapid population growth—the Tarheel State saw an 18 percent jump in population between 2000 and 2011 (the sixth highest in the nation), while Tennessee had 11.6 percent growth over the same period. Even North Carolina’s loss in household income over the past ten years—while undoubtedly troubling—is not out of line with the losses in other states.
This means we face an unemployment challenge, as opposed to a more deep-seeded problem with the state’s overall competitiveness.
Second, the report delves into the reasons for this challenge and finds that it is due to long-term over-reliance on a set of declining, less competitive manufacturing industries in comparison to surrounding states, and not to uncompetitive tax policies. Specifically, the report finds, the driver of our state’s higher unemployment is decline in those specific industries that proved the most vulnerable to offshoring, outsourcing, and global competitive pressures—examples include textiles, apparel, and furniture—and happened to employ a larger share of North Carolina’s workers prior to the 2011 and 2007 recessions than were employed in other states.
According to the latest issue of Prosperity Watch, North Carolina’s job growth has remained stubbornly stagnant over the last year, with the unemployment rate stuck between 9.6 and 9.4 since February 2012. Even more troubling, however, is the fact that what little employment growth the state has experienced since the end of the recession has largely occurred in low-wage service industries. In effect, the state is losing the middle-wage jobs that used to provide a pathway into the middle class for many North Carolinians and replacing them with jobs in industries that pay significantly below the state average—a boom in low-wage employment. See the latest issue of Prosperity Watch for details.
Earlier this week, the N.C. Division of Employment Security released the latest jobs numbers for January, and unsurprisingly, North Carolina’s labor market is continuing to struggle. As the latest issue of Prosperity Watch makes clear, the state’s employment recovery is still lagging the national average, and despite slowly beginning to close this gap, much work remains to provide adequate employment opportunities for North Carolina’s workers. See the latest Prosperity Watch for details.