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NC Budget and Tax Center

Despite all the claims we keep hearing about the state’s supposedly miraculous economic recovery, too many regions across the state are still waiting for the recovery to happen.  The latest issue of Prosperity Watch digs into unemployment and job creation trends in the state’s metro areas and finds that the decrease in unemployment over the last year is almost entirely due to unprecedented drops in the labor force, not to the jobless moving into employment. See the latest issue for details.

NC Budget and Tax Center

An oversight committee at the General Assembly splashed more cold water on claims that policy decisions made in the 2013 legislative session are responsible for big improvements in the state’s economy.

In testimony before the Joint Legislative Oversight Committee on Unemployment Insurance Wednesday, N.C. State economist Dr. Michael Walden made the crucial point that North Carolina’s economic recovery began in 2009—long before 2013—and is largely shaped by broader national and global economic trends beyond the influence of the state’s policy makers.

According to Walden, North Carolina’s experience of business cycles has often been bumpier than the nation’s—with faster growth in recoveries and steeper falls during recessions. Over the past two business cycles, the Tarheel State saw bigger percentage job losses than did the nation as a whole during recessionary periods. As a result, the state’s employment growth since the recession ended in 2009 is still insufficient to deliver the jobs needed to provide everyone a job who is seeking work and close the state’s jobs deficit—despite seeing employment grow at a faster rate than the average.

Taken together with the fact that North Carolina created fewer jobs in 2013 than it did the year before, according to preliminary estimates from the establishment survey, these trends make it clear that the current economic recovery is neither all that special, nor can employment growth be linked to policies enacted last year.

And while the state’s labor market is clearly moving in the right direction, recent improvements are still not enough to return employment to pre-recession levels. In fact, at the current rate of job creation holding all else constant, it will take 13 years to replace the jobs lost during the Great Recession and keep up with population growth.

Given this reality, it’s clear that policy makers are just plain wrong when they claim that the policies they enacted in 2013 are responsible for an economic turnaround in North Carolina.

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Not that it’s at all surprising, but new analysis from experts confirms that Gov. McCrory and his allies are dead wrong once again with their latest crowing about the drop in North Carolina’s official unemployment rate. Put simply, thee Guv is confusing a labor market collapse for good news. This is from the wonks at the N.C. Budget and Tax Center:

“RALEIGH (January 28, 2013) — North Carolina’s unemployment picture is much worse than it appears on the surface, according to new numbers released by the N.C. Division of Employment Security today. Although the unemployment rate dropped to 6.9 percent in December, this is due almost entirely to a historic collapse in the state’s labor force, not to genuine gains in employment.

Over the last year, the labor force shrunk by 110,930 workers—more than 2.5 percent—to the lowest levels in three years.  Read More

NC Budget and Tax Center

It’s the myth that will not die.

In the ongoing debate over the impact of last year’s draconian cuts to unemployment benefits, we keep hearing the story that reducing benefits for the jobless has helped reduce the unemployment rate.

If only this were true.

While the unemployment rate has undoubtedly fallen, this is because unemployed workers have simply fallen out of the labor force, rather than moving into employment—a trend the unemployment rate simply doesn’t take into account. Just this point was made yesterday in a New York Times piece by Annie Lowrey profiling North Carolina’s economy, which noted that for every unemployed person who moved into employment, another two unemployed people gave up looking for work and dropped out of the labor force altogether.

In fact, the state’s labor force contracted more than 2.5 percent in 2013 at the same time that the state’s population grew by almost 1 percent.  And anytime the labor force shrinks while the population grows, the economy is moving in the wrong direction.

If the Times piece gets it right about the connection between unemployment benefit cuts and the shrinking labor force, it is a bit too trusting of Governor McCrory’s claims that his plan helped boost job creation in the state.

Perhaps Ms. Lowrey should have noted Ned Barnett’s important point from last week—by any measure, employment growth in 2013 was the weakest of any year since the end of the recession. North Carolina created just 37,700 jobs from January to November last year, almost half the 66,000 jobs created over the same period in 2012 and still short of the jobs created in 2011 and 2010. At the rate of employment growth achieved in 2013, it will take another 13 years for the state to create enough jobs to replace all those lost during the recession and keep up with population growth.

If Governor McCrory was correct that cutting unemployment benefits forced unemployed workers to find work, then we would expect to see unemployed workers moving into employment. But we don’t—we actually see the opposite.  There were actually 9,000 fewer people employed in November than in January—again, the worst performance since 2010. This means that unemployed people aren’t moving into jobs, they’re just dropping out of the labor force altogether.

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NC Budget and Tax Center

More than 1 million jobless workers were deserted by lawmakers who failed to extend the federal unemployment benefits program that expired in late December. This came three weeks after the Congressional Budget Office concluded that extending emergency unemployment compensation through the end of 2014 would positively impact economic growth and job creation in the short term. Despite this report, conservative members of the US Senate blocked efforts yesterday to extend unemployment insurance at a time when long-term unemployment is at record high-levels.

To no surprise, conservatives are insisting that the extension of benefits be paid for by cuts in other programs, including those that offer support to low-income and jobless families. In exchange for their vote, some conservative Senators want to bar immigrant families from claiming the Child Tax Credit—a measure known as the Ayotte Amendment. This tactic is misguided and counterproductive. Read More