MEDIA RELEASE: Jobs report not as good as first appears, analyst says

A shrinking labor force and more low-wage jobs are driving factors in NC’s lower unemployment rate.

RALEIGH (June 21, 2013) – Despite a superficial improvement in North Carolina’s unemployment rate, the state’s jobs picture is still cause for concern, says an economic analyst after viewing new numbers released by the N.C. Division of Employment Security today.

More than 1,400 workers dropped out of the labor force last month, while only 1,000 unemployed workers found jobs, suggesting that the biggest factor in the state’s dropping unemployment is simply unemployed workers dropping out of the workforce, rather than genuine job creation.  Even more troubling, the total number of employed people in North Carolina is at the lowest levels since November 2012, suggesting that North Carolina's economy is continuing to struggle in generating long-term sustainable job creation.

When combined with the 20,000 workers who dropped out of the labor force in April, the result of these changes is that the state’s labor force is now at the lowest level since August 2012, erasing almost 9 months worth of gains.

Although today’s report provides some superficial good news, it’s not quite as good as it first appears,” said Allan Freyer, policy analyst with the Budget & Tax Center.  “While we have experienced some genuine—if minor—job creation over the last year, the biggest factor driving this spring’s big drops in the unemployment rate is the fact that jobless folks are giving up on finding work and dropping out of the labor force, rather than because we are experiencing sustainable long-term job creation.”

Additionally, although the unemployment rate dropped from 8.9 to 8.8 percent in May, about three-fifths of this improvement is due to a mathematical quirk in how the Bureau of Labor Statistics calculates the jobless rate.  This rate is determined by dividing the number of unemployed workers who are looking for work by the number of workers in the labor force.

Given that the labor force contracted by 1,400 while just 1,000 unemployed workers found jobs at the same time, it appears that the 2,400 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, this makes the unemployment rate look lower than it actually is.

Another major cause for concern: the state’s fastest growing industry pays the lowest wages.  Over the last year, Leisure and Hospitality Services grew by 25,200 jobs, accounting for almost half of the total employment growth in the state.  Unfortunately, this industry pays $8.30 an hour, more than $12 below the statewide average—suggesting that the state’s growth opportunities are in ultra-low wage jobs.

“Today’s jobs report makes it clear that the majority of all job creation is occurring in industries that don’t pay a living wage,” said Freyer.  “It’s hard to see how the state’s economy can continue to improve without significant income growth to support consumer spending at local businesses.”

FOR MORE INFORMATION, CONTACT: Allan Freyer, allan@ncjustice.org, 919.856.2151; Jeff Shaw, jeff@ncjustice.org, 503.551.3615 (cell).

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