Prosperity Watch Issue 24, No. 4: North Carolina's lagging unemployment rate due to greater job losses during the recession than the nation as a whole

Despite recent minor improvement in North Carolina’s unemployment rate, persistent joblessness is still an ongoing challenge facing the state’s policy makers—especially when compared to the steadily improving national jobs picture.  Much of the troubling divergence between the improving national unemployment rate and the more stagnant state unemployment rate is due to the fact that North Carolina suffered deeper job losses during the recession than did the nation as a whole.

In the short-term, the state’s jobs picture appears to be improving—the unemployment rate dropped from 9.4 to 9.2 percent from February to March, the first time in four years North Carolina’s jobless rate has dipped below 9.4 percent.  Over the longer term, however, labor market trends have been much less promising—and shown much less improvement than the national average.  At the same time as North Carolina’s unemployment rate remained mired above 9 percent, the national labor market has improved and the average unemployment rate has dropped from 8.2 to 7.6 percent since March 2012.

Additionally, the nation as a whole has done a better job of moving workers from joblessness to employment in the years since the recession ended—while North Carolina has seen the number of unemployed workers drop by 10% since January 2011, the nation as a whole saw its pool of jobless workers drop by 16 percent over the same period.

As indicated by the following chart, this difference between North Carolina’s unemployment trajectory and that of the nation since the recession is largely due to the difference in their respective job losses during the recession. Between the beginning of the Great Recession in December 2007 and the deepest trough of the labor market in May 2010, North Carolina experienced much steeper job losses than the nation as a whole.  While North Carolina lost almost 10 percent of its pre-recession employment by the middle of 2010, the nation never lost more than 7 percent—a clear difference that has shaped the ability of both the state and the nation to replace lost jobs in the years since.


 

As a result, North Carolina faces a much higher climb out of a much deeper hole to replace the jobs lost during the recession than does the rest of the nation.  This helps explain why North Carolina has failed both to return to pre-recession employment levels and to bring down the number of unemployed people as quickly as the nation.
 

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