Prosperity Watch Issue 13

Prosperity Watch Issue 13, No. 4: Pre-Recession Specialization in Manufacturing Jobs Leads to Higher Post-Recession Unemployment across North Carolina’s Metro Areas

Although North Carolina’s seasonally adjusted unemployment rate continued to fall last month—down from 10.2 percent in January to 9.4 percent in April—some regions of the state are experiencing recovery in the labor market more quickly than others.  According to data released by the Division of Employment Security on Friday, all but one of the state’s 14 metropolitan areas (Wilmington) saw an in increase in the number of employed workers over the last year, but the overall jobless picture in these metros varies widely, from a 12.1-percent unemployment rate in the Rocky Mount Metro Area and a 10.5-percent rate in Hickory-Morganton on the high end to a 7.1 percent jobless rate in Durham-Chapel Hill and 7.4 percent in the Raleigh-Cary Metro Area on the low end.  As with all regions below the state level, the unemployment rates for these metros are not statistically adjusted to reflect seasonal hiring patterns.

Given the historic importance of legacy industries like textiles, tobacco, and furniture manufacturing for the state’s employment base, North Carolina’s manufacturing sector can be especially relevant for explaining the variation across metros’ labor markets.  At the outset of the Great Recession, the manufacturing sector comprised 12 percent of the state’s total employment, but by this April, accounted for 37 percent of the state’s total job losses to date.  Although about a third of the state’s manufacturing base existed in rural areas, these job losses also filtered down to the state’s metro areas, hitting especially hard those metros with significant specialization in manufacturing when compared to the state average.  In other words, those metros with a larger percentage of their workers employed in manufacturing than were similarly employed in the state as a whole—those that were specialized in manufacturingtook a proportionately greater hit to their employment base during the recession than those metros that were less specialized in this sector. 

As a result, those metro areas overly-specialized in manufacturing have had a harder time replacing the jobs lost to the recession and, thus, have higher unemployment rates. As seen in the chart below, nine metro areas were not so specialized in December of 2007, and taken together their average unemployment rate in April 2012 is 8.5 percent, well below both the 9.9 percent combined jobless rate of the four metros that were highly specialized in this sector and the overall (unadjusted) state unemployment rate of 9.1 percent.  Although Raleigh-Durham is one of the most specialized metros in the state, its high-skill and high-wage manufacturing industries make it an outlier when compared to the state as a whole and the remaining specialized metro areas.

Similarly, the “specialized” metros accounted for 36 percent of the state’s manufacturing base in 2007 prior to the recession, but comprised almost 40 percent of the state’s total job losses in the sector to date.  This suggests that the metros overly-specialized in the over-all manufacturing sector were also over-concentrated in the specific manufacturing industries—the legacy industries of textiles, tobacco, and furniture—that traditionally required unskilled or low-skill labor, and as a result, were most susceptible to offshoring, layoffs, and plant closures. Given that jobs in high-skill manufacturing industries typically pay commensurately higher wages than lower-skill manufacturing jobs, recent wage data from 2011 reinforces this conclusion: the average manufacturing wage of the non-specialized metro area paid $1086 per week, $70 above the state average, while manufacturing workers in specialized metros earned only $841 per week, almost $150 below the average state wage.  This suggests that specialized metros were overly-concentrated in low-wage, low-skill manufacturing industries, precisely those industries most vulnerable to the ravages of the Great Recession.

Although clearly not the only factor involved, pre-recession specialization in manufacturing provides an important explanation for the variation in joblessness across the state’s metro areas.

Prosperity Watch Issue 13, No. 3:  North Carolina’s Jobs Deficit Worsened by Lowest Employment-to-Population Rate in decades

Over the past five months, North Carolina has seen its unemployment rate fall from 10.6 percent in October to 9.4 percent in April.  While this is undoubtedly positive news for North Carolina’s labor market, the fall in the unemployment rate fails to capture an important underlying trend—the increasing jobs deficit—because the unemployment rate measure only counts those workers either currently employed or actively seeking employment.  It cannot account for the large numbers of unemployed workers who want a job but have given up and stopped looking.

As a result, the falling unemployment rate actually masks the troubling and consistent growth in the state’s jobs deficit, or the number of jobs the state needs to create in order to replace those lost during the Great Recession and keep up with population growth.  For the third straight month, this jobs deficit moved in the wrong direction, increasing from 520,000 in February to 528,000 in March to 532,500 in April.

As indicated by the following chart, the current jobs deficit reflects the most sluggish employment growth in 30 years.  In the two most recent recessions, those beginning in 1990 and 2001, the state’s share of the population that was employed—the employment-to-population ratio—never dropped below a relatively healthy 62 percent.  And even the most serious previous recession in the last 30 years—the 1981 recession—only dropped below 60 percent for a few months, before climbing back into the mid-60s.  In contrast, North Carolina’s experience in the current recovery is significantly different—the employment-to-population ratio fell calamitously through the middle of 2009 to below 57 percent, where it has largely remained in the 33 months since the formal end of the recession.  In fact, the current share of the population gainfully employed is 56.6 percent.  This trend reinforces the troubling growth in the jobs deficit, suggesting that the labor market is not producing enough jobs to keep up with population growth, much less replace the jobs lost to the recession.

These numbers make it clear that the unemployment problem facing the state is due to the basic reality that there are simply not enough jobs for every worker who wants one.

Prosperity Watch Issue 13, No. 2: North Carolina’s Current Job Creation Rate Lags Previous Recoveries

In recent months, North Carolina’s labor market has seen significant improvement, with the state’s unemployment rate dropping from 10.4% last December to 9.7% in March. Despite this good news, however, the state’s recovery from the Great Recession is clearly lagging behind its past job creation rates from previous economic recoveries, including those from the 1981 recession, the 1990 recession, and the 2001 recession.

As seen in the following chart, the recovery from the Great Recession has taken longer and has had further to climb to recapture the number of jobs lost than in these previous three recoveries.  In March, North Carolina’s economy entered the 51st month since the beginning of the most recent recession in December 2007.  By this same point in the previous three recoveries, the state’s economy had already replaced all of the jobs lost from the downturn and experienced significant positive employment growth—in fact, these jobs had been replaced an average of 25 months sooner than in the current recovery.

For example, at this same point 51 months into the recovery, the state’s unemployment rate in October 1985 was 5.3%, while it was 4.3% in October 1994, and 5.3% in June 2005—all well ahead of the current jobless rate of 9.7%.  Similarly, the share of the state’s population gainfully employed (as measured by the Employment-to-Population Ratio) in the 51st month came to 62.9% in October 1985, 64.2% in October 1994, and 62.7% in June 2005.  By comparison, the current share of the North Carolina's population with some kind of employment in just 56.7%. 

Along with failing to catch up to pre-recession employment levels, this suggests that the current economic recovery is also failing to produce sufficient jobs to keep up with population growth, a trend captured by the state’s jobs deficit of 528,000 and reinforced by national job-openings data that indicate that there is only one job available for every 3.3 workers looking to fill that job.

Prosperity Watch Issue 13, No. 1:  North Carolina Faces Significant Racial Disparities in Life Expectancy

Despite long-term improvements in the state’s life expectancy over the last century, North Carolina is still experiencing a persistent racial disparity between the life expectancy rates of white populations and those of black populations.  According to the State Center for Health Statistics’ latest available data, the overall life expectancy of a person at birth in North Carolina is 77.3 years—more than a full year below the national average of 78.5.  

Even more troubling, the overall state average masks the persistence of significant racial disparities, as seen in the table below. On average, whites born in the state live 4.3 years longer than African Americans, and the gap jumps even higher to 5.4 years when comparing white males to African American males in the state.

These disparities are also evident in different regions across the state.  In fully 30 counties across North Carolina, the racial gap for life expectancy at birth is greater than the state-level gap of 4.3 years; this means that in almost a third of the state’s counties, a child born into African American families face even a wider life expectancy gap than the already large gap common to all African American children in North Carolina (*note: county-level data is available for only 86 of the state’s 100 counties).

For example, Henderson County has the largest county-level gap between whites and African Americans at 9.7 years.  In terms of geographic concentration, three of the top five counties experiencing above state-level gaps are located in the state’s Northeast region, an area that is part of the northern tip of the Black Belt.  Additionally, only four of the 86 counties in North Carolina have a higher life expectancy at birth for African Americans than whites. The largest gap of this kind occurs in Tyrrell County (also part of the Northeastern region) where African Americans are estimated to live 7.4 years longer than whites.

Life expectancy serves as an important indicator of overall quality of life, including basic socioeconomic status. One recent study found that socioeconomic and demographic characteristics account for 80% and 70% of the African American-white gap in life expectancy among males and females, respectively.