Prosperity Watch Issue 18

  Prosperity Watch Issue 18, No. 4:  Minority of North Carolina's Employment Concentrated in Growing Industries  

Given the state’s persistently high unemployment rate and growing jobs deficit, North Carolina faces a short-term challenge of creating enough job opportunities to match the number of workers seeking employment and the long-term challenge of ensuring this job creation occurs in those industries most likely to experience growth and pay decent wages.  Unfortunately, just one-quarter of the state’s employment base is concentrated in industries that are either growing or poised for growth in the future.  In contrast, the overwhelming majority of the state’s employment is concentrated in industries that are either declining in North Carolina or declining relative to the rest of the nation (see following figure).  This suggests that the state’s employment base is vulnerable to future long-term decline, a troubling trend likely to result in additional vulnerability to large-scale job loss in the future.

As shown in the figure, almost 19% of the state’s workers are employed in Growing and Stable Local Strengths.  These industries are already heavily concentrated in North Carolina compared to the rest of the country, making them a key strength for the state’s employment base.  In terms of long-term trends, these industries have also experienced positive employment growth since 2004, or have seen significant job growth in North Carolina relative to the industries’ job growth in the rest of the country, suggesting that North Carolina has a competitive advantage that bodes well for future growth potential

 According to a report released by the Budget & Tax Center last week, the state has 26 industries that meet this description, with weekly wages ranging from a low of $321 in the forestry industry to a high $1,979 in the spectator sports industry. Government is the largest employer in this category, with 3.4% of the state’s total employment and an average weekly wage of $777.

At the same time, 7% of the state’s workers are employed in industries considered Emerging Local Strengths. These industries are not yet heavily concentrated in North Carolina but have experienced growth in employment within North Carolina in absolute terms since 2004 and relative to the industries’ growth in the rest of the nation. Given the fact that they are not already concentrated in North Carolina but are experiencing faster growth in the state than they are experiencing nationwide, these industries represent an area of significant growth potential for North Carolina. The state has 59 industries that meet this description, with weekly wages ranging from a low of $376 in the tree and nut farming industry to a high of $3,009 in the securities and commodities exchange industry.

These two categories of industries are poised for long-term growth and provide the state with competitive advantage compared to the rest of the nation. For the long-term health and stability of the North Carolina labor market, the state needs to ensure that the percentage of the state’s labor force employed in these sectors needs to grow significantly.

Prosperity Watch Issue 18, No. 3: Public sector job losses erased private sector job gains in September

In last week’s unemployment numbers released by the Division of Employment Security, North Carolina’s workers received confirmation of what they probably already knew—the labor market continues to stagnate under the weight of insufficient job creation and the lack of available jobs is sufficient numbers to bring down the unemployment rate in a meaningful way. 

Most glaringly, the state continued to see the long-term erosion of public sector employment, job losses which appear largely responsible for the stubbornly high unemployment rate, which showed a negligible decrease from a summer high of 9.7% in August to 9.6% last month. Even more troubling, the state has failed to create enough total jobs to reduce unemployment to where it was in April, May, and June, when the jobless rate clocked in at 9.4%.

While part of the problem is the sluggish rate of private sector job growth, the long-term reduction of government employment is also a critical factor.  For example, North Carolina experienced private sector job growth last month with the creation of 1,500 new jobs (seasonally adjusted), these gains were almost completely wiped out by the loss of 1,400 public sector jobs, 98% of which came from state government job losses (see the following figure for details). Looking at government employment over the last year, we see a similar trend. Without the 5,500 public sector layoffs experienced in the last 12 months, the number of total nonfarm jobs created in North Carolina since September 2012 would have been 17% higher, and the state’s unemployment rate would have been 9.4% — unchanged from the jobless rate in April, May, and June.  In other words, public sector job losses are moving the state backwards in terms of improvement in the labor market.

Prosperity Watch Issue 18, No. 2: Income Inequality Grows in North Carolina, Likely Slowing Economic Growth

Income inequality—the extent to which income is distributed unevenly—is widespread and growing in North Carolina and the nation. Americans are experiencing historically high levels of income inequality as this chart shows. Since the late 1960s, income inequality in America has been indisputably trending upward.

Census data show that a wide income gap exists in North Carolina, with the top and bottom quintiles of the income distribution separated, on average, by an annual income of $144,246. The top quintile of households held more than half of all income in the state, meaning they held more income than the bottom 80 percent (lowest 4-fifths) of households combined in 2011 (see the chart below). The top quintile of households’ average income is more than 15 times as large as the average income of the entire bottom fifth and 3.5 times as large as the income of the middle fifth.

Income inequality is also growing. Each quintile of the income tier has experienced shrinking household incomes since 2007, but none more so than the households in the bottom fifth. For the average household in the bottom quintile, income dropped by 10.4 percent between 2007 and 2011, compared to 9.2 percent and 6.4 for the average household in the middle and top quintiles, respectively.

Growing income inequality limits economic mobility, which is the ability to climb up the income ladder, and limits and erodes the equality of opportunity. But beyond the impact of opportunity at the individual level, income inequality also has real negative effects at broader state and national levels. A recent study published by the International Monetary Fund found that income inequality stymies long-term, rapid growth.

Policies can reverse this troubling trend and support economic growth. Policymakers need to enact policies that grow our economy equitably and address the rising income gap by making changes to the tax code, which is a major driver behind income inequality. It is also important to invest in tools that support equality of opportunity for all people—such as tax credits for low‐income families and high-quality schools and job training programs—and in the meantime provide adequate services to those in need.

Prosperity Watch, Issue 18, No. 1: Climbing jobs deficit presents clear need for policy solutions

The new jobs numbers released by the NC Division of Employment Security last week confirmed what North Carolina’s workers have known from first-hand experience and which now presents one of the defining challenges facing policy makers—the state is just not experiencing enough job creation to keep pace with the demands of its growing population.

Along with an unemployment rate that increased from 9.6 percent to 9.7 percent in August, the full scope of this policy challenge is best captured in the state’s jobs deficit—the number of jobs the state needs to create to replace those lost to the 2007-2009 economic downturn and keep up with population growth—which grew to 553,400 last month, up from 546,000 in April and up from 530,600 at the beginning of the year.  At a time when there are almost three workers for every available job opening across the Southeast, the growing jobs deficit reinforces the lack of employment opportunities as the fundamental driver behind the struggling labor market. 

The climbing jobs deficit and corresponding lack of job openings present a clear and defining challenge for North Carolina’s policy makers.