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.