Prosperity Watch Issue 32

Prosperity Watch Issue 32, No. 1: North Carolina continues to lag nation in job creation, and moving in the wrong direction

Despite recent superficial improvement in North Carolina’s unemployment rate, persistent joblessness continues to plague the state’s workers and hinder the state’s recovery from the Great Recession. In recent years, North Carolina has consistently lagged the nation in reducing unemployment—a trend that appears to be getting worse.

At first glance, the news that the state’s unemployment rate has dropped 1.7 points from 10.4 percent in August 2011 to 8.7 percent in August 2013 shows that North Carolina is headed in the right direction.  But while any reduction in unemployment is certainly good news, a deeper look reveals that the news isn’t quite as good as advertised. As we have written about before, much of what is driving the drop in unemployment is a decline in the labor force.  

Moreover, recent gains by North Carolina are just not enough to catch up to the rest of the nation. For example, the national unemployment rate also dropped 1.7 points from August 2011 to August 2013, putting the national average at 7.3—well below the state jobless rate.

North Carolina has consistently lagged behind the rest of the nation in terms of the percentage of its citizens that have jobs. Since the unemployment rate does not count the number of unemployed workers who have given up on finding work, the number of people with jobs compared to the total working-age population is a far better indicator of the true health of the job market for workers than the traditional jobless rate. According to this measure, 54.6 percent of working age people in the Tarheel State were employed, compared to 58.6 percent in the nation as a whole. To reach the national average, North Carolina would need 130,000 more people with jobs in the economy.

The jobs-to-people trends are even more discouraging when looking over the longer term. In the two years from August 2011 to August 2013, the national percentage of the population with jobs has remained largely steady between 58.3 and 58.7, suggesting a stable level of employment in the nation as a whole. But the North Carolina rate has experienced a very different trend over the past two years. After rising from 56.3 in August 2011 to 57.4 percent in December 2012, the state’s rate has fallen precipitously back down to 56.3 in August, erasing nine months’ worth of gains. This downward trend suggests that North Carolina’s labor market is moving in the wrong direction, leaving too many workers with too few job opportunities.

Despite modest private sector job creation, unemployment remains high, and too many workers cannot find work. When compared to the national economy it is clear that North Carolina continues to underperform.  Policymakers must recognize that without considering direct job creation strategies and investments in job training and economic development, the jobs for workers trend will continue in the wrong direction.