New employment data from the federal government continue to poke holes in arguments from left-of-center activists about the decline in North Carolina’s labor force participation. That’s the assessment from John Locke Foundation President John Hood.
“These activists argue that North Carolina Gov. Pat McCrory and the Republican-led General Assembly hurt the state’s economy by allowing federal extended unemployment benefits to expire in July 2013,” Hood said. “To support their argument, they attribute almost all of the recent drop in North Carolina’s official unemployment rate to a decline in the state’s labor force.”
“But data released Monday morning is not consistent with that claim,” Hood added. “Beyond the new official unemployment rate of 6.9 percent for December 2013, down from 8.8 percent in June, broader measures of employment also show signs of improvement during the past year.”
Hood points specifically to the latest U.S. Bureau of Labor Statistics numbers that provide more detailed information than the official unemployment rate. That rate, known as U-3, includes only those unemployed workers who are actively seeking jobs.
Other measures known as U-4, U-5, and U-6 factor in discouraged workers who have given up the labor search, marginally attached workers who have exited the labor force for other reasons, and underemployed part-time workers who would prefer full-time jobs. The federal government releases rolling annual averages for these measures, updated each quarter.
“The 2013 averages just came out,” Hood explained. “If North Carolina’s exit from extended unemployment benefits had caused a large flight from the labor force, the effect should show up in broader measures. So what do they show? Not much. If you compare the U-5 rates for 2012 and 2013, the share of N.C. workers who were discouraged or otherwise marginally attached declined a bit. So did the share of North Carolina workers who were underemployed. Overall, North Carolina’s U-6 rate averaged 14.7 percent during 2013, down from 16.3 percent in 2012.”
As North Carolina’s U-6 rate dropped by 1.6 percentage points, the national U-6 rate dropped by 0.9 percentage points.
“The average number of working-aged North Carolinians who stopped looking for jobs and dropped out of the labor force due to discouragement, retraining, relocation, or other factors in 2013 was 1.4 percent, compared to 1.5 percent in 2012,” Hood added.
Hood also pointed toward the related issue of the size of North Carolina’s labor force decline. That decline started in February 2013, months before the end of extended unemployment benefits, Hood said. “Not only did the labor force start declining long before any change in unemployment benefits, but North Carolina was not alone in seeing a decline,” he said. “Other Southeastern states saw the same changes. Georgia’s decline mirrored North Carolina’s, while Tennessee’s decline was larger.”
Plus the size of North Carolina’s labor force decline from June 2013 to December 2013 was not large enough to be considered statistically significant, Hood said. “The Bureau of Labor Statistics says the small size of the household-survey sample in North Carolina limits the degree to which some changes can be considered significant. In the bureau’s own words, ‘our official estimates indicate that unemployment (both in terms of the level and rate) in North Carolina has gone down significantly since June, but neither the labor force nor employment level changes were significant.'”
The new data point toward some clear conclusions, Hood said. “Available evidence tells us North Carolina’s July 2013 exit from extended benefits was followed by a large, statistically significant drop in both the count and rate of unemployment,” he said. “It also was followed by a statistically significant increase in filled jobs as measured by the payroll survey. Other claims about household employment and labor-force participation lack statistical significance at this time.”