RALEIGH – I am, by nature, an optimistic fellow.
Despite North Carolina’s summer dry spell, for example, I haven’t given up on my lawn. I still get out the mower each weekend, check the gas and oil, crank up an audiobook, and spend exactly five minutes trimming the patch of crabgrass that is the only green and growing part of my front yard.
And as a kid, I rooted for the Cincinnati Bengals, usually to no avail.
So I don’t approach the subject of North Carolina’s economic woes with apathy or pessimism. I want my home state to prosper. I want to see signs that our business climate is markedly improving, and that our policymakers have set the stage for a strong recovery from the worst recession to hit us in decades.
But so far, the data don’t bear out such optimism.
You might have read something different a few days ago, when the latest unemployment numbers came out. For the month of August, North Carolina posted a 9.7 percent jobless rate – well below the 11 percent level we saw earlier this year. The state’s jobless rate is now close to the national average, after having compared unfavorably to the rest of the nation for two years.
Is the recent decline in North Carolina’s rate a sign that we’re finally closing the gap? Unfortunately, no. If you look more closely at the statistics that make up the unemployment rate, the good news is scant.
There has been some hiring in some months in some economic sectors, though most of it has been in government jobs. What’s really going on, however, is that an increasing number of North Carolinians are dropping out of the labor force. They’re discouraged, not reemployed.
Remember that the unemployment rate is the result of dividing the number of jobless people actively looking for work by the number of people in the civilian labor force. Two different trends will drive that rate down – more people finding jobs and more people ending their search for jobs.
In reality, there is been no net job growth in North Carolina since March. The number of North Carolinians classified as unemployed has dropped by about 70,000, but so has the number of people in the workforce.
Other states have posted increases in their unemployment rates over the summer. In many cases, that’s because they have seen some previously discouraged workers reentering the labor market to look for jobs.
It sounds paradoxical but it’s true: we’ll know that a recovery is truly picking up steam in North Carolina when some of our discouraged workers restart their job search, driving up the jobless rate in the short term.
Here’s a simple way to think about the longer-term trend. At the beginning of 2008, there were about 4.3 million workers employed in North Carolina, out of a labor force of nearly 4.6 million. Our jobless rate was just under 5 percent.
Then the recession hit. North Carolina got hit earlier than most states, and the consequences were worse than average here. Since the beginning of 2008, employment has dropped by about 275,000. The labor force has shrunk, too. It will likely take years for North Carolina to erase these losses.
I may not read the state’s recent unemployment trends as optimistically as some – particularly incumbent politicians – have chosen to read them. But I remain hopeful that North Carolina can restore its economic competitiveness.
We won’t get there through happy talk and wishful thinking, however. There is some hard work to do, and difficult decisions to make. North Carolina’s assets include a strong work ethic, a pleasant quality of life, recent improvements in our physical-capital stock, and a right-to-work law that keeps labor unions from forcing wages above the productivity of labor.
Our liabilities include mediocre educational attainment and higher marginal tax rates and regulatory burdens than most of our competitors.
To get back into the game, North Carolina policymakers will need to refocus government on its core responsibilities and reduce its cost. I remain optimistic that the job can be done, if they have the will.
Hood is president of the John Locke Foundation.