Opinion: Daily Journal

NC Workers Make Above-Average Gains

It’s certainly reasonable for people to use the unemployment rate and the number of jobs created to evaluate the performance of an economy.

Robust growth typically means greater opportunities for jobless people to find employment, for part-timers to find full-time jobs, and for employed people to change jobs that better suit their needs and circumstances. Do the past three years of unemployment and job-creation data meet the definition of “robust”? Probably not. Other recoveries have been stronger ones for the labor market. However, the problem is national, not local or regional. The entire nation’s recovery from the Great Recession has been subpar by historical standards.

In fact, North Carolina’s comparative performance on these measures since mid-2011 has been pretty good. The state’s unemployment rate has dropped from 9.1 percent in June 2011 to 6.7 percent in December 2013. A broader measure from the Bureau of Labor Statistics, U-6, includes not only those jobless and looked for work but also discouraged workers who’ve temporarily dropped out of the labor force and folks working part-time who would rather work full-time. North Carolina’s U-6 rate dropped from an average of 17.9 percent in 2011 to an average of 14.7 percent in 2013, a much faster rate of improvement than the national average.

With regard to jobs, North Carolina employers added some 184,000 positions from mid-2011 to the end of 2013, also a faster rate of growth than the national average.

However, there is a sense in which measures of unemployment and job creation miss the mark. At any given time, most workers are employed and not looking for new jobs. They may not be directly affected by changes in unemployment. What they are most likely interested in is the rate of change in their compensation — in wages, salaries, and non-wage benefits.

The U.S. Bureau of Economic Analysis tracks these data on a quarterly basis for each state. For the most recent period available, the 3rd quarter of 2013, North Carolina workers received $242 billion in compensation. Since mid-2011, total compensation for North Carolina workers had grown by an average annual rate of 3.7 percent, which exceeds the national growth rate (3.4 percent) and the average growth rate in the Southeast (3.1 percent).

Keep in mind that these figures, updated quarterly, reflect total spending on employee compensation. The numbers can rise both because of wage or benefit hikes or because of growth in the employed population. Because of survey schedules and sample sizes, per-capita income data are not available on a quarterly basis. They tend to lag quite a bit. For states, the latest estimates are annual figures for 2012.

From 2011 to 2012, North Carolina’s per-capita income rose by 3.8 percent, a rate that was once again faster than the national (3.4 percent) and regional (3.2 percent) averages. By comparison, in most other years since 2000, North Carolina’s rate of growth in per-capita income has fallen below the national average, the Southeast average, or both.

Because North Carolina’s job growth wasn’t as strong in the 2013 calendar year as it was in 2012, at least according to the preliminary figures, I’d expect our income growth also to have slackened a bit when the numbers are published. (Keep in mind that North Carolina’s economy actually grew at a healthy clip during the second half of 2013 — it was the first half of the year, before the end of unemployment insurance extended benefits, when our labor market proved sluggish.)

Still, if we look at compensation and income data rather than unemployment and jobs data, the story line is similar. The nation as a whole is still experiencing a weaker-than-normal recovery from recession. But North Carolina has done better than the national average since 2011. These facts are consistent with Republican claims that their legislative actions, beginning with the 2011 session, have improved the state’s economic climate — although other explanations for the favorable trend are possible.

On the other hand, these facts are inconsistent with critics’ claims that Republican policies have resulted in weaker economic growth. Of course, those claims will continue.

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Hood is president of the John Locke Foundation.