RALEIGH – Any North Carolina politicians pinning their hopes for electoral or fiscal improvement on rapid job growth later this year should brace themselves for disappointment. To date, the 2010 trend doesn’t look good. And there are good reasons to believe employment will recover more slowly now than in past recessions.
John Quinterno, formerly a liberal policy analyst at the North Carolina Justice Center and now a Chapel Hill-based consultant, presented the bare facts in a recent study reported on by Triangle Business Journal. Since January, he pointed out, most of the paltry number of net new jobs created have been in government.
Overall, the “recovery” has been anemic, with North Carolina down more than 250,000 jobs since December 2007. At the current rate of about 5,000 positions added a month, job growth isn’t even keeping up with the growth of the state’s working-aged population.
There’s little reason to expect a major increase in job creation anytime soon. Quinterno’s study projects continued weakness in consumer and business spending through the remainder of 2010, and some economists project that North Carolina’s jobless rate will end up closer to 11 percent than 10 percent by the end of the year.
I think that the tremendous uncertainty created by Washington’s fiscal and regulatory policies is a major factor motivating businesses to hold off on new enterprises and hires and motivating households to hold off on purchasing new goods and services. And I believe that North Carolina’s economic competitiveness has been weakened by a number of self-inflicted wounds, including punitive regulation and fiscal irresponsibility.
But you don’t have to agree with my diagnosis of the causes of North Carolina’s economic morass to recognize that it will take a long while for North Carolinians to slog their way out of it. An underappreciated reason why the labor market isn’t clearing as rapidly as in past recessions can be found in the housing market.
Of course, the recession had its origins in a boom-and-bust cycle in the housing market. But now that so many North Carolinians reside in neighborhoods where housing prices have fallen significantly from their peaks, they are finding it more painful to pick up and move elsewhere to pursue new job opportunities.
As Renee Courtois explained in the latest edition of Region Focus magazine, a Census Bureau measure called the “mover rate,” which captures the mobility of households, fell in 2008 to the lowest level since the measure began in 1948. “The proportion of movers who have stayed within the same county has spiked,” she wrote, “while the proportion who have moved out of state has fallen to the lowest level since the mid-1990s.”
Like it or not, some recessionary layoffs will always be permanent. They reflect the final death spiral of outmoded firms or industries that were limping along even during the economic boom and now have little prospect for recovery. For many affected workers, the only practical solutions are to change careers or change locations. Both typically require the flexibility to move to places offering the requisite training or employment opportunities.
This is all the more reason why governments should not try to use artificial means – such as guaranteed loans, regulations, or tax deductions – to boost the rate of homeownership. There are certainly personal and even social benefits when households build net worth over time through prudent saving and wise investing, but real estate need not dominate those assets. It is relatively illiquid. And as the events of the past three years have demonstrate, there is no reverse law of gravity suggesting that homes always appreciate in value.
In the past, one of America’s comparative advantages has been our flexible labor markets. With high rates of mobility and low rates of unionization and regulation in comparison to our European competitors, American firms have been able to find and hire people more quickly, increasing the productivity of our most important assets – our people. The advantage is eroding, however.
North Carolina politicians need to live in the real world. No magical stimulus fairy dust will fix the problem. Time to get to work at the long, arduous task of getting people back to work.
Hood is president of the John Locke Foundation.