RALEIGH – It’s been a couple of months since the Easley administration and I got into a spat about our state’s economy. In a previous exchange of words, I wrote that North Carolina was on the verge of reclaiming its title as the “Rip van Winkle State.” Dan Gerlach, who serves as Gov. Mike Easley’s senior fiscal policy advisor, took me out behind the woodshed for a rhetorical spanking. I returned the favor.
Now we’re at it again. This time, it’s Don Hobart, general counsel at the N.C. Department of Commerce, who thinks I’m all wet in a recent syndicated column in which I recounted some statistics from various sources and questioned the state’s priorities in economic development. Hobart has responded in at least three of the papers that run my column, and we’ve posted his response on Carolina Journal Online today.
I’ll file a more detailed refutation of Hobart’s piece later this week, but his missive did prompt me to return to the employment data for North Carolina and the Southeast to see how things may have changed since March. State leaders are trumpeting, for example, the fact that our unemployment rate has fallen. It’s true. At 6.7 percent in Dec. 2003, the jobless rate for the state came in at 6.1 percent in the preliminary May figures.
Unfortunately, some of this improvement appears to be attributable to the fact that there are long-term unemployed North Carolinians who have given up trying to find a job for now. They are no longer looking for work, and thus aren’t counted in the unemployment rate.
North Carolina and the rest of the Southeastern states have shown some signs of economic life in the past few months, as has the rest of the country. Employment is growing in some sectors. From March 2003 to May 2003 (preliminary), North Carolina’s economy added more than 11,000 jobs. Given the positives in the broader economy during the past couple of months — federal tax cuts, the end of the Iraq war, interest-rate declines — the stage should be set for a stronger recovery.
As we have seen in the past couple of years, though, North Carolina’s apparent job recovery is almost entirely related to the growth of government, not the growth of businesses. Of those 11,000 new jobs, more than 8,000 are in the public sector. Indeed, North Carolina continues to lag far behind the rest of the region in private-sector growth and employment.
From the onset of the recession in March 2001 until May 2003 (preliminary), North Carolina lost 140,000 private-sector jobs. This by far the worst performance in the Southeast. Florida actually gained 51,000 jobs — despite the post 9/11 hit on tourism — with states such as Georgia, Virginia, Tennessee, and Arkansas suffering far smaller declines in actual positions and in proportional terms.
North Carolina’s share of the total job loss actually looks worse now than it did when I ran the numbers a couple of months ago. Nearly one-third of all the private-sector jobs lost in 10 Southeastern states (the old Confederacy minus Texas) were right here in North Carolina. On the other hand, government employment in North Carolina has growth by nearly 6 percent since 2001, far faster than the 3.4 percent regional average. Almost a quarter of all new public-sector jobs in the Southeast have been created in our state.
Hobart criticizes my take on the North Carolina economy as a “Chicken Little” view. That’s an allusion to the wrong children’s story. In terms of economic competitiveness, North Carolina is a tortoise surrounded by jack rabbits. And while in the story the hare gets lazy and fritters away his advantage, in real life it is only North Carolina in our region that has raised taxes three years in a row. We have the highest tax rate on income, investment, and capital gains in the region.
In this case, slow and not-very-steady will lose the race.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.