Carolina economy had strong spring
Even though Gov. Roy Cooper is a Democrat and the North Carolina Supreme Court has a majority of justices with Democratic backgrounds, state Democrats will be trying to make 2018 a “change election.”
They hope to break the Republican supermajority in one or both legislative chambers. They also hope to elect more Democrats to state courts, and at the federal level hope to win at least two congressional seats now held by state Republicans. Some county offices now held by the GOP are in play, as well.
Democrats could very well have a successful cycle in 2018. A number of historical and institutional factors could work in their favor, including the midterm-election losses usually suffered by the party controlling the White House. But North Carolina Republicans have something going for them, as well: the state’s strong economic performance.
Three recent data releases showed the state’s economy is once again among the nation’s pacesetters. North Carolina employers added about 100,000 net new jobs over the 12-month period that ended in May, according to the latest numbers from the U.S. Bureau of Labor Statistics. That’s the eighth-fastest rate of job growth in the country.
As for the separate household survey that produces unemployment rates, comparing annual averages is necessary to gain the necessary sample sizes to draw meaningful conclusions beyond the headline rate. During the 12-month period ending in March, North Carolina’s U-6 rate — the broadest measure of the labor market, including the unemployed actively looking for work, discouraged and marginally attached workers, and part-timers who’d rather be working full-time — dropped by 1.7 points to 7.7 percent. Only four states posted bigger improvements in their labor markets.
Gross domestic product figures aren’t yet available for the first quarter of 2018. But the U.S. Bureau of Economic Analysis has released estimates for personal income, which represents the largest component of economic activity. Over the 12 months ending in March, personal income in North Carolina grew by 3.7 percent, ranking our state 13th on this growth measure.
Job creation, unemployment, and income growth certainly don’t exhaust the range of issues that matter to voters, of course. Both Republicans in 1994 and Democrats in 2006 had wave elections during periods of economic growth.
But North Carolina Democrats have a serious credibility problem here. Ever since Republicans won control of the state legislature in 2010 and began implementing their conservative policy agenda, Democrats have repeatedly predicted economic disaster.
When Republicans first rejected Democratic attempts to maintain high sales taxes in 2011, then began a series of income-tax reductions in 2013, Democrats claimed that companies didn’t really value lower taxes as much as they valued expenditures on public services, and that the result would be less, not more, recruitment of new jobs into the state.
Democrats predicted that Republican tax cuts would hurt the economy in another way, as well, by rerouting money from those likely to spend it (recipients of jobless benefits, for example, or public employees) to those likely to save it (taxpayers with above-average incomes). According to this outdated demand-side theory of growth, North Carolina’s consumption, and thus the overall economy, ought to have faltered.
It is difficult to evaluate claims about economic-growth policy in the real world, because you can’t really run a controlled experiment. Perhaps if Democrats had retained control of the General Assembly over the past eight years, resulting in higher taxes and higher state expenditures, North Carolina’s economy would have grown even faster than it has.
Possible — but unlikely. Most modern studies of state economic growth have found that taxes are negatively associated with economic performance but public expenditures are not positively associated with it.
As a political matter, if North Carolina continues to add jobs at a rate faster than the national and regional averages, the claim that Republican policies are bad for the state’s economy will sound unpersuasive to voters. Perhaps other, national trends will help North Carolina Democrats win races. But their pessimistic claims about the state’s economy won’t do it.
John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.