RALEIGH – On Thursday, Gov. Mike Easley released early the results of a federal jobs survey taken in May, touting another month of job growth as evidence that his fiscal and economic policies were sound. The appropriateness of his action may well be questionable, but the motivation is understandable.
The state of North Carolina’s economy is almost certainly going to be the main issue in state electoral contests this year. More generally, much of the public-policy debate over the past several years has centered on economic growth. What should government do to foster it, or at least not inhibit it? What has been the role of national and international trends and policies? Are targeted-incentive policies fair and efficacious?
Gov. Easley has offered some straightforward answers. On what government can do, he advances the argument that taxpayer “investment” in infrastructure and education is worth doing in the midst of a recession, even if it requires a tax increase. On the causes of economic turmoil, the governor lays most of the problem squarely at the feet of the national government and international trade. On incentives, he argues that they are necessary and effective, and that the state can help shape the private marketplace to the public’s benefit and ensure that “good jobs” in the “industries of the future” come here.
To argue for his economic policy, Easley offers as evidence the fact that since January, North Carolina employers have added nearly 50,000 new jobs. This rate of growth is higher than both the Southern and national averages.
But here’s where things get sticky. First, if George W. Bush’s ineffectual handling of the economy was to blame for North Carolina’s economic woes, what accounts for the sudden surge in job growth this year? Bush is still president, his main policies (tax cuts) have only really kicked in during the past 18 months, and no past free-trade agreements have been repealed.
Perhaps one might assert that it’s because North Carolina, under Easley, was doing what was needed to offset Bush’s poor economic performance in the rest of the country. But that doesn’t add up, either. Most of the “investment” Easley touts in education and infrastructure either hasn’t been implemented yet or (in the case of schoolchildren) will take a very long time to have an effect, positive or otherwise, on the labor market. The only exception would be the new employees North Carolina has hired to carry out some of Easley’s initiatives; our state has led the South and the nation in government hiring since January, but it accounts for only about 9,000 of the 50,000 new positions.
The likelier explanation for North Carolina’s jobs spurt since January can be found by looking at the larger trend. From January 2001 to January 2004, North Carolina’s economic performance was, quite simply, abysmal. We shed 160,000 jobs, or 4 percent of the total. This was the worst loss in the South and one of the worst in the nation. Our personal incomes grew by an average of only 4.3 percent, far below the national (6 percent) and regional (8.5 percent) averages.
While the nation as a whole experienced a relatively mild recession in 2000-01 and then saw a strong recovery begin sometime in 2002 or 2003, North Carolina suffered a worse-than-average recession and then had a slower-than-average recovery, generating consistent net growth in jobs only since January while our neighbors’ labor markets were picking up a year ago. Recent growth has, in other words, not been a case of North Carolina “leading the way” but rather of North Carolina starting to catch up with everybody else. If you dig a bigger hole, you will experience larger percentage gains in your altitude as you claw your way out.
But it will take a while: North Carolina’s economy still has 110,000 fewer jobs today than it had when Easley took office (not that I’m suggesting his policies are entirely to blame). And that’s still the worst economic performance in the region, though in fairness the state of Georgia (down 106,000 jobs) looks like it might take that mantle from us in the coming months.
Good thing they’ve got that magnificent education lottery down there.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.