RALEIGH – North Carolina’s unemployment rate fell in April by three-tenths of a point, to 9.4 percent. Good news? Not really.
When interpreting government statistics, you have to look at the details, not just the top-line number. As Carolina Journal’s Rick Henderson pointed out, North Carolina’s April decline in unemployment was attributable entirely to people leaving the workforce, according to the seasonally adjusted figures. At 9.4 percent, our state still has one of the highest unemployment rates in the United States – a dubious distinction North Carolina can claim for virtually the entire period since the onset of the Great Recession.
That unemployment rate, technically known as U-3, consists of the number of people actively looking for work who cannot find it. It is a useful way to gauge how effectively an economy makes use of its available human capital – its stock of willing, capable workers.
But it’s not the only gauge of labor utilization. In slow-growth environments where new jobs are scarce, and where factors such as technological change or international competition make some jobs obsolete, people who grow discouraged and leave the workforce can make the U-3 rate look better, even though that’s hardly a sign of economic vitality.
The U.S. Bureau of Labor Statistics publishes other measures of the labor market. I have previously explained how each of them is constructed. They aren’t computed monthly, however, so they don’t provide the real-time trends that reporters, politicians and others desire.
Still, BLS has recently released estimates for the 1st quarter of 2012. They don’t look good. What might be called the “underemployment rate” – the U-6 measure that includes discouraged workers who have dropped out of the workforce as well as those who work part-time but would like a full-time job – averaged 17.6 percent in North Carolina from the 2nd quarter of 2011 through the 1st quarter of 2012. Only four states had a higher rate. The national average was 15.6 percent.
Some politicians and commentators have taken to calling U-6 the “real” unemployment rate. It’s fine if you want to define your own terms, but you have to be consistent. This broadest measure is always larger that the official U-3 rate, even when times are good. So while North Carolina’s U-6 rate approaches 18 percent today, it was 8.6 percent back in 2006, before the start of the Great Recession, compared with North Carolina’s official U-3 unemployment rate of 4.7 percent that year. The national averages in 2006 were 8.2 percent (U-6) and 4.6 percent (U-3). By 2009, North Carolina’s U-6 rate had skyrocketed to 17.7 percent. It didn’t change much in 2010 (17.4 percent) and 2011 (17.9 percent).
If you look at the other side of the statistic – reported jobs created rather than reported spells of unemployment – North Carolina also ranks poorly. I’ve seen some suggestions to the contrary, but they are based on raw job counts rather than percentage changes. Of course more-populous states add (or lose) jobs in higher numbers than less-populous states. If you measure the percentage change in counted jobs, North Carolina’s rate of employment growth has trailed the national average over the past year.
In short, there has been essentially no recovery in our state’s labor market. A tiny net job gain has been offset by increases in working-age population. Recent declines in the U-3 rate primarily reflect worker discouragement, not reemployment.
Other measures paint no brighter picture of North Carolina’s comparative performance. Bloomberg News computes a measure called the Bloomberg Economic Evaluation of the States, or BEES Index. It looks at changes in employment, income growth, and the value of public companies based in the state, among other factors. I previously reported that as of the 3rd quarter of 2011, North Carolina ranked dead last on the BEES Index. With the benefit of 4th-quarter figures, North Carolina has improved its ranking – to 48th.
Slight improvements in recent data notwithstanding, North Carolina is not yet back on track. We continue to have one of the weakest economies in the nation. And Gov. Beverly Perdue, the most unpopular governor in the nation, is seeking another tax increase. Her fantasy world sounds intriguing.
Hood is president of the John Locke Foundation.