After three years of economic performance far below historical norms and the performance of other Southern states, North Carolina has posted some impressive job-growth numbers since the beginning of 2004. Economists are upbeat about the future, as they should be, and state politicians such as Gov. Mike Easley are patting themselves on the back for wise “investments” in education and recruitment incentives.
Time for a reality check, however. North Carolina’s solid growth in employment so far this year — roughly a 35,000 net gain in positions since January — represents only a modest bounce-back from a horrible performance in the 2000-03 period. Indeed, while the rest of the South began a significant labor-market recovery early last year, and the rest of the nation in about mid-2003, North Carolina is only now experiencing something similar. We’re following again, not leading.
Consider the federal job numbers first. From January 2001 to January 2004, North Carolina lost about 160,000 positions, or about 4 percent of its employment base, while the nation as a whole lost about 1.7 percent and the South as a whole about 0.6 percent (though that was so low primarily because fast-growing Florida gained — neighboring states such as Georgia, Tennessee, and South Carolina lost about 1.5 to 2 percent). In other words, North Carolina had by far the worst performance in job growth in the South.
From January 2004 until the preliminary April numbers, North Carolina has posted the best job-growth rate, at about 0.93 percent, compared with about 0.5 percent for the region and nation. Of course, this is explicable in part because North Carolina’s recovery started so late; other places have already added the early-stage recovery jobs that North Carolina is only now recording. The longer-term trend remains depressing: the net job loss is about 125,000, still the worst in the South and far below the national average in percentage change. When you subtract the increase in government employment that North Carolina and others have experienced, the numbers on the state’s private economy looks even worse: nearly 150,000 jobs lost, representing a 4.4 percent decline in NC compared to a drop of 1.5 percent for the South and 2.6 percent for the nation.
The per-capita income trend looks no better. From 2000 to 2003, personal income per North Carolinian showed the slowest growth rate in the South, 4.3 percent. The national average was 6 percent.
Again, some are blaming free trade and productivity gains for destroying manufacturing jobs and, thus, North Carolina’s labor market. This argument can only take you so far. For one thing, it’s not accurate to attribute the entire loss of manufacturing jobs in the state — and it has been substantial (21 percent since the start of 2001) — to companies looking overseas for lower wages. While the numbers differ according to specific sector, manufacturing costs are no longer dominated by wages. In fact, only 10 percent of the total cost of U.S. manufacturing consisted of wages last year. Collectively, the cost of paying for taxes, regulatory compliance, litigation, and benefits add up to more than twice the cost of wages. North Carolina has noticeably not been assisting manufacturers much with reducing these costs, and indeed state and local politicians have been working furiously to raise them further by hiking taxes on personal income, retail sales, and health benefits while presiding over costly regulatory expansions and delays.
The other reason not to blame off-shore manufacturing alone for North Carolina’s underwhelming performance is that the trend is present even when you back manufacturing out of the statistics. Our state has shed 20,000 non-manufacturing jobs in the private sector since 2001 while virtually all of our neighbors have added them.
It’s good news that North Carolina’s employment picture appears to be improving this year. It’s bad news that we’re essentially just playing catch-up with our neighbors.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.