Look B4U leap 2

| March 31, 2014

John Hood Headshotby John Hood, John Locke Foundation and NC SPIN panelist, March 21, 2014.

I know my advice is fated to be hated. I know it’s hard to follow. But I’m going to offer it, anyway — again. Politicians and pundits across the ideological spectrum should avoid drawing sweeping conclusions from limited, preliminary data about North Carolina’s labor market.

When the latest federal surveys came out on last Friday, supporters of Gov. Pat McCrory and the Republican legislature celebrated another decline in the jobless rate, to 6.4 percent in February. They pointed out, correctly, that it was the first time since the onset of the Great Recession that North Carolina’s rate was lower than the national average (6.7 percent).

On the other hand, opponents of McCrory and the GOP legislature observed, also correctly, that the results of a separate federal payroll survey painted a far less rosy picture of the state’s labor market in early 2014. By this measure, North Carolina employers shed 23,300 positions in January and February, the worst jobs trend in the nation.

So what’s really going on? The truth — admittedly inconvenient for those working the 24-hour news cycle — is that no one really knows. In the short run, the household survey (from which the unemployment rate derives) and the payroll survey (a larger sample that produces jobs data) can produce wildly varying results. Eventually, through revisions and convergence, the two surveys generally produce similar trends. But if you push the inherently fragile short-term statistics too hard, you’ll break something.

For example, until January 2014 the payroll survey showed significant and accelerating job creation. North Carolina employers added 49,000 jobs in 2010, 50,000 in 2011, 73,000 in 2012, and 86,000 in 2013. The household survey, on the other hand, showed a modest improvement during 2011 and 2012, followed by a weaker trend in 2013. North Carolina’s unemployment rate continued to fall during 2013, but the main cause appeared to be declines in the labor force, not sizable gains in household employment.

Over the past year, Democrats and liberal critics seized on the household survey results and virtually ignored the payroll survey. Suddenly, for early 2014, they are citing the payroll survey, which now looks bad, and virtually ignoring the household survey, which now looks good.

How good? According to the household survey, North Carolina has experienced a gain of 24,300 employed persons in January and February. Unemployment dropped by 26,900 persons. That is, 91 percent of the drop in unemployment so far in 2014 seems attributable to higher employment, not to declines in labor force participation.

It’s also worth noting that the latest survey data clash with the Left’s continued claims about the economic consequences of ending extended UI benefits. Recall that North Carolina exited the extended-benefits program in July of 2013. Since then, the number of unemployed North Carolinians has fallen by 92,000. Increased employment (51,000) now accounts for most of the trend. It is true that North Carolina’s labor force dropped substantially during 2013. But the labor force drop began in early 2013, before the extended benefits went away, and also occurred in South Carolina, Alabama, Tennessee, and Georgia, where extended benefits remained in place through December 2013. The cause, apparently regional in nature, remains a mystery.

At the start of 2014, the rest of the country also ended UI extended benefits. Was there a sudden, marked drop in the labor force as jobless workers simply gave up? No. The nation’s labor force grew, thanks to a rise in both employees (680,000) and in jobless folks actively looking for work (108,000).

My point is not that North Carolina’s labor market is healed, or that any one set of economic statistics is definitive. The last two months of payroll-survey data have been awful. If the figures aren’t revised, and if the trend continues for several more months, that would truly be cause for alarm. But at this point, the conflicting signals for early 2014 are too much of a jumble to sort out.

According to a broad set of measurements over a longer timeframe, the state’s economic recovery still compares favorably to regional and national benchmarks. Personal income in North Carolina rose 1.9 percent in 2013, faster than the regional and national averages. According to a monthly index of economic indicators produced by the Federal Reserve Bank of Philadelphia, North Carolina’s growth rate ranked 9th in the nation over the latest 12-month period (through January) and 12th in the nation since 2011.

I’ll follow my own rule here: Relatively good economic performance in 2011, 2012, and 2013 doesn’t mean that North Carolina is destined to have good performance in 2014. So far, one statewide survey shows a two-month drop of 23,300 employees and another statewide survey shows a two-month rise of 24,300 employed persons. So I’m going to just keep looking for a while before I leap to any conclusions. Who’s with me?

http://www.carolinajournal.com/daily_journal/index.html

Category: NC SPIN Perspectives - Opinions from NC Leaders & Organizations

Comments (1)

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  1. Rip Arrowood says:

    Just because this place is named “NC Spin”, doesn’t mean that it’s a requirement to spin everything.

    Sometimes facts are just facts….