Carolina economy solid, not spectacular

How has North Carolina’s economy been performing lately? Let’s focus on four standard measures: unemployment, jobs, incomes, and gross domestic product.

Last week, the US Census Bureau released its latest jobs report. It’s based on two surveys. The household survey polls hundreds of North Carolinians and generates, among other statistics, the unemployment rate. The establishment survey polls tens of thousands of employers across North Carolina and generates, among other statistics, the job count.

In February, about 184,000 North Carolinians were unemployed but actively looking for a job. That translates into headline unemployment of 3.5%. Low by historical standards, this rate has bounced around between 3.3% and 3.9% since late 2021.

While North Carolina’s labor-force participation remains a bit lower than it was before COVID, the magnitude is too small to explain our low unemployment. Indeed, even the Census Bureau’s broadest measure — which includes not only those actively looking for work but also discouraged workers and those involuntarily working part-time — has our state at 6.2%, well below the national average of 6.9%.

In regional terms, however, North Carolina is no standout. Our headline unemployment was statistically indistinguishable from the nation’s, while Alabama, Florida, Georgia, Mississippi, South Carolina, and Virginia all had lower-than-average unemployment rates.

Similarly, the Census Bureau’s establishment survey shows roughly 72,000 net new jobs in North Carolina over the latest 12-month period, a gain of 1.5%. That’s a solid rate of job creation but hardly spectacular, outperforming Georgia, Virginia, and Tennessee but underperformingAlabama, Florida, South Carolina, and Texas.

Regarding income, the US Bureau of Economic Analysis found that over the most-recent 12-month period, North Carolina’s average per-person income rose 3.4%. Among our neighbors, only Georgia had a lower growth rate.

Finally, using the broadest measure of all, North Carolina’s gross domestic product went up 3.6% last year after adjusting for inflation. That growth rate was 17th in the country — higher than that of most other states, and of the nation as a whole (2.9%), but lower than the rates in Texas (6.5%), Florida (4.9%), and South Carolina (3.9%).

Now, when political commentators and activists pay attention to economic data (which is increasingly uncommon), they typically seek to jam square statistical pegs into round partisan holes. Democrats, for example, may see these numbers and immediately proclaim as a failure the past 13 years of Republican policymaking from the North Carolina General Assembly. This claim doesn’t make sense, though, given that most of the states experiencing stronger growth rates have GOP legislatures implementing their own conservative policy preferences.

Similarly, some conservatives may catch a fleeting glimpse of these numbers and conclude that the General Assembly ought to attempt a rapid phase-out of North Carolina’s personal income tax — since the likes of Texas and Florida don’t have one. But South Carolina taxes personal income. So do Utah, Montana, Kansas, North Dakota, and Virginia. Each has outperformed North Carolina in one or more of these measures over the past year.

I happen to think North Carolina’s conservative turn since 2010 has been wise, not only producing some short-term benefits but, more importantly, laying the groundwork for a long-term improvement in our state’s investment climate, labor markets, and quality of life. My conclusion is based not on eyeballing a few statistics but on examining hundreds of empirical studies that confirm significant relationships between tax rates, regulatory burdens, and cost-effective public services on the one hand and economic growth on the other.

Still, not everything is about politics or policy. Some industries thrive during rough times or in business-unfriendly places because of technological change, shifting consumer preferences, or blind luck. Others falter even when the policy environment is pro-growth.

My real purpose in calling attention to North Carolina’s recent economic performance is to warn against complacency. Lawmakers ought not assume another big increase in baseline state revenue next year. And they should always look for new ways to make North Carolina a more attractive place to live, work, invest, and create new businesses.

John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history.