How good is the job market?

As a professional economist, I look at volumes of data to understand what is happing in the economy.  But if I could only look at one piece of this information, I would focus on the job market, and for two reasons.  First, the job market reflects the strength of businesses.  Typically, businesses hire when economic times are good, and they fire when economic times are bad or uncertain.  Second, the strength of the job market is key to the economic wellbeing of most households.  With some exceptions, such as retirees, the earnings from jobs are essential to keeping households able to meet their financial needs for on-going happiness.

Therefore, in today’s column I examine the status of North Carolina’s job market, including comparisons to the national market. My analysis is for recent years, specifically from 2021 to 2026.

The first data to examine are job growth.  North Caroline has done well in adding jobs.  From 2021 to mid 2026 the number of jobs in the State increased by over half a million, an 11% gain.  North Carolina’s percentage gain was ahead of the national job gain, and the State ranked in the tip five of states in percentage job growth. The unemployment rate in North Caolina is also typically lower than the national jobless rate.

Now let’s look at job earnings.  Average weekly job earnings in North Carolina are lower than national average weekly earnings, with the most recent North Carolina weekly average being 9% under the average national weekly earnings.

But there’s an adjustment that needs to be made to this comparison.  It’s the fact that North Carolina’s cost-of-living is slightly lower than the national cost-of-living. The most recent data show the average-cost-of living in North Carolina is 6.5 percent lower than the national cost-of-living. This means each dollar in North Carolina buys more than a dollar spent in the nation. When this factor is recognized, average North Carolina weekly earnings are only 2.5% less than the average national weekly earnings.

A big issue in the economy during the recent five years has been inflation, which is simply a condensed way of saying the cost-of-living is rising.  While inflation is a national issue, it can vary by regions and states. The inflation rate in southern states is slightly lower than the national rate.  Since North Carolina is part of the southern region, this means inflation is lower in the State compared to the nation.

One benefit of being in a region with a more moderate inflation rate is it means increases in worker earnings have a better chance of staying ahead of prices.  Indeed, examining the numbers shows the average worker in North Carolina during the last five years was more likely to see pay increases keep pace with price increases than the average worker in the nation.

Thus far in this column I’ve looked at the North Carolina economy in total.   But such a view hides the internal changes on-going in the State economy.  Anyone who is familiar with North Carolina’s economic history and trends knows the State has had its economy totally remade in the last half century.  Until the late 20^th century North Carolina’s economy was based the manufacturing of products such as textiles, furniture, and tobacco products.  Indeed, these three were referred to as the “Big Three” of the North Carolina economy. But that changed with the emergence of international competition and the development of new economic sectors.  North Carolina lost much of its “Big Three” to foreign countries, but also saw new manufacturing and services take the “Big Three’s” place. These new sectors include  technology and pharmaceutical manufacturing plus tourism, hospitality, and professional services.

The recent employment numbers show the re-making of the State’s economy has continued between 2021 and 2026.   Employment in traditional manufacturing has continued to trend downward, but at a slower pace.  However, there has been some improvement in custom made apparel products, which has provided some optimism for the future of that industry. But the State’s relatively new manufacturing sectors of technology and pharmaceuticals have continued expanding and adding jobs.  In particular, the artificial intelligence (AI) component of technology is spreading to more applications.

The big take-away of this analysis of the job market is that it continues to be positive, with hiring on-going despite the challenges presented by tariffs and higher energy prices. 

But this optimistic conclusion doesn’t mean the job market will remain stable without changes.  While all companies are continuing to work around the costs of tariffs and tighter energy supplies, AI likely presents the most important job market challenge for the future.  Many experts who study AI have come to two conclusions.  First, AI will require significant changes in how numerous workers train for jobs.  Worker tasks will be different using AI, meaning training for those tasks will require new approaches.

Second, there is consensus among many economists that AI will both create some new jobs as well as eliminate some existing jobs.  While optimists think the net result will still be net new jobs, there is the possibility the opposite will occur.

A strong argument can be made the job market is the key element in our economy, and especially in how our economy works to help people and households.   North Carolina’s recent job market has, overall, done better than the national job market.  But, because economies are never stable, and also because new technology – like AI – is emerging, the question is whether this good record for the State’s job market will continue. You decide.

Walden is a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.