Labor participation is falling again

Published March 16, 2023

By John Hood

The U.S. Bureau of Labor Statistics just released its latest jobs report for North Carolina and the rest of the country. As usual, the report contained a mixture of good news and bad.

First the good. Our headline unemployment rate of 3.8% isn’t just low. It’s much lower than our 5.3% average rate over the last decade. And it’s way, way lower than the 14.2% spike we suffered during the COVID-induced Great Suppression.

Some of that historically low unemployment rate is attributable not to what is present — economic growth and robust job creation — but to what is absent.

In February 2020, just before the pandemic hit, 61.2% of working-aged North Carolinians were either employed or actively looking for a job. That rate plummeted to 56.5% in April 2020, then began to rebound. By March 2022, our labor-force participation had returned to its pre-COVID mark of 61.2%.

Alas, as of January 2023, it’s back down to 60.4%. Roughly 6,000 fewer North Carolinians are working or actively looking for jobs now than was true last summer. In the workforce department, we’re headed in the wrong direction.

Obviously this number is too low to constitute a crisis. About 5 million people are currently employed in North Carolina. In most sectors and communities, the challenge isn’t finding a job. It’s finding people willing to fill vacant jobs. That would be true even if we could woo those 6,000 missing workers back into the market.

Moreover, our recent downtick isn’t unique. Labor-force participation has also dropped in our neighboring states of South Carolina, Georgia, and Tennessee, though it rose in Virginia. Nationally, the rate reached 62.5% last month, the highest since the onset of COVID.

In previous columns, I’ve pitched several ideas for inducing more people into the labor market. We need to induce more hard-working Americans to relocate to North Carolina in the first place. As for our current population, we need more effective responses to pervasive substance abuse and mental illness. And we need to keep reforming our public-assistance programs to ensure government doesn’t present North Carolinians with disincentives to work.

The main point I want to make today, though, is that policymakers shouldn’t take our continued success for granted. Has North Carolina had one of the fastest-growing economies in the country over the past four years? Yep. Are we experiencing another multi-billion-dollar surplus in state revenue? Yep. Has past state legislation made North Carolina a national leader in tax reform, regulatory reform, and school choice? Yep.

But many of our competitors have been innovating, too. Their economies are growing. Their government coffers are full, too. We can’t afford to be complacent or self-congratulatory. We need to press ahead.

Pushing the policy envelope isn’t about earning plaudits from national associations. It isn’t about checking to-do items off a list. In this case, it’s about bringing more North Carolinians off the sidelines of the labor market so they can find jobs that fit their skills and aspirations.

There are as many specific paths to happiness as there are individuals pursuing it. That being said, even the most meandering of paths will make some common stops. One of those stops is meaningful work. It’s not just about the material benefits. To have meaningful work to do is to feel needed, and a sense of personal agency. That’s why fostering investment, job creation, and entrepreneurship represents more than just an economic agenda. It’s a humanitarian one.

Government has a constructive role to play is creating the conditions for growth. It promotes public safety and the rule of law. It finances certain public goods that can’t be provided by purely voluntary means. In performing these tasks, it should endeavor to keep its tax and regulatory burdens as low as possible.

“I favor the policy of economy, not because I wish to save money, but because I wish to save people,” Calvin Coolidge said in his 1925 inaugural address. “Economy is idealism in its most practical form.”

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