Underwhelming performance of North Carolina labor market in 2013

by South by North Strategies, September 20, 2013.

In August, employers in North Carolina eliminated 1,700 more payroll positions than they added (+/- 0.0 percent). That drop was driven almost entirely by a net reduction of 6,400 jobs (-1.5 percent) on the part of local governments. So far in 2013, North Carolina has gained just 20,000 more jobs than it has lost (+0.5 percent), and the year is shaping up to be the worst year for job growth since the onset of the recovery.

These findings come from new data released today by the Labor and Economic Analysis Division of the NC Department of Commerce.

“North Carolina’s labor market turned in an underwhelming performance in August,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “No progress was made in closing the state’s large job gap, as what modest growth occurred in the private sector was erased by reductions in the public sector.”

In August, North Carolina businesses shed 1,700 more jobs than they added (+/- 0.0 percent). Last month, private-sector payrolls netted 5,100 positions (+0.2 percent), but public-sector payrolls shed 6,800 jobs (-1.0 percent), due almost entirely to cuts by local governments (-6,400, -1.5 percent). Within the private sector, the professional and business services sector netted the most jobs (+3,300, +0.6 percent), with all of the gain coming from the administrative and waste management subsector. Education and health services netted 2,900 positions (+0.5 percent), followed by the trade, transportation, and utilities sector (+2,800, +0.4 percent). The leisure and hospitality sector, meanwhile, lost the most jobs (-2,800, -0.6 percent), followed by the construction (-1,700, -1 percent) and other services (-1,600, -1.1 percent) sectors.

A revision to the July payroll data found that the state gained slightly more jobs than first estimated (+8,600 versus +8,200). With that revision, North Carolina now has, on net, 115,700 fewer payroll positions (-2.8 percent) than it did in December 2007. Since bottoming out in February 2010, the state has netted an average of 5,050 payroll jobs per month, resulting in a cumulative gain of 212,100 positions (+5.5 percent).

“North Carolina experienced minimal net payroll growth during the first eight months of 2013,” noted Quinterno. “The net gain of 20,000 jobs recorded during the first two-thirds of the year is 53.7 percent smaller than the figure netted during the first eight months of 2012. For North Carolina to net as many jobs in 2013 as it did in all of 2012, the state would need to net an average of 17,475 jobs per month for the rest of the year. At no point since 1990 has the state averaged such job growth over the final third of a calendar year.”

The household data for August also pointed to the existence of a sputtering labor market. Last month, the number of unemployed persons fell (-8,741, -2.1 percent), but so did the number of employed persons (-3,562, -0.1 percent).The drop in the unemployment rate to 8.7 percent—the lowest monthly rate posted since December 2008—therefore was attributable to people leaving the labor force rather than individuals finding new positions. In fact, the size of the state’s labor force has fallen steadily since December 2012 and is now smaller than at any point since January 2012.

The ongoing slides in two major measures of labor utilization provide additional evidence of an under-performing statewide labor market. In August, the labor force participation rate fell for the seventh-consecutive month. The current rate of 61.8 percent is the lowest monthly figure recorded at any point since January 1976. Similarly, the employment-to-population ratio fell again in August to 56.4 percent, a level only slightly above the 37-year low of 56.3 percent posted in late 2011.

August’s labor market report provides additional insight into the effects of the extensive changes to the state’s system of unemployment insurance compensation implemented over the summer. While the number of unemployed persons fell by 2.1 percent in August, the number of individuals receiving state-funded insurance compensation (new and continuing claims) fell by 8.5 percent from July to August. Additionally, the number of new insurance claims fell by 16.1 percent between July and August.

“North Carolina’s labor market has turned in an utterly underwhelming performance so far in 2013,” observed Quinterno. “The overall decline in the unemployment rate is masking a number of alarming developments—developments that point to a labor market that simply is under-performing. The modest recovery that North Carolina has experienced in the wake of the most recent recession appears to be stalling out in 2013.”