North Carolina’s official unemployment rate dropped again in March to 6.3 percent. John Hood looks beyond that headline number and assesses the implications for North Carolina public policy.
The latest federal employment data for North Carolina support the case that a fiscally conservative approach to state fiscal policy is helping improve the economy’s long-term outlook. That’s the assessment from John Locke Foundation President John Hood.
North Carolina’s official unemployment rate for March was 6.3 percent, according to data released this morning from the U.S. Bureau of Labor Statistics. That rate is down 0.1 percentage points from February and down 2.2 percentage points from an 8.5 percent unemployment rate in March 2013.
The N.C. Division of Employment Security will wait until Monday morning to release the data, but it is publicly available now from BLS.
That official rate is based on preliminary data from the BLS’ household survey. North Carolina’s 6.3 percent rate compares to a national average that remained steady from February to March at 6.7 percent.
“Over the past 12 months, North Carolina’s 2.2-percentage-point decline in the unemployment rate was second-largest in the nation,” Hood said. “South Carolina’s rate dropped 2.5 percentage points, while Indiana came in third with a drop of 2 percentage points.”
Preliminary payroll figures show that North Carolina gained 19,400 jobs in March. “That’s the second-largest gain in the nation,” Hood said. “On a percentage basis, North Carolina and four other states tied for the largest monthly jobs gain at 0.5 percent.”
North Carolina’s 19,400 jobs gained in March substantially offset the state’s surprising 23,300 jobs lost during January and February, Hood added. “Although additional months of data will be needed before drawing any firm conclusions, the early-2014 dip in jobs appears to be weather-related,” he said. “The same pattern occurred in several other states with higher-than-average winter storm activity.”
“One reason why this explanation might be valid is that the leisure and hospitality sector, which typically accounts for about one-tenth of North Carolina’s employment, was responsible for half of the state’s employment drop for January and February,” Hood added.
The latest numbers have implications for North Carolina’s ongoing public policy debates, Hood said. “Many critics of North Carolina’s 2013 unemployment-insurance reforms have claimed that subsequent declines in state unemployment are attributable primarily to people dropping out of the labor force, not to people finding employment,” he said. “The recent data show this claim is false.”
Since North Carolina exited the UI extended-benefits program in July 2013, household employment has increased by more than 61,000, a 1.4 percent growth rate that exceeds the national average. During the same period, unemployment dropped by about 94,000.
“In other words, nearly two-thirds of North Carolina’s decline in unemployment after the end of extended benefits is attributable to more people finding jobs, not people dropping out of the labor force,” Hood explained. “The same trend is in evidence in the payroll survey, which shows that North Carolina has added about 56,000 jobs since the end of extended benefits, a job-creation rate faster than the national average.”
Hood also addresses critics who say state tax burdens have no long-term effects on economic growth. These critics have argued that the 2011 General Assembly shouldn’t have overridden then-Gov. Bev Perdue’s veto to enact a state budget plan that trimmed spending and allowed sales, income, and business tax rates to drop.
“Since the implementation of that fiscally conservative budget in mid-2011, North Carolina’s economy has exceeded the national average in payroll job creation — it’s up 183,000, or 4.7 percent,” he said. “North Carolina also has exceeded the national average in household employment growth (up 201,000, or 4.8 percent), decline in unemployed workers (down 188,000, or 39 percent), and decline in unemployment rate (down 4.1 percentage points, compared to the national average decline of 2.4 points).”
Hood cautioned against reading too much into short-term data. “As we’ve seen in the recent past, preliminary numbers can be revised in ways that can turn sweeping judgments into significant errors,” he said. “But the trend lines appear to be moving in the right direction for North Carolina’s long-term economic health. And the latest numbers are consistent with support for North Carolina’s fiscally conservative policies.”