N&O rushes in where even krugmans fear to tread

John Hood explained in Carolina Journal today and in The Wall Street Journal this past holiday weekend what workers (and a growing set of potential workers, re-encouraged) in North Carolina intrinsically know: since last summer this state has experienced “one of the nation’s largest improvements in labor-market performance and overall economic growth.”

Last summer, the state’s historically rare combination of a Republican-led General Assembly and a Republican governor reformed the state’s taxes, unemployment benefits, and regulatory structure. They did so despite loud vituperation from local and even national media, as well as the partisan religion-draped scolds, who were all in agreement that (a) the reforms wouldn’t work, (b) Republican leaders know they won’t work, because (c) everyone knows they’re just plain mean and evil and want to destroy the poor and the government while they have the chance.

Naturally, this deeply held, earnestly felt, and hotly expressed echo-chamber agreement runs counter to hundreds upon hundreds of peer-reviewed academic studies over the past quarter century, but in time the truth would come out.

It is:

We now have 11 months of data with which to test these predictions. From June 2013 to May 2014, the number of unemployed North Carolinians dropped by 87,403. The number of employed North Carolinians rose by 85,461. Thus the state’s reported labor force has declined by 1,942 since mid-2013, or about four-hundredths of a percent. (The national average decline during the same period was a tenth of a percent. Labor-force participation across the country is lower than it used to be for a variety of reasons, including the aging of the population.)

In other words, 98 percent of the drop in North Carolina unemployment since the end of extended benefits is attributable to workers gaining employment. Two percent is attributable to workers dropping out of the labor force. Other federal data also show substantial improvements in North Carolina’s labor market during the same period. Payroll jobs rose at a rate 16 percent faster than the national average. The state’s ratio of employment to population rose three times faster than the national average. And the number of discouraged and other marginally attached workers outside the labor force went down in North Carolina, not up.

Even Paul Krugman, whose premature predictions of a coming Carolina collapse included accusing the state’s leaders of not just “cruelty” but also “a case of meanspiritedness converging with bad economic analysis,” has retreated into tactical silence on North Carolina.

The News & Observer, however, has retrenched in the face of good news. “It’s time to rethink NC tax cuts,” the editors declare. The tax cuts have created “an artificial crisis,” you see. Oh, and

there is no clear evidence that the tax cuts are stimulating the state economy. The unemployment rate has dropped along with the rest of the nation, but much of the drop reflects a reduced labor force. Lately, the state unemployment rate has crept up as more unemployed people have resumed a search for work as the national economy improves.

So the good news is really bad (and don’t look at the numbers like that pesky John Hood does), and what good news remains owes to the national economy (but presumably not that part of the national economy improved by the nation emulating North Carolina through the expiration of the extended unemployment benefits program). Such analysis would imperil the waving Jedi hand of fatuous pronouncements with carpal tunnel syndrome.

Time, meanwhile, marches on.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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