Challenges lurk behind good economic news

Posted January 7, 2014

— Gov. Pat McCrory spiked the economic football when he spoke to the North Carolina Bankers Association economic forum Monday, telling the group that the Republican public policy agenda was leading to a big turnaround in the state's economy. 

"We've already seen some positive results with the economy," McCrory told the forum in a speech that highlighted his first year in office. "We've gone down to 7.4 percent unemployment in North Carolina. People are working."

In particular, McCrory argued that decisions such as cutting the size and duration of the state's unemployment benefits have helped more people to find work. 

His administration followed up on Tuesday, pointing to a report by CNBC's Steve Liesman that highlighted the North Carolina's drop in unemployment following the state's decision to cut unemployment benefits. 

"North Carolina ended its emergency benefits in July. You can see what happened there to employment, while the decline in the labor force remained on the same track that it was on," Liesman said. 

However, analysts say it may be a bit early to declare victory, given the time it typically takes government action to translate into economic results and the troubles in North Carolina's economy that lurk behind the dropping unemployment number. 

"Public policy takes a while to have an effect," said Mike Walden, a North Carolina State University economist who frequently works on economic projections for state leaders. He said there is consensus among economists that government policy takes years, not months, to result in changes in the economy. 

McCrory took office in January 2013, and many of the biggest changes that have happened during the past year took effect July 1, including changes to the state's unemployment system.

North Carolina's economy is part of the broader economy. Figures in Walden's most recent economic outlook show the state's unemployment rate rising parallel with the national rate, starting in 2006. Both the state and national rates began to dip at the same time about four years ago.

North Carolina's 7.4 percent unemployment rate is still higher than the national average of 7 percent. 

Walden cautioned that the unemployment rate is a quirky measure. Determined by the federal government, the unemployment rate most frequently cited by news reports can change based on how many people have jobs and whether those without jobs are actively looking for work. 

"What I tend to look at is job creation," Walden said. 

Over the past four years, he said, the number of jobs available in the state has been growing. 

While the state is digging its way out of the hole created by the recession, it is not all the way back.

There are 83,900 fewer payroll jobs in North Carolina when measured in November 2013 than in December 2007, according to John Quinterno, owner of South by North Strategies, a Chapel Hill policy research firm.

In November, the state lost 6,500 more jobs than it gained, according to federal and state figures analyzed by Quinterno.

If there are fewer jobs than there were six years ago, how can the unemployment rate be declining?

"A lot of the gain in the unemployment rate is due to a mathematical quirk," said Allan Freyer, a policy analyst with the liberal-leaning N.C. Budget and Tax Center.

McCrory told audience members at the economic forecast forum Monday that, "Our goal was to get people off unemployment and onto your payrolls." Whether state policy was affecting the trend or not, something else has been happening, according to economists. 

Much of the dip in the unemployment rate was driven by workers leaving the workforce – deciding that they no longer needed a job or had little hope of finding one. For example, Quinterno said, some older workers close to retirement age might have decided to rely on Social Security. 

In the past year, the size of the workforce – those looking for work – has decreased in 92 of the state's 100 counties.

"There doesn't seem to be a whole lot of evidence that policies in 2013 did something special for the economy," Freyer said.

But if 2013 doesn't quite make the case for what McCrory terms a "Carolina Comeback," economists say there's some reason to believe the picture may be better in 2014.

In his economic forecast, Walden projects "at least 100,000 net payroll jobs will be added in the state in 2014, lowering the seasonally adjusted statewide unemployment rate to between 6.5 percent and 7 percent at the end of 2014."

Walden's outlook is mirrored by other estimates, such as Moody's analysis that suggests North Carolina is poised to see the 11th-highest rate of economic growth in the nation

"The rural areas are the greatest challenge," McCrory noted at the end of his speech, giving a nod to the headwinds faced by the state's economy. 

Walden agreed that big differences between the state's urban areas, such as Raleigh and the Research Triangle, and more rural areas, such as Rocky Mount, are a big problem for the state. Rocky Mount's unemployment rate was 10 percent in November.

"We have a rural-urban divide," Walden said. Other potential drags on the economy include workers who lack the skills for modern jobs and not enough funding for roads and schools.


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  • ccsmith1902 Jan 9, 2014

    How can McCrory take credit for the drop in unemployment when his new tax plan only went into effect 2 weeks. ago. Does he think we are terminally stupid????

  • Banker1230 Jan 8, 2014

    View quoted thread

    Obama quotes what his is given from what the states report. Of course when the GOP tells him the stats form their states he passes it on.

  • Banker1230 Jan 8, 2014

    Since McCory has been in office I have seen people on unemployment still unemployed. Thanks to him cutting the Federal extension they are now losing their houses and applying for welfare. I guess he figures that is better than showing them unemployed, He is completely out of touch with what is going on in this state. By the way robbery is on the rise.

  • GovernmentMule Jan 8, 2014

    View quoted thread

    If that's the way you feel then there had also better be an AG probe of the federal government because they do exactly the same thing.

  • Hubris Jan 8, 2014

    "He fudged the numbers because he cut people off unemployment, now they don't count against the unemployment rate for the state." Banker1230

    Are you talking about McCrory or Obama? They both do the same thing, only Obama has been doing it for about 4 years longer and absolutely nothing to show for it.

  • Banker1230 Jan 8, 2014

    More GOP lies, the unemployment rate is much higher than what they say. He fudged the numbers because he cut people off unemployment, now they don't count against the unemployment rate for the state. Time for the AG probe.

  • sixnitepkg Jan 8, 2014

    funny how no GOP paid trolls are on commenting on "liberal media bias" on THIS article! Maybe it's because this article's headline is so blatantly FALSE & MISLEADING it qualifies as GOP propaganda! Once you READ THE WHOLE ARTICLE you'll see that THERE IS NO "good economic news" at least for anyone who makes less than $100k/yr.

    read the article! the ENTIRE drop in the unemployment rate is a fallacy! the ENTIRE drop in unemployment is caused by all of the people who have been forced to give up on finding a job, and been dropped from the count! NC has actually LOST 83,900 jobs since Gov. McCrory has taken office - DESPITE the better economy in the rest of the US! The article even links to a supposedly positive outlook (Moody's) that predicts NC as 11th greatest growth in the US, but Moody's predicts that next year's gains won't make good last years losses! When you're at rock bottom the only way to go is up! (or at least if you're close to rock bottom ANY upward movement looks good!)

  • 42_wral_mods_suck_i'm_gone Jan 8, 2014

    McCrory's taking credit for nonexistent economic gains while in office for a year, but blames everyone else for not turning DHHS around in a year.

    Sorry Pat you can't have it both ways.

  • free2bme Jan 7, 2014

    McCrory has done nothing positive for this state. He makes up most of what he says. He can not name one company or job he has added to NC this year. Is it time to vote McCrory out yet.!!