Fact Check: Is the economic news really that good?
Posted May 31, 2014
Updated June 6, 2014
Raleigh, N.C. — Well, a recent ad by Americans for Prosperity certainly sounds like good news.
"This morning, more people will go to work in North Carolina than anytime in our history," says the on-screen narrator for AFP, a conservative group that has been a booster for the Republican-led General Assembly – particularly GOP efforts to cut taxes.
"Our unemployment rate has dropped, lower than the national average," the ad continues. "Over 200,000 jobs created under the leadership of our new legislature and Gov. McCrory. Tax rates lowered for everyone. Tax reform has moved us from one of the worst states to do business in to one of the best. North Carolina, we're headed in the right direction."
Those words are delivered over peppy, optimistic-sounding music along with a montage of people working, flags waving and bucolic countryside, but they don't quite jibe with some other recent economic analyses."Despite falling unemployment rates, most of North Carolina’s metro areas are not creating enough jobs to fully recover any time soon from the job losses of the Great Recession, according to new jobless numbers released by the Division of Employment Security" read a news release from the Budget & Tax Center, a project of the liberal-leaning NC Justice Center. "Ten out of the state’s 14 metro areas have yet to reclaim the jobs lost during the recession, and it will take six of them more than a decade to create enough jobs to return to pre-recession levels at the current rate of employment growth."
It doesn't seem like both takes can be true. However, economists say, like many complicated subjects, economic data is rarely black and white. While the Americans for Prosperity ad doesn't get the numbers wrong – at least not completely – experts we consulted say it does miss some important context.
OUR QUESTIONS: Are more people really employed in North Carolina than ever before? Can Republicans really lay claim to more than 200,000 jobs created?
A NOTE ON THE AD: AFP announced the ad buy two weeks ago. Officials would not say how much they would spend to air the television commercial, but sources with knowledge of the buy suggested it was roughly $300,000. The ads are scheduled to run into June.
THE BACKUP: AFP has posted backup for this ad online. For the two questions we're examining in this post, the major resource AFP relies on are Bureau of Labor Statistics data. That information does show the state has gained more than 200,000 jobs since January 2011, when Republicans took the reins at the General Assembly. Fact Check: Political claims
ON THE NUMBERS: "Yes, if you start at January 2011 and come to the latest data, then over 200,000 net new jobs have been added in North Carolina," said North Carolina State University economist Mike Walden.
But he quickly adds a big asterisk. There are two different surveys that economists look at when talking about employment and unemployment rates. One is the "household" survey, which interviews people and asks if they have a job. The other is the "payroll" survey, which is based on a sample or records from non-agricultural businesses.
The state, Walden said, is "at an historic level of employment using the household survey, but we are still short 60,000 jobs by the payroll survey compared to before the recession."
That's also a caveat that John Quinterno, principal at South by North Strategies, points out. He also notes that the labor force participation rate – the measure of how many people who are of age to hold jobs and are either working or looking for work – is at near historic lows.
“In April, North Carolina experienced a modest gain in the total number of payroll jobs in the state for the second month in a row. Yet, compared to year earlier, a smaller share of the state’s working-age population was participating in the labor force," Quinterno said.
It's a mistake, he said, to rely on any one number as an absolute measure or the economy. In reality, economic news is still mixed.
"On a number of measures, the economy is still in relatively poor shape," he said.
Asked about the difference between the payroll and household survey numbers, Donald Bryson, deputy state director at AFP, said the ad's claims still hold up.
"The BLS data indicates that more people are employed in North Carolina than there were before January 2011. Multiple news outlets reported that North Carolina was second in the nation in job creation for the month of March. We then followed that up with another 15,000 jobs in April. In those two months alone, the state created nearly 35,000 jobs," he said. "There is obviously still a ways to go, but I think that more people being employed, along with great job creation numbers, indicates an economy headed in the right direction."
CREDIT: In order to make the 200,000 number work, you have to go back to January 2011.
"The gains from January 2011 to January 2013 were during a period of divided government – with Democrat Gov. (Beverly) Perdue and the Republican-controlled General Assembly," Walden points out.
So, should Perdue get some credit?
No, says Bryson. Perdue opposed some of the key initiatives put forward by legislative Republicans. That includes two budgets that she vetoed, which lawmakers then overrode.
"Gov. Perdue can’t get credit for a budget that she vetoed," he said.
More problematic for this claim may be giving any political figure credit for big swings in the economy. It can take years, often decades, for economic policies to have an impact. The sweeping tax package Republicans passed in 2013 took full effect only in January. Changes to the unemployment system have been in full effect only since last July.
There's also some evidence that the state's economy was on the rebound without intervention.
"North Carolina has had job growth, on trend, since early 2010, after the recession hit bottom," Walden said.
That means the recovery started before Republicans came to power, much less were able to pass a budget or other economy-boosting measures.
"State legislatures and state elected officials have a limited impact on what they can do," Quinterno said. "They can do a lot to make things worse, but they can do very little to make things better."
FINAL NOTES: Quinterno said he takes issue with the claim that "tax rates are lower for everyone." The implication, he said, is that everyone in North Carolina is paying lower taxes. That is not the case, he said. We've grappled with the issue of how many people may or may not be paying more in taxes in a prior fact check.
As for the claim that North Carolina has risen from "one of the worst states to do business in to one of the best," it is based in part on a report by the Tax Foundation, a think tank that advocates for a particular set of tax policies. The foundation finds the most favor with tax policies typically championed by Republican lawmakers.
AFP also cites North Carolina's recent No. 4 business-friendliness rankings in Forbes and CEO magazines. It should be noted that North Carolina placed second on CEO's list in 2010, the year before the Republican majorities came to power. North Carolina was No. 3 on the Forbes list in 2010.
THE CALL: Americans for Prosperity has government statistics to back up its claims. But there's more to the story. There is other data to suggest that North Carolina's economy isn't in a full recovery mode, and it is always perilous to ascribe changes in the economy to policies that have been in place only for months or years. Also, North Carolina actually ranked higher on two of the three business rankings cited by AFP before Republicans took over the legislature.
This ad cherry-picks its data and lacks important context. It gets a yellow light.