Diverse N.C. economy not insulated from recession

Raleigh, N.C. — State leaders for years have touted North Carolina's transition to a knowledge-based economy from one that relied heavily on agriculture and on textile and furniture manufacturing.

Being a part of the global economy means the state suffers when that economy goes south, however.

North Carolina's 9.7 percent unemployment rate in January was the sixth-highest nationwide, and the state saw the largest jump in joblessness in the U.S. in the past year – a 4.7 percentage point increase.

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"We believed that we'd undergone an economic transition and that our economy was so diversified that many of our technology sectors were recession-resistant, and we're seeing that's not the case," said Jason Jolley, an economic development researcher at the Kenan Institute for Private Enterprise at the University of North Carolina-Chapel Hill.

In January 1999, North Carolina's unemployment rate stood at 3 percent, well below the national average. In 2006, the state rate had climbed to 4.3 percent, but that was still better than the nation's rate.

"Our economy was already struggling and then, when this recession hit, it had a much greater effect than many expected," Jolley said.

He blamed steady population growth for the state's unemployment spike.

"Sometimes, [population gains] can be a positive when things are growing because we have labor supply," he said. "When the economy's taking a downturn, that's more people that may be susceptible to unemployment."

David Clegg, deputy chairman of the state Employment Security Commission, said more accurate record-keeping also factors into the high unemployment numbers. In some states, he said, farmers and contractors aren't counted among the jobless.

"We track more of North Carolina's 4.5 million-person labor market than other states do," Clegg said.

State officials said the diversified economy will help North Carolina rebound more quickly than most states when the economy turns around, but Jolley said the state would be well-served to recruit corporate headquarters to lessen the impact of future downturns.