South By North Strategies, Ltd.

CHAPEL HILL, NC (October 21, 2014) – In September, employers in North Carolina added 14,000 more payroll jobs than they cut (+0.3 percent), due entirely to hiring in the private sector. The monthly household survey, meanwhile, recorded a drop in the unemployment rate to 6.7 percent, although the size of the labor force fell over the month. With last month’s changes in payroll levels, North Carolina now has approximately the same number of jobs as it did in December 2007, yet the state also has 35.7 percent more unemployed residents than it did 6.75 years ago, as well as an unemployment rate that is 1.7 percentage points higher.

These findings come from new data released today by the Labor and Economic Analysis Division of the NC Department of Commerce.

“The September employment report was consistent with the relatively uninspiring performance turned in by North Carolina’s labor market in recent years,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “North Carolina netted jobs in September, but the state also experienced declines in the size of the labor force and in the number of employed persons. While certain conditions in the state have improved over the last year, the labor market remains far from recovered.”

Between August 2014 and September 2014, North Carolina employers added 14,000 more jobs than they cut (+0.3 percent). Private-sector payrolls netted 16,700 positions (+0.5 percent), but public-sector payrolls lost, on net, 2,700 jobs (-0.4 percent), owing primarily to net reductions by state government (-3,200, -1.6 percent). Within private industry, the professional and business services sector netted the most jobs (+7,400, +1.3 percent), with 87.8 percent of that gain originating in the administrative and waste services subsector. The education and health services sector netted 4,700 jobs (+0.8 percent), followed by the finance sector (+4,000, +1.9 percent). Meanwhile, the leisure and hospitality services sector shed the most jobs (-2,700 jobs, -0.6 percent). All other major industrial sectors experienced modest changes in payroll sizes.

A revision to the August 2014 payroll data found that the state gained 2,300 more jobs that month than first estimated (+14,800 versus +12,500). With the revision, North Carolina now has, on net, slightly more payroll jobs (+2,000, +0.1 percent) than it did in December 2007, which is when the “Great Recession” began nationally. Since bottoming out in February 2010, the state has netted an average of 6,015 payroll jobs per month, resulting in a cumulative gain of 330,800 positions (+8.6 percent).

Note that the return of North Carolina’s payroll size to the pre-recession level does not mean that the state’s labor market has recovered. Over the past 6.75 years, North Carolina needed not only to replace the jobs lost during the recession, but also to add jobs to keep pace with the growth of the working-age population. By one estimate, North Carolina is 449,000 payroll jobs short of the number it should have added since late 2007 to accommodate population growth.

“Although 2014 has seen job growth across North Carolina, the pace of payroll growth remains moderate,” noted Quinterno. “Over the first nine months of the year, the state netted an average of 7,300 jobs per month, a pace that is insufficient to close the state’s job gap anytime soon.”

In contrast to the payroll data, the household data recorded in September painted a more negative picture of the state’s labor market. Last month, the statewide unemployment rate dipped to 6.7 percent from 6.8 percent, while the number of unemployed individuals fell by 4,563 (-1.4 percent). At the same time, the number of employed North Carolinians dropped slightly (-5,622, -0.1 percent). The decline in the unemployment rate therefore was attributable mathematically to a contraction in the size of the labor force (-10,185 persons, -0.2 percent).

Over the past year, the statewide unemployment rate fell by a full percentage point, dropping to 6.7 percent from 7.7 percent, with the number of unemployed North Carolinians decreasing by 49,243 persons (-13.7 percent). However, 63 percent of the decline was attributable to people who left the labor force entirely rather than those who became employed. If those 31,038 leavers from the labor force were added back and considered unemployed, the statewide unemployment rate in September would have equaled 7.3 percent. Even if 50 percent of those individuals were added back to the labor force and considered unemployed, the statewide unemployment rate would have equaled 7 percent.

Year-over-year declines in the statewide labor force participation rate provide additional evidence of a labor market with problematic underlying dynamics. In September, the share of working-age North Carolinians participating in the labor market was 60.3 percent, which was lower than the 61.5 percent figure logged a year ago, not to mention the lowest monthly rate recorded at any time since January 1976.

In addition, another important measure of labor utilization, the employment-to-population ratio, fell over the year, dropping to 56.3 percent from 56.7 percent. The current share of working-age North Carolinians with a job now is tied at the lowest level logged at any point since 1976.

The September labor market report provides additional insight into the effects of the extensive changes to the state’s system of unemployment insurance implemented in July 2013. Between August and September, the number of claimants of regular state-funded insurance fell by 6 percent, dropping to 37,107 from 39,466. Compared to a year earlier, 30,362 fewer individuals received regular state-funded insurance in September (-45 percent).

Also in September, the state paid a (nominal) total of $35 million in regular state-funded unemployment insurance compensation, an amount 53.8 percent lower than the (nominal) total of $75.8 million paid in September 2013.

“North Carolina netted jobs in September, but even with those gains, the state is not adding jobs at a rapid enough pace to keep pace with the growth in the working-age population,” added Quinterno. “At the same time, a look beyond recent drops in the unemployment rate will reveal a labor market with underlying dynamics inconsistent with those associated with a robust recovery.”