South By North Strategies, Ltd.

CHAPEL HILL (September 18, 2009) – Summer in North Carolina ended with another poor performance by the state’s labor market. In August, the state saw a small drop in in the unemployment rate (-0.1 percentage points) and a slight gain in the number of payroll positions (+7,000), according to the Employment Security Commission. Nevertheless, hundreds of thousands of North Carolinians are starting fall as they did summer: jobless and facing limited employment prospects.

“North Carolina’s labor market deteriorated all summer long,” says John Quinterno, a principal at South by North Strategies, Ltd., a research firm specializing in economic and social policy. “North Carolina ended August with fewer total jobs, fewer private sector jobs, and a smaller labor force than it had at the the start of June.”

In August, North Carolina employers added 7,000 more positions than they shed. The gain was driven by an increase in government payrolls (+20,100). In contrast, private sector employers, eliminated 13,100 more positions than they created. With the exception of the construction industry, every major private industry reduced payrolls. The trade, transportation, and warehousing industry posted the largest numerical decline (-4,400). Relative to payroll sizes, employment in the information industry fell the most (-1.7 percent).

“The net employment gain posted in August must be taken with a spoonful of salt,” cautions Quinterno. “The gain is so slight that it easily could turn negative upon subsequent revision, as happened with June’s employment report. The gain also is partially offset by revisions to the July data that found that the state lost 2,100 more positions than first reported.”

“By any objective measure, job growth, especially the private-sector job growth vital to a long-term recovery, is not taking place in North Carolina,” adds Quinterno. “Despite the talk about an improving economy, North Carolina has fewer jobs — both total and private-sector ones – that it did at the start of June. And it has many fewer of both job types than it had one year ago.”

A similar story can be told about the state’s unemployment rate. The statewide, seasonally-adjusted rate dropped slightly in August, falling from 10.9 percent to 10.8 percent. Much of the drop was tied to a fall in the size of the labor force — a fall caused in large part by jobless individuals who stopped looking for work and therefore were excluded from the official count.

“The drop in the unemployment rate should not be exaggerated,” warns Quinterno. “Last month, nearly 15,000 individuals exited the labor force and were omitted from the monthly estimates. Furthermore, that decline is part of an ongoing pattern. From the start of June to the end of August, 46,561 North Carolinians left the labor force.”

“North Carolina’s labor market remains in weak shape, observes Quinterno. “Conditions steadily deteriorated all summer long, and on a variety of important employment indicators, North Carolina is worse off now than it was at the beginning of summer.”

“Perhaps the best that can be said is that things are not as bad as they could have been, thanks to modest improvements in the national economy and the federal recovery package,” adds Quinterno.

“Unfortunately, robust economic and job growth still appear to be way over the horizon.”

Contact: John Quinterno, Principal, (919)622-2392