South By North Strategies, Ltd.

CHAPEL HILL (June 18, 2010) – The May employment report for North Carolina paints a picture of a fragile labor market. Last month, the state added 12,900 more payroll positions than it lost. The gains were concentrated in the public sector due to significant hiring by the federal government, most likely for temporary census positions.

“The May employment report is less impressive than it appears,” says John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “Private-sector payrolls contracted, and net job growth overwhelmingly was driven by public-sector hiring, primarily by the federal government.”

In May, employers added 12,900 more positions than they eliminated. The public sector netted 16,100 positions with federal hiring accounting for 80 percent of the total. Total private-sector payrolls, in contrast, fell by 3,200 positions. Among private industries, manufacturing shed the most positions (-2,900) followed by leisure and hospitality services (-2,700), Those losses were offset by gains in professional and business services (+1,600) and trade, transportation, and utilities (+1,300). And a revision to the April data raised net payroll growth for that month from 7,500 to 10,200.

“So far in 2010, payroll employment in North Carolina has grown by 31,300 positions, which is only slightly greater than the number needed to keep pace with population growth,” notes Quinterno. “The private sector has netted just 14,100 positions, and many of the public-sector jobs that have been gained likely are temporary ones. This is not the road to a swift and sustainable recovery.”

Despite a recent moderation in job losses, conditions stagnated over the past year. Compared to May 2009, the state had 3,300 fewer jobs (-0.1 percent). In terms of individual industries, construction (-22,600) and manufacturing (-21,600) lost the greatest number of positions over the past year, while construction declined the most in relative terms (-11.6 percent). Government employment grew the most in actual (+39,900 positions) and relative (+5.6 percent) terms. Since December 2007, North Carolina has lost, on net, 254,000 positions or 6.1 percent of its payroll employment base.

Stabilizing labor market conditions are reflected in May’s household data. Last month, the labor force contracted by 0.1 percent as 6,027 individuals stopped working or seeking work. The number of employed individuals rose, and the number of unemployed individuals declined. The unemployment rate therefore dipped from 10.8 percent to 10.3 percent. Since the start of the recession, the number of unemployed Tar Heels has grown by 123.3 percent, and the unemployment rate has jumped from 4.7 percent to 10.3 percent.

“The second half of 2010 could be quite difficult for North Carolinians seeking work,” cautions Quinterno. “Private-sector job growth is anemic, and much of the recent growth has resulted from such government actions as temporary census hiring, housing tax credits, emergency unemployment insurance benefits, and recovery act funding. Many of these policy supports are ending, and it is unclear what will take their place in supporting overall demand.”