South By North Strategies, Ltd.

CHAPEL HILL (June 25, 2010) –  North Carolina’s local labor markets underwent few real changes in May, according to preliminary data released today by the Employment Security Commission. In May, 53 counties posted double-digit unemployment rates, and 21 counties recorded unemployment rates of at least 12 percent.

“The May employment report is unimpressive,” says John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “While local unemployment rates have fallen over the past year, they remain unacceptably high. Perhaps the best that can be said is that conditions could be worse.”

Since the recession’s onset in December 2007, North Carolina has shed 6.1 percent of its payroll employment base (-254,000 positions) and has seen its unadjusted unemployment rate climb from 4.7 percent to 9.9 percent.

Every part of the state experienced weak labor markets in May. Unemployment rates exceeded 10 percent in 53 counties, and in 21 counties at least 12 percent of the labor force was jobless and actively seeking work. County unemployment rates ranged from 4.9 percent in Currituck County to 16 percent in Scotland County.

“Labor markets in non-metropolitan communities are particularly weak,” adds Quinterno. “Last month, 10.8 percent of the non-metro labor force was unemployed, compared to 9.5 percent of the metro labor force. More alarmingly, the non-metropolitan labor force continued to shrink. Since December 2007, the non-metropolitan labor force has contracted by 1.1 percent. Many of those missing individuals are effectively jobless.”

Last month, unemployment rates fell in 10 of the state’s metropolitan areas, and 11 metros gained more jobs than they lost. Nevertheless, five metros posted double-digit unemployment rates. The Hickory-Morganton-Lenoir area had the highest unemployment rate (13 percent) followed by Rocky Mount (12.9 percent). The lowest metro unemployment rate was 7.3 percent in Durham-Chapel Hill.

“Because of the lack of seasonal adjustments, monthly fluctuations in local unemployment rates must be interpreted cautiously, especially at this time of year,” warns Quinterno. “A better comparison is an annual one.”

Compared to May 2009, unemployment rates were the same or lower in 99 counties and 14 metro areas. Yet compared to a year ago, 73 counties and four metro areas had smaller labor forces. Among metros, Hickory-Morganton-Lenoir posted the largest decline in the size of its labor force (-2.9 percent), followed by Rocky Mount (-2 percent). Jacksonville posted the largest gain (+5.4 percent).

“Despite stabilization in labor market conditions, the long-term employment picture remains the same,” cautions Quinterno. “The sustained job growth needed to absorb displaced individuals and new workers simply isn’t occurring.”

In the long term, any meaningful recovery will be driven by growth in the state’s three major metro regions: Charlotte, the Research Triangle, and the Piedmont Triad. Yet job growth in 2010 has been sluggish. Collectively, employment in these three major metro regions has fallen by 3.8 percent since the start of the recession. The overall May unemployment rate in the major metros equaled 9.5 percent. Of the three areas, the Research Triangle had the lowest May unemployment rate (8 percent), followed by the Piedmont Triad (10.4 percent) and Charlotte (11.4 percent).

“The second half of 2010 could be even more difficult for North Carolinians seeking work,” observes Quinterno. “Private-sector job growth is anemic, and much recent growth has resulted from government actions like temporary census hiring, home tax credits, emergency unemployment, and recovery spending. Many of those supports are ending, and it is unclear what will take their place in supporting overall demand.”

Consider the emergency unemployment benefits that the U.S. Congress has failed to extend. Explains Quinterno: “Over the last 12 months, unemployed North Carolinians received $5.5 billion in regular state payments and federal emergency benefits. These payments generated an estimated $9 billion in statewide economic activity. In May, the federal Emergency Unemployment Compensation program alone generated $383 million in economic activity. Congress’ decision to allow that funding to expire will exacerbate the weak employment conditions found  across the state.”