South By North Strategies, Ltd.

CHAPEL HILL (July 23, 2010) –  North Carolina’s local labor markets exhibited little energy in June, based on preliminary data released today by the Employment Security Commission. During the first month in a hot, languid summer, 55 counties posted double-digit unemployment rates, while 24 counties recorded rates of at least 12 percent.

“The June employment numbers lacked any real vitality,” says John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “While conditions in some areas improved over the last year, the overall situation is grim. And further troubles likely are in store for 2010’s second half.”

Since the onset of the recession in December 2007, North Carolina has shed 5.7 percent of its payroll employment base (-238,100 positions) and has watched its unadjusted unemployment rate climb from 4.7 percent to 10.1 percent.

Every part of the state experienced weak labor markets in June. Unemployment rates exceeded 10 percent in 55 counties, and in 24 counties, at least 12 percent of the labor force was jobless and actively seeking work. County unemployment rates ranged from 4.8 percent in Currituck County to 16.3 percent in Scotland County.

“Labor markets in non-metropolitan communities remain especially weak,” adds Quinterno. “Last month, 11 percent of the non-metro labor force was unemployed, compared to 9.6 percent of the metro one. More alarmingly, the non-metropolitan labor force continues to shrink. Since December 2007, the non-metropolitan labor force has contracted by 1.2 percent. Many of those missing individuals are effectively jobless.”

Last month, unemployment rates rose in 8 of the state’s metropolitan areas, and 7 metros lost more jobs than they gained. The Rocky Mount and Hickory-Morganton-Lenoir areas tied for the highest unemployment rate (13 percent), followed by Burlington and Charlotte (11.1 percent). Durham-Chapel Hill had the lowest rate at 7.5 percent.

“Because of the lack of seasonal adjustments, monthly fluctuations in local unemployment rates must be interpreted cautiously, particularly during the volatile summer months,” warns Quinterno. “A better comparison is an annual one.”

Compared to June 2009, unemployment rates were the same or lower in 65 counties and all 14 metro areas. Yet compared to a year ago, 81 counties and 7 metro areas had smaller labor forces. Among metros, Hickory-Morganton-Lenoir posted the largest decline in the size of its labor force (-3.9 percent), followed by Burlington (-2.4 percent). Fayetteville posted the largest gain (+3.8 percent).

“Despite stabilization in 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. Many seeming improvements really are the by-product of workers leaving the labor market.”

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 4 percent since the start of the recession. The overall June unemployment rate in the major metros equaled 9.6 percent. Of the three areas, the Research Triangle had the lowest June unemployment rate (8.2 percent), followed by the Piedmont Triad (10.6 percent) and Charlotte (11.5 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 have ended or are about to end.”

Consider the case of the emergency unemployment benefits that expired before being reinstated this week. Explains Quinterno: “Over the last 12 months, unemployed North Carolinians received $5.5 billion in regular state payments and federal emergency benefits. These payments sparked an estimated $8.8 billion in statewide economic activity. In June, the Emergency Unemployment Compensation program alone generated $288 million in economic activity.”

“In the course of extending emergency benefits, the U.S. Congress scaled back the program’s effectiveness,” adds Quinterno. “Congress discontinued the federal addition compensation program, which added $25 to each weekly insurance check. Based on June data, full implementation of that step  would lower the average weekly payment in North Carolina by 8 percent and reduce statewide economic activity by $23 million.”