South By North Strategies, Ltd.

CHAPEL HILL (August 27, 2010) – North Carolina’s local labor markets performed poorly in July, according to preliminary data released today by the Employment Security Commission. Last month, 54 counties posted double-digit unemployment rates, while 20 counties recorded rates of at least 12 percent.

“North Carolina’s labor market struggled in July,” says John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “Although conditions in some communities improved somewhat, joblessness remains a serious problem across the state.”

Since the onset of the recession in December 2007, North Carolina has shed 6.6 percent of its payroll employment base (-276,700 positions) and has watched its unadjusted unemployment rate climb from 4.7 percent to 9.9 percent.

Every part of the state experienced weak labor markets in July. Unemployment rates exceeded 10 percent in 54 counties, and in 20 counties, at least 12 percent of the labor force was jobless and actively seeking work. County unemployment rates ranged from 4.5 percent in Currituck County to 16.2 percent in Scotland County.

“Labor markets in non-metropolitan communities remain 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 one. More alarmingly, the non-metropolitan labor force continued to shrink. Since December 2007, the non-metropolitan labor force has contracted by 1.5 percent. Many of those missing individuals are effectively jobless.”

Last month, unemployment rates fell in all 14 of the state’s metropolitan areas. Rocky Mount had the highest unemployment rate (12.8 percent), followed by the Hickory-Morganton-Lenoir area (12.7 percent). Durham-Chapel Hill had the lowest rate at 7.3 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 July 2009, unemployment rates were the same or lower in 96 counties and every metro area. Yet compared to a year ago, 81 counties and 8 metro areas had smaller labor forces. Among metros, Hickory-Morganton-Lenoir posted the largest decline in the size of its labor force (-4.5 percent), followed by Burlington (-2.8 percent). Jacksonville posted the largest gain (+7.1 percent).

“Recent drops in unemployment rates have been driven not by improvements in underlying conditions, but by workers abandoning the job market,” cautions Quinterno. ”The robust job growth needed to absorb displaced individuals and new workers is not happening. Much of the little growth occurred earlier in the year has been lost over the summer.”

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 3.7 percent since the start of the recession. The overall July unemployment rate in the major metros equaled 9.5 percent. Of the three areas, the Research Triangle had the lowest July unemployment rate (8 percent), followed by the Piedmont Triad (10.4 percent) and Charlotte (11.6 percent).

“Recent trends have exposed just how weak local economies are,” observes Quinterno. “Private-sector activity remains anemic and is not replacing the economic support provided by various policy measures that have ended or are about to end. What little recovery we’ve had appears in danger of stalling out.”

One somewhat bright spot in the July report was the boost that unemployment insurance benefits provided to individual households and the state’s economy. Explains Quinterno: “Over the past 12 months, unemployed North Carolinians received $5.4 billion in regular state payments and federal emergency benefits. Those payments sparked an estimated $8.9 billion in statewide economic activity.”