South By North Strategies, Ltd.

CHAPEL HILL (October 22, 2010) – Private-sector job creation in North Carolina ground to a virtual halt in September. Last month, the state netted just 500 more private payroll jobs than it lost. Government hiring, primarily at the local level, added another 9,600 positions, thereby bringing the month’s total job gain to 10,100 positions. Additionally, the size of the state’s labor force fell for the fifth straight month; this suggests that joblessness is more widespread than shown in official statistics.

“Scratch beneath the surface, and the headline jobs number for September is much 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. “The net gain of just 500 private-sector jobs is the second-worst total posted so far in 2010. There continues to be scant evidence that a recovery in the labor market is underway.”

In September, employers added 10,100 more positions than they cut. The public sector accounted for 95 percent of the gain due primarily to hiring by local governments. Private-sector payrolls, meanwhile, netted just 500 positions. Among private industries, leisure and hospitality services added the most positions (+5,200), followed by trade, transportation, and utilities (+3,300), and finance (+1,200). Those gains largely were offset by losses in manufacturing (-3,800), construction (-2,400), educational and health services (-900), and professional and business services (-900).

Additionally, a revision to the August data lowered the net job loss first reported for the month. North Carolina actually lost 17,600 positions in July, not the 18,600 positions first reported. With that revision, North Carolina has shed, on net, 250,400 positions or 6 percent of its payroll employment base since December 2007.

“North Carolina’s labor market has sputtered since the spring of 2010,” notes Quinterno. “This shows just how dependent the economy has been on public policy supports like those provided through the federal recovery act. As those supports have dropped away, little has taken their place as sources of demand. Since May, private-sector payroll employment in North Carolina has grown by just 400 positions.

Labor market conditions have improved somewhat over the past year. Compared to September 2009, which is the month when job losses in North Carolina hit bottom, the state has gained 49,300 (+1.3 percent) jobs. In terms of individual industries, government grew the most in absolute and relative terms (+37,700, +5.3 percent), while construction shed the most jobs in absolute and relative terms (-12,100, -6.6 percent).

The household data for September also were troubling. Last month, the labor force contracted by 0.3 percent as 13,186 individuals stopped working or seeking work. The number of employed individuals fell, as did the number of unemployed individuals. Owing largely to the contraction of the labor force, the unemployment rate fell from 9.7 percent to 9.6 percent. The reduction in the size of the labor force is disturbing and suggests that joblessness is much more widespread than reflected in official measures.

“Some 94,733 North Carolinians have left the labor force since April,” observes Quinterno. “That contraction is responsible for much of the recent decline in the unemployment rate. Unfortunately, this is a sign of an unhealthy labor market. By the same point in time following the 1990-91 and 2001 recessions, the state’s labor force was beginning to grow again.”

“The September employment report illustrates just how weak the economy really is,” explains Quinterno. “In the year since the state’s labor market hit bottom, few meaningful improvements have occurred. Public policy supports provided a bounce in late 2009 and early 2010, but the economy has been unable to stand on its own without them. At this point, the idea that a recovery is underway is an academic one with little relevance to the experience of hundreds of thousands of jobless North Carolinians.”