South By North Strategies, Ltd.

CHAPEL HILL (February 1, 2011) – Some 71 percent of North Carolina’s counties and 36 percent of the state’s metro areas ended 2010 with labor forces smaller in size than they were at the start of the year. Furthermore, 57 counties and 5 metros posted double-digit unemployment rates in December. These findings come from estimates released today by the Employment Security Commission.

“Weak labor conditions prevailed across much of North Carolina in December,” says John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “Job growth was slight, and the lack of employment growth continued to force people out of the labor market. Neither trend is consistent with a recovery in the job market.”

Since the economy fell into recession in December 2007, North Carolina has shed 6.5 percent of its payroll employment base (-272,800 positions) and has seen its unadjusted unemployment rate climb from 4.7 percent to the current level of 9.7 percent. In December 2010, the state as a whole gained 2,300 more payroll positions than it lost.

Every broad region of the state experienced weak labor markets in December. Unemployment rates were at or above 10 percent in 57 counties; over the past year, however, there has been a sharp reduction in the number of counties posting double-digit unemployment rates. Individual county rates ranged from 5.8 percent in Orange County to 15.8 percent in Graham County.

“Labor markets in non-metropolitan communities remain especially weak,” adds Quinterno. “Last month, 10.8 percent of the non-metro labor force was unemployed, compared to 9.2 percent of the metro labor force. More alarmingly, the non-metropolitan labor force continued to shrink. Between December 2009 and December 2010, the non-metropolitan labor force fell by 4.7 percent or 63,100 individuals. Many of those missing persons are effectively jobless.”

Last month, unemployment rates fell in all 14 of the state’s metropolitan areas. Rocky Mount had the highest unemployment rate (12.6 percent), followed by the Hickory-Morganton-Lenoir area (12.5 percent). Durham-Chapel Hill had the lowest rate (6.9 percent).

Because of the lack of seasonal adjustments, monthly fluctuations in local unemployment rates must be interpreted cautiously. A better comparison is an annual one.

Compared to December 2009, unemployment rates were lower in 85 counties and every metro area. Yet compared to a year ago, 71 counties and 5 metro areas had smaller labor forces. Among metros, Hickory-Morganton-Lenoir posted the largest decline in the size of its labor force (-2.2 percent), followed by Greenville and Wilmington (tied at -0.4 percent). Durham-Chapel Hill posted the largest gain (+1.9 percent), followed by Asheville (+1.7 percent).

“Although a few of North Carolina’s metro areas – notably Asheville, Charlotte, Durham-Chapel Hill, and Goldsboro – recorded modest levels of job growth in 20010, overall growth levels were insufficient to drive down unemployment,” cautions Quinterno. “Much of the recent improvement in unemployment is due to the exiting of workers from the labor market. The contraction in the size of the labor force is a worrisome development.”

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 growth has been sluggish. Collectively, employment in these three metro regions has fallen by 5.2 percent since December 2007. The overall December unemployment rate in the major metros equaled 9 percent. Of the three areas, the Research Triangle had the lowest unemployment rate (7.7 percent), followed by the Piedmont Triad (10 percent) and Charlotte (11.1 percent).

“In the 15 months since the state’s labor market hit bottom, most local job markets have posted few meaningful improvements,” explains Quinterno. “The private sector simply is not generating jobs at a pace either expected by this point in a recovery or needed to accommodate all those wishing to work. As a result, some 48,000 North Carolinians have responded over the past year by leaving the job market.”