South By North Strategies, Ltd.

CHAPEL HILL (August 19, 2011) – Payroll reductions on the part of North Carolina’s local governments canceled out all of the job gains recorded in July in the private sector. Last month, the private sector gained 6,900 more payroll positions than it lost, while the public sector shed 11,000 positions. The total number of jobs in North Carolina therefore fell by 4,100 positions, according to new data from the Employment Security Commission. Moreover, the state’s unemployment rate exceeded the 10-percent mark for the first time since August 2010.

“Cuts in local government jobs weighed down North Carolina’s labor market in July,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “While the private sector performed somewhat well by recent standards, the overall job situation deteriorated. Payroll employment fell, the labor force shrank, unemployment rose, and the share of adults with a job fell to a 35-year low.”

Last month, North Carolina employers cut 4,100 more payroll jobs than they added. Net losses occurred entirely in the public sector (-11,000, driven by the net loss of 11,800 local government jobs), while the private sector added 6,900 jobs. Within the private sector, professional and business services gained the most jobs in absolute and relative terms (+3,600, +0.7 percent), while financial activities lost the most jobs in absolute and relative terms (-1,500, -0.7 percent).

A revision to the June data also found that the state lost 2,800 fewer payroll jobs than first reported (-8,100, versus an original estimate of -9,500). With that adjustment, North Carolina has lost, on net, 303,700 positions, or 7.3 percent of its payroll base, since December 2007. Alarmingly, that job gap has widened steadily since April of this year.

“Compared to December 2007, North Carolina has fewer payroll jobs in every major industry sector except for educational and health services and leisure and hospitality services,” noted Quinterno. “While public-sector employment had been a source of strength earlier in the downturn, it now is depressing growth. Since March 2011, local government employment has fallen by 3.5 percent, and state government employment has declined by 5 percent.”

Between July 2010 and July 2011, North Carolina gained, on net, 4,400 jobs (+ 0.1 percent). All of the growth that occurred in the private sector (+34,700 positions) was more than offset by public-sector losses. In terms of individual private industries, leisure and hospitality services grew the most in absolute and relative terms (+13,200, +3.4 percent), followed by professional and business services (+12,900, +2.7 percent). In the public sector, net losses stemmed from declines in state (-16,200, -8.1 percent) and local governments (-8,800 -2.1 percent).

The household data for July also were troubling. Last month, the total number of employed individuals fell by 10,159 (-0.3 percent), while the number of unemployed individuals rose by 7,620 (+1.7 percent). The size of the workforce fell slightly (-0.1 percent).

Over the year, the number of unemployed North Carolinians fell by 8,081 (-1.7 percent), while the number of employed individuals rose by 7,511 (+0.2 percent). Between July 2010 and July 2011, the size of the labor force held steady. Over the year, the unemployment rate fell to 10.1 percent from 10.3 percent. The July unemployment rate also was the first recorded reading above the 10-percent level since August 2010, when the rate also equaled 10.1 percent.

“North Carolina’s labor market effectively has spun its wheels for the last year,” observed Quinterno. “The job gap has closed only marginally, and the unemployment rate remains above 10 percent. Additionally, the share of working-age North Carolinians with a job has fallen and is now tied with the lowest level recorded since 1976.”

“The July employment report offers yet more evidence that the state’s labor market is worsening rather than improving,” added Quinterno. “Since the labor market bottomed out in February 2010, the total number of jobs in the state has increased by just 0.5 percent. Over the last three months, net job growth actually turned negative due largely to layoffs in the public sector.”

“Unless public leaders acknowledge the magnitude of the current jobs crisis and act accordingly, joblessness and the accompanying hardships will mount across North Carolina.”