South By North Strategies, Ltd.

NC Job Market Goes Nowhere

CHAPEL HILL (August 20, 2010) – The latest employment report for North Carolina is the worst one recorded so far in 2010. In July, the state shed 29,800 more payroll positions than it added. This drop erased 77 percent of the payroll employment gains made during the year’s first half. Moreover, a fall in the size of the labor force suggests that joblessness is more widespread than reflected in the unemployment rate.

“North Carolina’s fragile job market took a turn for the worse in July,” says John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “The job report was the worst one of the year and points to a labor market that is deteriorating rather than improving.”

In July, employers cut 29,800 more positions than they added. The public sector shed 27,300 positions with local governments responsible for most of the losses (-26,500). Total private-sector payroll employment fell by 2,500 positions. Among private industries, construction lost the most positions (-2,800), followed by leisure and hospitality services (-1,700) and professional and business services (-1,300). The losses were offset by gains in trade, transportation, and utilities (+2,800), manufacturing (+600), and finance (+600).

Additionally, a revision to the June data eliminated the slight net gain first reported for the month. Rather than gaining 5,100 positions, North Carolina actually lost 3,700 jobs. After accounting for that revision, North Carolina has shed, on net, 276,700 positions or 6.6 percent of its payroll employment base since December 2007.

“Last month’s payroll losses erased 77 percent of the gains recorded during the first half of 2010,” notes Quinterno. “North Carolina has netted just 9,000 payroll jobs since December. The pace of growth – 1,300 positions per month – is insufficient to keep pace with population growth, let alone replace the jobs lost during the recession.”

Labor market conditions have been flat over the past year. Compared to July 2009, the state had 6,000 (+0.2 percent) more jobs. In terms of individual industries, professional and business services grew the most in absolute and relative terms (+19,700, +4.3 percent). Government added 14,000 positions (+2 percent). Construction (-18,300) and manufacturing (-7,900) lost the greatest number of positions over the past year with construction declining the most in relative terms (-9.7 percent).

July’s household data also were troubling. Last month, the labor force contracted by 0.8 percent as 35,612 individuals stopped working or seeking work. The number of employed individuals fell, as did the number of unemployed individuals. Owing mainly to the contraction of the labor force, the unemployment rate fell from 10 percent to 9.8 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 59,900 North Carolinians have left the labor force since May,” observes Quinterno. “The contraction is responsible for much of the recent decline in the unemployment rate. Unfortunately, this trend is consistent with a labor market that is declining rather than recovering.”

“The July jobs report exposed just how weak the economy really is,” explains Quinterno. “The economy is proving unable to generate jobs absent the crutch provided by public policy supports, and individuals across the state simply are abandoning the labor market.”

Tax Changes and NC’s Small Businesses

A comprehensive new report by the N.C. Budget and Tax Center looks at how potential changes to the federal tax code might affect different groups of North Carolina taxpayers.

One interesting finding pertains to the potential impact on the state’s small businesses.

Only three percent of taxpayers reporting any business income, let alone small-business income, would see any benefit from extending the Bush tax cuts for the wealthiest taxpayers. In North Carolina, fewer than 4 percent of taxpayers claiming any business income earned more than $200,000 in 2008, and even fewer would see their taxes increase under President Obama’s plan.14 Whereas fewer than one in thirty small-business owners nationwide would see any benefit from extending the Bush tax cuts for the wealthy, the vast majority of small businesses would benefit from boosting demand for their goods and services by further extending unemployment benefits and providing aid to states and local governments to avert additional layoffs of teachers, police officers and other public employees.
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Allowing the Bush tax cuts for the wealthiest taxpayers to expire on time would generate enough federal revenue (approximately $40 billion in 2011) to aid small businesses directly by reducing their share of payroll taxes.16 Such a measure would, like extending unemployment insurance benefits or fiscal relief to states, benefit many more businesses—and do a better job of boosting the economy—than even a temporary extension of the Bush Tax cuts for high-income earners.

Around The Dial – August 19

Economic policy reports, blog postings, and media stories of interest:

• Naked Capitalism looks disbelievingly at the “who could have known” crowd.
• The Stash remembers when a year of college cost less than a stereo.
• Free Exchange looks at the summer youth employment market.
• Economix discusses arguments against capping bank size.

NC Unemployment Claims: Week of 7/31

Time to Stop Digging

Robert Skidelsky notes that the first thing to do to climb out of a hole is to stop digging.

The trouble is that the current crisis finds governments intellectually disabled, because their theory of the economy is a mess. Events and common sense drove them to deficit finance in 2009-2010, but they have not abandoned the theory that depressions cannot happen, and that deficits are therefore always harmful (except in war!). So now they vie with each other in their haste to cut off the lifeline that they themselves extended.
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Policymakers need to re-learn their Keynes, explain him clearly, and apply his lessons, not invent pseudo-rational arguments for prolonging the recession.