BTC BRIEF: North Carolina's Economy is Competitive with Neighboring States

By Allan Freyer
Policy Analyst, Budget & Tax Center
May 2013

Job growth continues to lag in North Carolina because of long-term overreliance on declining, less competitive industries compared to surrounding states, and not because North Carolina’s overall economy is unsound or the state’s business climate is uncompetitive. As policymakers consider ways to boost employment in the Tarheel State, robust investments in education and job training for new and growing industries are critically important for reversing this slide and would provide a far better approach to spurring job creation than the personal and corporate income tax cuts now being debated.

With North Carolina’s unemployment rate stuck above 9 percent and lagging the national average for most of the past four years, it has become conventional wisdom in Raleigh that the state’s economy is simply not competitive compared to Virginia, South Carolina, Georgia, and Tennessee. But a deeper look into the guts of North Carolina's economy reveals that this conventional wisdom is quite wrong. While North Carolina’s job growth continues to lag behind these neighboring states, our broader economy is much more competitive—in median income, per capita growth and other factors—than is typically assumed.

Since North Carolina had a larger share of its employment concentrated in durable and nondurable goods manufacturing in 2000 than did the surrounding states, it lost far more jobs
by 2011 than the other states did. If North Carolina’s mix of jobs had more closely resembled our neighbors’ in 2000, then the unemployment picture in the Tarheel State would be much less dire. In fact, we would have up to 156,000 more jobs than we do today.

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