MEDIA RELEASE: Drop in unemployment rate due largely to shrinking labor force

Only 4 out of every 10 formerly unemployed workers found employment over last year

RALEIGH (March 17, 2014) — North Carolina’s unemployment picture is weaker than it looks like on the surface, according to new numbers released by the N.C. Division of Employment Security today. Although the unemployment rate dropped to 6.7 percent in January, this is largely because the labor force continues to shrink, not because of significant gains in employment.

Over the last year, the labor force contracted by 60,373 workers, more than 1.3 percent, to the lowest levels in three years.  Since the unemployment rate is calculated by dividing the number of unemployed people by the number of people in the labor force, the unemployment rate can go down if the labor force shrinks, even if genuine joblessness remains high.  And that’s what happened from January 2013 to January 2014—only 45,000 unemployed workers found employment over the last year. The rest just gave up and dropped out of the labor force. This means that just 4 out of every 10 workers who moved out of unemployment actually found jobs.

“Only 4 out of every 10 unemployed workers found jobs in the last year," said Allan Freyer, Public Policy Analyst with the Budget & Tax Center, a project of the NC Justice Center. “If North Carolina is going to see a healthy long-term recovery in employment growth, we need to see all jobless workers moving into jobs, rather than out of the labor force.”

Five years into the recovery from the Great Recession, we would expect North Carolina to see a steadily accelerating rate of job creation each year, yet instead we see the opposite. The state created 70,000 jobs since last January, only 4,000 more jobs than were created over the same period from 2012 to 2013. But this was also 4,000 fewer jobs than were created over the same period from 2011 to 2012, suggesting that suggests that overall employment growth remains stagnant.

Most of the job growth we’re seeing in North Carolina appears due to overall improvements in the national economy, rather than something special happening in the Tarheel State. Over the last year, North Carolina saw employment growth of 1.7 percent—the same rate as the nation as a whole. In fact, 2013 marked the first year North Carolina saw a slower rate of job creation than the rest of the nation since 2010.

“In recent months, we’ve heard claims that policies enacted in the first half of 2013 generated extra special job growth in the second half of 2013. But the reality is far different,” Freyer said. “Across every meaningful measure of labor market progress, the second half of 2013 failed to perform better than the second half of 2012.”

Given seasonal hiring patterns, most economists prefer to compare the year-over-year. And when we compare the second half of 2012 to the same period in 2013, we find that 2012 performed better. There were 2,000 more jobs created from July 2012 to January 2013 than over the same period from 2013 to 2014, and 7,000 more unemployed workers found employment in 2012 than in 2013. It’s hard to see how something special happened in 2013.

Given the depth of job loss experienced by North Carolina during the recession, the state needs to create jobs at a much faster rate than the national average and its own recent historical performance.  Along with creating more jobs overall, the state needs to create more, better jobs that pay enough to allow workers and their families to make ends meet. This is the only way to generate a true Carolina Comeback.

FOR MORE INFORMATION, CONTACT: Allan Freyer, allan@ncjustice.org, 919.856.2151; Jeff Shaw, jeff@ncjustice.org, 503.551.3615 (cell).
 

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