Prosperity Watch Issue 33, No. 3—North Carolina's labor force experiences significant decline

Over the past six months, many policy makers celebrated the falling unemployment as an indication that North Carolina’s economy has turned the corner and begun experiencing robust job creation. Unfortunately, this is a jobs recovery many in the state are still waiting for. The dropping unemployment rate has largely coincided with a steep drop in the labor force-the pool of workers who either have jobs or want them rather than in the unemployed finding new jobs.

The following figure reinforces this point—starting in about December 2012, North Carolina’s labor force stopped growing and began to contract at a historically unprecedented rate. Over the course of 2013, the state’s workforce shrank by 2.5 percent, at the same time that the state’s working-age population grew by almost 1 percent. By November, the labor force was at the lowest levels since 2009. And anytime the workforce is shrinking while population is growing, the economy is moving in the wrong direction.

A major factor in the collapsing labor force involves the fact that there are just not enough jobs to meet the needs of jobless workers and a growing population. There are still three unemployed workers for every one available job opening, and 2013 saw the weakest record of job creation in four years. Moreover, as jobless workers experience long-term unemployment beyond 26 weeks, they are less likely to remain engaged in the labor market particularly without the temporary support and incentive to continue looking for work that is provided by unemployment insurance.

Improvements in the labor market must be measured by the health of the state’s workforce as well as the growth in employment opportunities.  Under the current conditions, North Carolina’s unemployment challenges are being shifted to labor force challenges and not solved.

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