North Carolina’s unemployment rate took a sharp turn downward in December, suggesting a dramatic economic turnaround is well underway, but economists warned that the statistics are distorting a more sober reality.
The state’s December rate tumbled to 6.9 percent from 7.4 percent the month before, a level last seen in September 2008. Just a year earlier, in December 2012, North Carolina’s jobless rate was 9.4 percent.
The data was issued Tuesday by the Labor and Economic Analysis Division of the N.C. Department of Commerce. The U.S. jobless rate for December was 6.7 percent.
Gov. Pat McCrory cited the data as a validation of Republican economic policies.
“The trend of more people getting back to work in North Carolina is great news for our state,” McCrory said in a statement. “We continue to see that our pro-growth and pro-jobs policies enacted over the last year are having a positive impact and getting people into jobs.”
U.S. Rep. Renee Ellmers of Dunn cheered the drop in joblessness as a vindication of the state’s decision to cut off unemployment checks to more than 70,000 North Carolina residents last summer. Some economists believe that unemployment benefits can reduce one’s incentive to find work, prolonging joblessness, or encourage those on government assistance to hold out for better jobs.
Economists are not so sanguineabout North Carolina’s employment statistics for December and for all of 2013.
North Carolina added 11,100 jobs in December, nearly half in trade, transportation and utilities, but also made noteworthy gains in financial activities and health services. If the state added that amount of jobs every month, it would be well on its way to recovery.
In reality, however, North Carolina created fewer jobs in 2013 than it did in 2012. Last year’s jobs gain was 64,500, roughly two-thirds of the 89,900 jobs created in 2012.
Just as disconcerting, the state’s labor force shrunk last year, eliminating nearly 111,000 people from the pool of those who are working or looking for work. Such a shrinkage artificially reduces the jobless rate because legions of jobless people don’t show up in the data.
“It’s the first labor force shrinkage since the end of the recession,” said Allan Freyer, public policy analyst for the Budget & Tax Center at the N.C. Justice Center. “It’s unprecedented, the size of it.”
N.C. State University economist Mike Walden said the shrinkage of the labor force is a national problem that suggests discouraged job applicants are giving up finding work.
“I think employers are still being cautious,” Walden said. “I also think we are in a ‘structural change’ of employers increasingly replacing workers with machinery and technology.”
Wells Fargo economist Mark Vitner expects the 2013 jobs gain to be revised to at least 80,000, but he estimated that December’s unemployment rate is probably closer to 8 percent than the official 6.9 percent.
“The drop in the unemployment rate certainly exaggerates the strength of the improvement,” Vitner said. “I don’t think we’re anywhere near that.”
Vitner, however, remained somewhat optimistic and said North Carolina is creating jobs faster than the rest of the country and is clearly on a recovery trajectory.
East Carolina University economist James Kleckley said the December jobless rate is the statistical equivalent of an optical illusion.
He said the state has recovered about 75 percent of the jobs it lost in the recession and estimated that North Carolina’s real jobless rate is probably at least 9 percent.
“In my mind, there’s no way the unemployment rate could be going down,” Kleckley said.
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