Falling labor force continues to drive drop in unemployment rate

North Carolina’s falling labor force continues to drive reductions in the state’s unemployment rate, according to the February jobs report released by Division of Employment Security this morning. Over the last year, just 4 in 10 formerly unemployed workers actually found jobs, while the rest dropped out of the labor force.

Despite falling to 6.4 percent since February 2013, the unemployment rate masks the true plight of joblessness in the state.  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 also go down if the labor force shrinks, even if genuine joblessness remains high.  And that’s what happened from February 2013 to February 2014—only 48,000 jobless workers moved into employment over the last year. The rest—another 64,000 workers—just gave up and dropped out of the labor force, continuing a historically unprecedented contraction in the state’s workforce.

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. And we’re not seeing that because job creation remains anemic. In fact, North Carolina created just 46,000 payroll jobs over the last year, according to preliminary estimates released today. This is significantly less than the 69,000 jobs created in 2012, and the 62,000 jobs created in 2011.

Five years into the recovery from the Great Recession, we would expect North Carolina to see a steadily accelerating rate of employment growth each year, yet the numbers released today paint a different picture. While these numbers will certainly be revised in the next year, it is clear that the state’s employment growth is not living up to expectations, and more importantly, is failing to meet the needs of the state’s unemployed.

For the state to make true progress on bringing down unemployment, the state needs to create jobs at a significantly faster rate than the national average. But we’re not. Over the past year, North Carolina actually saw slower job creation than the national average, growing employment by 1.2 percent, compared to the 1.6 percent growth rate for the nation as a whole. This suggests that much of the growth the state is experiencing is simply due to the steady overall improvements in the national economy, rather than something special happening in North Carolina.

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, the state needs to create more better jobs—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.