RALEIGH – North Carolina’s economy has seen a substantial recovery from the depths of the Great Suppression – that is, since the COVID-19 slowdown of 2020. Most businesses are back and operating. Schools and universities too. More employees than ever are working from home. This had positive consequences for worker satisfaction and traffic congestion (although the consequences for productivity are admittedly unclear). The state government is flush with revenue. North Carolina’s overall unemployment rate was just 4.3% in August.
However, behind these positive trends lie signs of unrest. Perhaps the most obvious is what the overall unemployment rate, called the U-3 rate, does not measure.
The U-3 rate is a fraction whose numerator is the number of people who report to the Bureau of Labor Statistics that they are unemployed and are actively looking for work. The denominator is the number of active people plus the number of people without a job but actively seeking.
Note that if you are working but not actively looking for a job – because you have given up out of frustration, at least temporarily, or are in the midst of a life change such as moving or taking care of a family. senior parent – you are not counted as “unemployed” in the overall rate. Also, if you work part time but prefer to work full time, you are not being employed to your full potential or according to your preferences. You are underemployed. For the purposes of U-3, however, you are simply counted as “employee”.
All states have significant shares of disgruntled, transitional and involuntary part-time workers. Although the U-3 rate does not measure these shares, the federal government captures this information in other ways. North Carolina residents would do well to look past the overall unemployment rate that gets the most media attention each month and supplement their understanding of the North Carolina job market by looking at other metrics .
For example, the government calculates a statistic called labor force participation. What proportion of potential workers are either employed or actively seeking? In August, this rate for North Carolina was 59.2%. Unfortunately, our labor market participation is down from 60.1% at the start of 2021. This is larger than the decline so far this year in Virginia (0.3%). In Tennessee, there has been no clear change. In Georgia, Florida and South Carolina, labor force participation increased in 2021, not decreased. This is a case where North Carolina comes out like a very sore thumb.
Here is another sign of trouble. The Bureau of Labor Statistics publishes broader measures of unemployment, consisting of 12-month moving averages updated quarterly. These broader measures include the unemployed and underemployed workers that the U-3 rate leaves out. In June, the largest measure for North Carolina, the U-6 rate, was 10.3%. That’s higher than U-6 rates in most Southeastern states (although Florida, at 12%, has the highest U-6 rate of all, reflecting its particular vulnerability to industry downturns in the world. tourism and recreation).
While you’ve read this column so far, your mind may have been ahead of the curve in considering the political implications. I don’t blame you – I’m particularly prone to that temptation, given my time as head of a public policy think tank, the John Locke Foundation.
Finding that these labor market signals are troubling, however, does not necessarily establish partisan blame or advance someone’s case. Democratic activists believe Republicans should have started spending excess state revenue more quickly and massively. Republican activists believe Governor Roy Cooper’s COVID-19 restrictions were too restrictive and continue to have lingering effects. The two sides disagree on the role of expanding unemployment insurance payments in keeping workers out of the labor market, and many other potential explanations.
I have my own perspective on these issues, but the first step in organizing an effective remedy debate is to agree on the fundamental scope of the problem. Our overall unemployment rate does not describe it correctly, as part of its recent drop is the result of workers giving up, not workers finding jobs.
John Hood is a member of the board of directors of the John Locke Foundation and author of the new novel Mountain Folk, a fantastic historical set during the American Revolution (MountainFolkBook.com).