JLF’s John Hood discusses North Carolina’s economic turnaround in employment — it’s the story, and the numbers, the liberal critics of our state’s fiscal reformers don’t want you to know.
Last year, Gov. Pat McCrory and the General Assembly adopted several key changes in economic policy. They restructured and reduced state taxes, for example. They lightened the regulatory burden. And they reformed the state’s unemployment-insurance system — lowering the amount and duration of benefits in order to speed up repayment of billions of dollars in debt to Washington and thus avoid job-killing increases in payroll taxes. As a consequence of the benefit changes, North Carolina was also forced to exit the UI extended benefits program six months before the rest of the country did.
UI reform went into effect in July 2013. The other policies were enacted at about the same time but were not in force until 2014, although it is conceivable they may have had a signaling effect on business decisions during the latter half of 2013.
At the time, left-wing critics warned that the end of extended benefits, in particular, would have a negative impact on North Carolina’s economy. There weren’t enough jobs to accommodate the long-term unemployed, they argued, and the resulting loss of purchasing power would weaken the state’s recovery. Conservative politicians and economists pointed to strong empirical evidence that extended UI benefits keep unemployment rate artificially high — that workers are more likely to accept available jobs after their benefits end and that some employers are even more likely to create jobs in labor markets where extended benefits have expired.
We now have 11 months of data with which to test these predictions. From June 2013 to May 2014, the number of unemployed North Carolinians dropped by 87,403. The number of employed North Carolinians rose by 85,461. Thus the state’s reported labor force has declined by 1,942 since mid-2013, or about four-hundredths of a percent. (The national average decline during the same period was a tenth of a percent. Labor-force participation across the country is lower than it used to be for a variety of reasons, including the aging of the population.)