RALEIGH — North Carolina’s ongoing struggles with double-digit unemployment raise questions about government claims dealing with economic recovery. That’s the assessment of the John Locke Foundation’s top budget analyst.
“Economic growth hit 3.5 percent in the third quarter, but it is too soon to know how real or sustainable that is,” said Joseph Coletti, JLF Fiscal Policy Analyst. “The Washington bureaucrats claim that stimulus spending has created or saved more than 640,000 jobs. But that’s an impossible claim to check.”
“Even if you accept that claim, the cost per job is $160,000,” Coletti added. “The national unemployment rate was never supposed to reach 10 percent, yet now the White House is telling us to expect such European levels of unemployment well into the future.”
The N.C. Employment Security Commission’s latest report lists the state’s unemployment rate at 11.0 percent for October, up two-tenths of a percentage point from the September rate of 10.8 percent. North Carolina now ranks No. 9 in the nation in unemployment.
The state has logged nine straight months of double-digit unemployment. North Carolina’s unemployment rate peaked at 11.1 percent in May, according to the ESC.
Coletti raises questions about more than just the impact of stimulus spending. “The stimulus may not have helped, but other government programs have distorted the current economic picture,” he said. “For instance, the Cash for Clunkers program sped up many consumers’ plans for buying new vehicles. Tax credits for first-time homebuyers convinced people to buy houses earlier than they might have bought them without credits.”
“In effect, the government has pulled economic activity from the future to the present,” Coletti explained. “The economy will have to give back those temporary gains. Car buyers and home buyers who made purchases in the last few months are unlikely to make the same purchases again in six months or a year.”
North Carolina’s politicians have compounded the problem by raising taxes, Coletti said. “Much of the touted economic recovery is based on government-induced consumer spending,” he said. “Unfortunately for North Carolina consumers, they’ve been forced to pay a higher sales tax since Oct. 1. When you increase the cost of every item subject to the state sales tax, you decrease the likelihood that customers will buy those items. We don’t know the impact yet of that sales tax increase, but we can be certain it’s not going to boost consumer spending.”
Seasonally adjusted employment decreased in October by more than 5,600 workers to a total of 4.03 million, according to the ESC. Unemployment increased by 4,500 workers, with more than 496,000 workers now listed as unemployed. Unemployment has increased by more than 174,000 people in the past year. The state rate in October 2008 was 7 percent.
North Carolina’s continued employment struggles should signal to state lawmakers that it’s time for government to change direction, Coletti said. “The governor and General Assembly can’t do anything about the Obama administration’s policies, but they can take steps that actually would speed an economic recovery,” he said. “Lowering taxes and reducing regulatory burdens would help encourage the business owners and entrepreneurs who create jobs.”
“The governor has pledged to seek every ‘recovery’ dollar she can get for the state,” Coletti added. “But that’s just a case of the government taking dollars out of the economy and handing them out to politically connected groups while calling the process ‘recovery.’ You can’t build an economy by scooping water out of one end of a swimming pool, dumping it into the other end, claiming the swimming pool has more water, and calling it stimulus.”