RALEIGH — North Carolina has outperformed regional and national averages in most standard measures of economic growth, including job creation, gross domestic product, and personal income, since conservatives took control of the levers of state government.
A new John Locke Foundation briefing document highlights those gains, along with the national recognition North Carolina has seen because of its economic improvement.
“Looking at the real data, not the disinformation put forward by critics of conservative legislative reformers, it’s clear that North Carolina has seen major gains in the past few years,” said Becki Gray, JLF Vice President for Outreach. “With all of the competing claims during the heat of the campaign season, we wanted to collect the facts in one compact, easy-to-understand place.”
Since 2011 N.C. employers have added some 441,600 net new jobs, Gray said. “The state’s official unemployment rate is 4.7 percent, the lowest rate the state has seen in nine years,” she added. “It’s also lower than the national rate of 5 percent. Compare today’s rate to the 10.4 percent unemployment rate from January 2011.”
North Carolina was one of just six states to see its unemployment rate drop from September 2015 to September 2016, Gray said. “During that same period, 82,600 more jobs were created. That’s an increase of 1.9 percent, a rate higher than the national average.”
Looking beyond the “headline” unemployment rate, North Carolina has seen improvement in the broader measure, called U6, that incorporates underemployment. “In 2012-13, the national U6 rate was 14.3 percent, while North Carolina’s rate was 15.6 percent,” Gray explained. “By 2015-16, the national rate had dipped to 9.9 percent, while North Carolina’s had dropped to 10.2 percent. So while the national rate dropped by 4.4 percentage points, North Carolina’s rate dropped by 5.4 points.”
“This was the largest labor-market improvement in the Southeast and the eighth-largest improvement in the nation,” Gray said.
Since 2013, North Carolina’s after-tax per-person income has gone up about 10 percent faster than national and regional averages, Gray said. “The state has met or exceeded the U.S. per-capita income growth rate for 10 consecutive quarters, the best stretch of comparative income growth in 20 years.”
“During that time period, per-person incomes rose 3.6 percent in North Carolina, compared to 3.4 percent nationwide and 3.3 percent in the Southeast,” she added.
Since mid-2013, North Carolina’s gross domestic product has grown at an inflation-adjusted annual rate of 3.2 percent, Gray said. “That’s higher than the national rate of 2.5 percent and the regional rate of 2.4 percent.”
All of this improvement has taken place as conservative N.C. leaders have pursued policies that favor growth, Gray said. “A healthy economy is one that grows from strong pro-growth policies that restrain the growth of government, leave more resources for private investment, unleash free markets, and make smart, fiscally responsible public investments,” she said. “Conservative policies pay off.”
The document details the positive changes. The last three two-year state government spending plans have limited annual General Fund spending growth to an average of 2.6 percent, compared to average 7 percent growth in previous years.
“While North Carolina struggled with a $2.5 billion budget shortfall in January 2011, the latest budget year ended in June 2016 with a surplus of almost $1 billion,” Gray said. “Through the first three months of the current budget year, there’s a revenue surplus of $158 million. That’s 3.1 percent higher than government projections, with 75 percent of that coming from personal income tax collections.”
Frugal spending has helped North Carolina build its rainy-day reserve from $150 million in 2010 to $1.6 billion today, Gray said. “At 7.5 percent of the General Fund budget, this is the largest reserve in state history,” she said. “For hurricane disaster recovery, a safety net for the next recession, and a stop-gap measure against future tax increases, building the reserve was a smart move.”
Policymakers lowered and flattened tax rates, transformed a multibillion-dollar unemployment insurance debt to the federal government into a $2.1 billion reserve fund, and repealed the dreaded “death tax.”
“The end result is $6 billion in tax savings over seven years,” Gray said. “The tax savings amount to $166 in 2016 for a median-income family, and $290 in 2017.”
Even with more frugal spending and lower taxes, conservative policymakers have awarded state employee pay increases in four of the last five years, with plans to make workers eligible for merit bonuses in 2016-17.
“Since 2013, public school teachers have seen average pay increases of 15 percent, with a 4.7 percent average pay increase this year, the largest in the country,” Gray said. “Average teacher pay is projected to reach $50,000 in the next school year and $55,000 within three years.”
Total K-12 education funding has increased in five of the last six state budgets, including a $512 million increase in the latest budget plan. “Since 2013, funding for textbooks and digital resources has more than tripled.”
Government restraint also has led to a rollback of unnecessary regulations, Gray said. “A rules review process has subjected more than 8,000 of the state’s 21,000 state government rules to new scrutiny so far,” she said. “Of those reviewed to date, nearly 2,300 will have to go through a readoption process, and 871 rules will be scrapped completely. That’s 11 percent of the rules reviewed that will be eliminated.”
All of this positive change has attracted national attention, Gray said. “North Carolina has jumped all the way to No. 11 in the Tax Foundation’s latest State Business Tax Climate rankings,” she said. “Just a few years back, we were ranked No. 44. We’ve also climbed from No. 24 to No. 19 since 2013 in the Cato Institute’s state freedom index.”
The numbers also look good moving forward, Gray said. “The recent Babson Capital/UNC-Charlotte Economic Forecast predicts 194,500 net new jobs in North Carolina over the next two years, a 4.7 percent increase,” she said. “The unemployment rate is expected to drop to 4.2 percent by December 2017.”
“Restraining the growth of government, cutting taxes, rolling back regulations, making smarter investments — that’s been the standard operating procedure in recent years,” Gray said. “Is it working? The numbers tell the story.”
The briefing document “It really is about the economy” is available at the JLF website. For more information, please contact Becki Gray at (919) 828-3876 or [email protected] To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected]