South By North Strategies, Ltd.

NC Local Labor Markets In June

CHAPEL HILL (July 23, 2010) –  North Carolina’s local labor markets exhibited little energy in June, based on preliminary data released today by the Employment Security Commission. During the first month in a hot, languid summer, 55 counties posted double-digit unemployment rates, while 24 counties recorded rates of at least 12 percent.

“The June employment numbers lacked any real vitality,” says John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “While conditions in some areas improved over the last year, the overall situation is grim. And further troubles likely are in store for 2010’s second half.”

Since the onset of the recession in December 2007, North Carolina has shed 5.7 percent of its payroll employment base (-238,100 positions) and has watched its unadjusted unemployment rate climb from 4.7 percent to 10.1 percent.

Every part of the state experienced weak labor markets in June. Unemployment rates exceeded 10 percent in 55 counties, and in 24 counties, at least 12 percent of the labor force was jobless and actively seeking work. County unemployment rates ranged from 4.8 percent in Currituck County to 16.3 percent in Scotland County.

“Labor markets in non-metropolitan communities remain especially weak,” adds Quinterno. “Last month, 11 percent of the non-metro labor force was unemployed, compared to 9.6 percent of the metro one. More alarmingly, the non-metropolitan labor force continues to shrink. Since December 2007, the non-metropolitan labor force has contracted by 1.2 percent. Many of those missing individuals are effectively jobless.”

Last month, unemployment rates rose in 8 of the state’s metropolitan areas, and 7 metros lost more jobs than they gained. The Rocky Mount and Hickory-Morganton-Lenoir areas tied for the highest unemployment rate (13 percent), followed by Burlington and Charlotte (11.1 percent). Durham-Chapel Hill had the lowest rate at 7.5 percent.

“Because of the lack of seasonal adjustments, monthly fluctuations in local unemployment rates must be interpreted cautiously, particularly during the volatile summer months,” warns Quinterno. “A better comparison is an annual one.”

Compared to June 2009, unemployment rates were the same or lower in 65 counties and all 14 metro areas. Yet compared to a year ago, 81 counties and 7 metro areas had smaller labor forces. Among metros, Hickory-Morganton-Lenoir posted the largest decline in the size of its labor force (-3.9 percent), followed by Burlington (-2.4 percent). Fayetteville posted the largest gain (+3.8 percent).

“Despite stabilization in market conditions, the long-term employment picture remains the same,” cautions Quinterno. “The sustained job growth needed to absorb displaced individuals and new workers simply isn’t occurring. Many seeming improvements really are the by-product of workers leaving the labor market.”

In the long term, any meaningful recovery will be driven by growth in the state’s three major metro regions: Charlotte, the Research Triangle, and the Piedmont Triad. Yet job growth in 2010 has been sluggish. Collectively, employment in these three major metro regions has fallen by 4 percent since the start of the recession. The overall June unemployment rate in the major metros equaled 9.6 percent. Of the three areas, the Research Triangle had the lowest June unemployment rate (8.2 percent), followed by the Piedmont Triad (10.6 percent) and Charlotte (11.5 percent).

“The second half of 2010 could be even more difficult for North Carolinians seeking work,” observes Quinterno. “Private-sector job growth is anemic, and much recent growth has resulted from government actions like temporary census hiring, home tax credits, emergency unemployment, and recovery spending. Many of those supports have ended or are about to end.”

Consider the case of the emergency unemployment benefits that expired before being reinstated this week. Explains Quinterno: “Over the last 12 months, unemployed North Carolinians received $5.5 billion in regular state payments and federal emergency benefits. These payments sparked an estimated $8.8 billion in statewide economic activity. In June, the Emergency Unemployment Compensation program alone generated $288 million in economic activity.”

“In the course of extending emergency benefits, the U.S. Congress scaled back the program’s effectiveness,” adds Quinterno. “Congress discontinued the federal addition compensation program, which added $25 to each weekly insurance check. Based on June data, full implementation of that step  would lower the average weekly payment in North Carolina by 8 percent and reduce statewide economic activity by $23 million.”

Helping Homeowners or Banks?

Dean Baker of the Center for Economic and Policy Research isn’t a fan of the federal government’s approach to dealing with the foreclosure crisis.

The limited benefit to homeowners from this programme would be of concern, except that we know that the money shelled out by the government went to investors and servicers (ie banks). And, as we in Washington know, money handed out to banks is always money well-spent, isn’t it?
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The flow of money from taxpayers to banks is not hard to recognise. It is easy to distinguish between helping banks and helping homeowners. Homeowners are helped if either: 1) Their cost of being a homeowner is less than or equal to the cost of renting a comparable unit; and 2) They accumulate equity in their home.
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A serious plan for helping homeowners would have limited taxpayer dollars to modifications where 1) or 2) was likely to be the case. This would involve looking at factors such as price to rent ratios, a hugely relevant issue that never seems to come up in policy debates on helping homeowners.
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The point is simple: if the ratio is high then homeowners would likely save money by renting. Furthermore, a high ratio is good evidence of a bubble, which would mean that prices would be lower in future years, guaranteeing that most homeowners will not accumulate equity before they sell. As it stands, the housing bubble has not fully deflated, so prices in many areas will almost certainly be lower in two to three years, guaranteeing that many current homeowners will never accumulate equity.

Around The Dial – July 22

Economic policy reports, blog postings, and media stories of interest:

• Calculated Risk reviews current housing indicators.
• Simon Johnson advises “with banking, question everything.”
• TaxVox consigns “starve the beast” to history’s ash heap.
• Paul Krugman proposes “the FedFail index.”
• The Working Poor Families Project calls for smarter job training.

NC Unemployment Claims: Week of 7/3

Old Mistakes Repeat Themselves

Writing for Project Syndicate, Robert Skidelsky  asks what advocates of fiscal austerity must believe in order to make their policy proposals coherent. Concludes Skidelsky’ commentary:

The classical view of the economy, which [John Maynard] Keynes set out to demolish, is not only alive, but in recent years has been dominant, feeding the belief that competitive markets can be left to regulate themselves, will always provide as much employment as is wanted, and are immune to large-scale collapse. This also fuels opposition to government intervention, and to “stimulus” policies, which are supposedly redundant, if not harmful, since the events that require them cannot happen (but do).
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Unless we start discussing economics in a Keynesian framework, we are doomed to a succession of crises and recessions. If we don’t, the next one will come sooner than we think.

Around The Dial – July 21

Economic policy reports, blog postings, and media stories of interest:

• Brad DeLong argues it is too soon to end the expansion.
• Marshall Auerback is not happy with the Treasury Department.
• The National Skills Coalition announces the passage of the SECTORS act.
• The Charlotte Observer reports on the ending of temporary census jobs.
• Calculated Risk analyses the performance of the federal HAMP program.

Good For Innovation?

Earlier this week, The News & Observer reported that Becton Dickinson, a maker of medical equipment,plans to open a distribution center in Johnston County.  The company will receive a package of state and local subsidies potentially worth up to $2.3 million.

While new industry and jobs are welcome during a time of high unemployment,  the deal reopens many of the longstanding debates surrounding business subsidies, such as those over the quality of subsidized jobs. Yet this package also raises questions about whether the decision is consistent with the state’s stated emphasis on entrepreneurship and innovation as drivers of long-term growth.

In this month’s cover story, The Washington Monthly describes how Becton Dickinson allegedly has used anticompetitive practices to keep small, entrepreneurial firms from brining innovative medical products — specifically syringes that reduce the risk of accidental needle-sticks – to market. Reports the article:

… In the case of syringes, the incumbent heavyweight has long been Becton Dickinson, or BD, a New Jersey–based company that controls 70 percent of the syringe market and has a lengthy history of trampling competitors. As early as 1960, BD was brought up on Justice Department charges for its anticompetitive practices …
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As it turns out, [Thomas] Shaw’s retractable syringe hit just as these trends were converging. In fact, the year his product came onto the market, three of the nation’s largest GPOs [group purchasing organizations] merged to form a company called Premier, which managed buying for 1,700 hospitals, or about a third of all hospitals in the United States. Shortly thereafter, Premier signed a $1.8 billion, seven-and-a-half-year deal with Becton Dickinson. Under the agreement, member hospitals … had to buy 90 percent of their syringes and blood collection tubes from the company. Over the next two years, BD landed similar deals with all but one major GPO.
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Meanwhile, as Shaw was fighting his battles hospital to hospital, Becton Dickinson was working to extend its hold on the nation’s GPOs. According to confidential documents filed as part of a whistleblower lawsuit, in 1999 BD paid $1 million to Novation, the only major GPO with which it hadn’t yet signed a sole-source contract, in return for a three-year sole-source deal …

Another recent take on the company’s supposed behavior towards smaller competitors is found in the recent book Cornered (chapter 6), authored by Barry Lynn of the New American Foundation.

Financial Reform And The Poor

A segment on the PBS NewsHour discussed what financial reform might mean for the poorest Americans.