South By North Strategies, Ltd.

Weekend Wonk Out

A round-up of policy reports from the week ending on 11/20:

• The Center for American Progress looks at how to reduce youth unemployment.
• Demos charts the rise and fall of the Glass-Steagall Act.
• The Brookings Institutions looks at the economic prospects of America’s metros.
• The Center on Budget and Policy Priorities analyzes the effects of raising Medicare taxes for high earners.
• The Institution on Taxation and Economic Policy asks just who pays taxes.

October Employment Report: NC

October’s employment report from the Employment Security Commission offers more evidence that a jobless recovery is taking shape in North Carolina.

Last month, North Carolina employers added 12,100 more positions than they eliminated. This was the second time in three months in which the state netted some jobs. Nevertheless, the job market is not generating enough positions to absorb new workers or those displaced over the past year.

In October, North Carolina employers added 12,100 more positions than they shed. The public sector added 5,800 positions while the private sector netted 6,300 positions. Among private-sector industries, education and health services posted the largest gain (+5,800) while construction shed the most positions (-6,600). Additionally, a downward revision to the September employment report resulted in the net loss of another 2,500 positions.

Click here to read South by North Strategies’ analysis of the October employment report.

NC’s Job Market Goes Nowhere Fast

CHAPEL HILL (November 19, 2009) – October’s employment report from the Employment Security Commission offers more evidence that a jobless recovery is taking shape in North Carolina.

Last month, North Carolina employers added 12,100 more positions than they eliminated. This was the second time in three months in which the state netted some jobs. Nevertheless, the job market is not generating enough positions to absorb new workers or those displaced over the past year.

“Since reaching a low point in July, North Carolina’s job market has posted some gains,” says John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “October marks the first time in 15 months in which private payrolls grew slightly. While conditions may have stabilized, they are not necessarily improving.”

In October, North Carolina employers added 12,100 more positions than they shed. The public sector added 5,800 positions while the private sector netted 6,300 positions. Among private-sector industries, education and health services posted the largest gain (+5,800) while construction shed the most positions (-6,600). Additionally, a downward revision to the September employment report resulted in the net loss of another 2,500 positions.

“North Carolina’s job market is going nowhere fast,” adds Quinterno. “Even with some positive October data, private-sector hiring remains anemic. In fact, most hiring in the state is being driven by the public sector, either through direct hiring or through the financing of health care services. If not for government spending, employment conditions would be much worse.”

Despite the recent moderation in job losses, conditions have deteriorated markedly since October 2008, which is when North Carolina’s job market began its slide.

Compared to one year ago, the state has 188,100 fewer jobs (-4.6 percent) and 203,000 fewer private-sector ones (-6 percent). In terms of individual industries, manufacturing (-67,600) and construction (-42,200) lost the greatest number of positions over the past year, while construction declined the most in relative terms (-18 percent). Government employment has grown the most in both absolute (+14,400 positions) and relative (+2 percent) terms.

“The past year has been a horrible one for North Carolinians who depend upon paid employment to earn a living,” notes Quinterno. “Severe job losses have pushed unemployment to the highest levels posted since 1976, which is when modern records began being kept.”

The extent of joblessness is reflected in the household data for October. Last month, the labor force contracted by 1,106 individuals as discouraged workers abandoned job searches. Furthermore, the October unemployment rate of 11 percent tied June 2009 for the second-highest monthly state unemployment rate seen since 1976. And compared to a year ago, fewer Tar Heels are in the labor force or employed, and 1.5 times as many are unemployed.

“Right now, there is a tremendous amount of idle labor in North Carolina, both in terms of unemployed individuals and those who are effectively jobless but are not included in the official statistics,” continues Quinterno. “Even though labor market conditions have improved slightly over the past three months, the level of growth is insufficient to make much of a dent in the current situation.”

“Consumer demand is weak, economic conditions are uncertain, and employers have many alternatives to adding full-time positions,” says Quinterno. “Absent increased demand, North Carolina’s labor market will limp along well into the future.”

Public Policy Promotes Debt

Popular discussions about debt often portray the issue in individual terms and make little mention of the economic forces that may lead individuals and firms to incur debt (e.g. flat wages coupled with rising living costs; tight credit) or the the public policies that actually encourage firms and households to borrow.

Writing in The New Yorker, James Surowiecki analyzes how the federal tax code encourages debt by subsiding its costs in various ways. Observes Surowiecki:

The government doesn’t make people go into debt, of course. It just nudges them in that direction. Individuals are able to write off all their mortgage interest, up to a million dollars, and companies can write off all the interest on their debt, but not things like dividend payments. This gives the system what economists call a “debt bias.” It encourages people to make smaller down payments and to borrow more money than they otherwise would, and to tie up more of their wealth in housing than in other investments. Likewise, the system skews the decisions that companies make about how to fund themselves. Companies can raise money by reinvesting profits, raising equity (selling shares), or borrowing. But only when they borrow do they get the benefit of a “tax shield.” Jason Furman, of the National Economic Council, has estimated that tax breaks make corporate debt as much as forty-two per cent cheaper than corporate equity. So it’s not surprising that many companies prefer to pile on the leverage.

Around the Dial – Nov. 19

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

• The New York Times traces the failure of bank regulators to curb risky practices.
• At CBS MoneyWatch, economist  Mark Thoma discusses how to prevent financial crises.
• The News & Observer looks at Sony Erricson’s decision to move from RTP to Atlanta.
• The Wall Street Journal summarizes the Senate’s health reform bill.