JOHN HOOD COLUMN: Economic data paint a cloudy picture
Published 10:12 am Wednesday, September 6, 2023
RALEIGH — How healthy is our economy? If you’ve just returned from the grocery store or gas station, you may be inclined to rate it poorly. Although prices aren’t rising as fast as before, that phenomenon is properly called disinflation. It isn’t the same thing as deflation. The cost of living remains much higher than it was a couple of years ago.
Still, we have yet to experience the recession many economists predicted when the Federal Reserve began to tighten the money supply. And our labor market, at least, shows signs of continued health.
I recently downloaded data from two federal agencies, the Bureau of Labor Statistics and the Bureau of Economic Analysis, to compare North Carolina’s performance to that of other states. On some measures, it’s unexceptional. On others, it’s distinctive.
According to the latest unemployment data, for example, our state’s headline jobless rate was 3.3% in July, down from 3.7% a year ago. Neither the rate nor its recent trend was significantly different from the national average.
This U-3 rate, as it’s officially labeled, counts only working-aged individuals who are both unemployed and actively looking for work. BLS provides other estimates that include folks so discouraged at their job prospects that they’ve given up looking (U-4), folks who’ve stopped looking because of family responsibilities or other personal reasons (U-5), and those who are working part-time but would rather have full-time jobs (U-6).
For North Carolina, those labor-market measures were, respectively, 3.7%, 4.3% and 6.6% for the latest 12-month period. Again, the rates were statistically indistinguishable from the national norm. Thirteen states, including Florida and Virginia, were lower than average on all BLS measures of unemployment. Only New York, California and Nevada were higher than average.
In terms of employment, North Carolina added some 108,000 net new jobs from July 2022 to July 2023. That’s a growth rate of 2.2% — solid but not stellar. Florida (3.2%), Texas (3.3%) and Nevada (3.8%) were the national leaders in job creation. (The fact that Nevada had the fastest job growth as well as higher-than-average unemployment serves to illustrate why it’s important to look at more than one statistic at a time.)
On the broadest measure of economic activity, gross domestic product from the BEA, North Carolina’s performance has been exemplary in recent years. From 2021 to 2022, for example, our GDP expanded by an inflation-adjusted 3.2%. That was the sixth-fastest growth rate in the country. Only Idaho, Tennessee, Florida, Nevada and Texas posted higher growth rates.
During the first quarter of 2023, however, North Carolina’s GDP grew at an annualized rate of only 1%. That was one of the lowest rates in the country.
The BEA also measures personal income. In 2022, our average income was $57,416 per North Carolinian. That’s about 88% of the national average. On this measure, our growth rate exceeded that of most states from 2021 to 2022 — but again, our performance was weaker during the first quarter of 2023.
A statistical fluke? Perhaps. But I think caution is clearly warranted.
For the General Assembly, that means ensuring that the state budget deal likely to be voted on next week leaves sufficient money in reserve to protect taxpayers and core state services in the event of a sudden downtown in economic activity and state revenue. For counties and municipalities, there is also a good argument for prudence. Although the onset of the COVID pandemic in 2020 didn’t create the fiscal problems that many observers predicted — Congress borrowed and allocated far more money to states and localities than was truly needed, in retrospect — I hope policymakers haven’t gotten used to expecting only good news from their revenue officers.
There are other trouble signs, after all. While the Eurozone does not appear to have slid into a full-fledged recession yet, growth there was essentially flat during the first three months of 2023. Other trading partners are looking wobbly, too. Let’s hope for the best but take precautions against the alternative.
John Hood is a John Locke Foundation board member.