YOU DECIDE: Will North Carolina do better in the recession?
May 02, 2008
MEDIA CONTACT: Dr. Mike Walden, 919.515.4671 or email@example.com
An increasing number of economists now think the country is in a recession, and recessions have not been kind to North Carolina.
Traditionally, the state suffers more during economic downturns than other states. For example, during the last recession, in 2001, North Carolina's jobless rate was the fourth highest among all states.
If that's true, the question becomes: How hard North Carolina will be hit?
Will the state repeat its unfortunate experiences of the past with a worse unemployment rate and a greater drop in commerce than other parts of the country? Or will our state break with the patterns of the past and be a place that outperforms other regions?
Recent numbers certainly suggest the state's economic engine has slowed. The jobless rate is up over one-half percentage point in the past year. Total jobs in the state fell last month. And state tax revenues show signs of weakening.
But these conditions prevail just about everywhere. National recessions hit most states. So the more relevant question is how North Carolina is performing compared to the rest of the nation.
Here the news - so far - is encouraging.
Let's begin with the housing market, the sector that has led the economy into the current slowdown. This market is suffering from big drops in construction, reductions in prices in some areas and a jump in foreclosures.
Last year, housing construction plunged 23 percent nationwide, and so far, building activity is on pace to be off 33 percent for the year. But in 2007, residential construction in North Carolina was down 17 percent, and this year it's trending toward a 26 percent reduction.
House prices have also held up better, actually rising slightly in our state last year while remaining flat in the nation. So while the housing market news isn't all good in North Carolina, it could be worse, and our performance so far is better than the nation's.
What about foreclosures, perhaps the ultimate casualty of the housing bust?
Once again, the numbers have been better in North Carolina. While foreclosures were up in 2007, the foreclosure rate was 30 percent lower than in the nation.
Now let's turn to jobs, the market most people use to gauge the economy's strength.
Statewide unemployment rose in the past year but at a rate slightly slower than in the nation. Part of the reason comes from a surprising source: manufacturing. In the last three years of available data (2004 to 2006), the production from North Carolina's factories was actually up, and the gain was almost 50 percent faster than in the nation.
North Carolina's manufacturing jobs are down in the past year, but a big part of the reason is the continuing improvements in worker productivity, which allow factory workers to produce more output than their predecessors. Manufacturing jobs are being shed at a slower pace in today's economic slowdown than during the recession of 2001.
There's even some good news for textiles and apparel, the industries most devastated by job cuts in the last three decades. Job losses in these traditional sectors are currently running two-thirds slower than during the 2001 economic pullback. So while the bleeding continues - something that still hurts the state - the losses have narrowed.
Finally, what about how much workers are paid?
Again, North Carolinians can smile. In the last two years, gains in worker earnings have risen faster in our state than in the country.
None of these statistics should suggest all is well, economically speaking, in North Carolina. There are still problems in the housing industry, and more people are losing their homes. Unemployment is up and companies are tentative about hiring. Families, businesses and government all face tighter budgets. Unfortunately, these conditions go with the territory during a recession.
The good news however, is that to date, North Carolina appears to be doing better than is the nation - relatively speaking - with these conditions.
You decide if this is reason to celebrate!
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Dr. Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of N.C. State University's College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The Department of Communication Services provides his You Decide column every two weeks. Earlier You Decide columns are at http://www.cals.ncsu.edu/agcomm/writing/walden/decide.htm
Related audio files are at http://www.ncsu.edu/waldenradio/
Posted by Dave at May 2, 2008 04:18 PM