By John Quinterno
This column originally appeared in the Raleigh News & Observer.
The claim that North Carolina is undergoing a robust economic recovery brought about by hard policy choices has become a central narrative in the re-election campaign of Gov. Pat McCrory. Yet if North Carolina’s recovery is so robust, why is public enthusiasm for the “Carolina Comeback” so hard to find?
Ultimately, the lack of popular acclaim for the “Carolina Comeback” is due to its failure to raise the incomes and living standards of most North Carolinians. As documented in a set of issue briefs sponsored by the nonprofit organization Think NC First, the available economic data demonstrate that there has been no comeback for the typical North Carolinian, who by and large is worse off today than when the recession began in 2007.
Take what should be the central feature of any recovery: widespread improvements in the income levels and living standards of ordinary households. In 2014, the last year with data, the typical (median) household in the state had an inflation-adjusted annual income that was significantly lower than when the recession started in 2007. Over that period, inflation-adjusted median household income fell by $4,449, dropping from $51,005 to $46,556. The income of the typical household fell by $2,814 during the recession and then dropped another $1,635 during the recovery. In short, the typical household lost ground during the recession and then kept losing ground even after the recovery took hold.
The fall in median household income levels has affected every major racial and ethnic group, all of which were, at a minimum, no better off in 2014 than in 2007. Specifically, the typical non-Hispanic white, African-American and Hispanic households all saw their incomes fall significantly over that period. And place has provided no protection against falling median household income levels, which currently are statistically unchanged or lower than their pre-recessionary values in 98 of 100 counties.
Lower hourly wages
Because most households derive almost all of their incomes through paid work, falling incomes are intertwined with a statewide labor market defined by subpar job growth and elevated joblessness, which are factors that drive down wages. After adjusting for inflation, hourly wages were lower in 2014 than in 2007 for every group of workers except for those in the top 10 percent of the wage distribution. Even education has provided little protection from falling labor earnings, as every group of workers (ages 25+), including those with college degrees, earned significantly less in 2014 than in 2007.
Declining wages and incomes have left North Carolina a poorer, more unequal state. Not only has income inequality worsened significantly since 2007, but higher shares of people are dealing with poverty and working poverty. If all 3.7 million North Carolinians who lived in 2014 in households with incomes below twice the poverty level gathered, they would form the state’s most populous county – a county with about as many people as live in the state’s seven most-populous counties combined.
Even the measures on which North Carolina appears to have performed well are less impressive on closer inspection. Consider the broadest gauge of economic activity: gross domestic product. From 2009, when it reached its cyclical low, to 2015, inflation-adjusted GDP grew by 1.3 percent per year, a rate that barely exceeded that of population growth. The result was a decline in GDP per capita, a common, if flawed, measure of well-being. So, while GDP has grown, it has not grown enough to improve individual economic welfare.
A similar pattern applies to important labor market trends. Although North Carolina has regained all the payroll jobs lost in the recession, the state has not added enough jobs to accommodate today’s larger labor force. The failure to add enough jobs means that North Carolina still has fewer jobs than it should have despite being over six years into a recovery.
The decline in the unemployment rate also is less impressive than it seems since the drop was driven partly by a fall in the share of the working-age population participating in the labor force. Furthermore, underemployment remains elevated. In 2015, the share of the population that was unemployed, working on a part-time basis involuntarily, discouraged or otherwise on the margins of the labor market was 11.3 percent, versus a pre-recessionary figure of 8.5 percent.
Subpar growth, a jobs gap, elevated joblessness, stagnant wages, falling incomes, increased economic hardships and greater income inequality – these are the economic realities that have confronted North Carolinians for nearly a decade. If the public is insufficiently enthused about the “Carolina Comeback,” this may explain why.
John Quinterno is a principal with South by North Strategies, Ltd. in Chapel Hill. He is the author of the issue briefs available at Think First NC on which this column is based.