Unemployment is still a major problem in North Carolina. The headline unemployment rate has inched up from 5.3% to 5.9% since the beginning of the year, but that still doesn’t tell the whole story. When people who have been forced out of the job market since the Great Recession by a lack of job openings are included, the actual unemployment rate is still in double digits, almost twice what is commonly reported. This gap between the official unemployment rate and the reality on the ground can skew the policy conversation, making it look like the good times are back when that’s not really the case.
The US economy has improved since facing down the prospect of complete collapse a few years ago, which has buoyed employment prospects in North Carolina. However, any talk of a complete recovery is grossly overstated. There are likely more than 230,000 North Carolinians who would like to work, but don’t show up in the official figures. When those “missing workers” are included, the total tally of North Carolinians who can’t find a job rises past half a million.
When the unemployment rate is calculated, anyone who does not report that they are actively looking for work is not counted as unemployed. Under normal circumstances this makes sense because we don’t want to include children, retirees, and students when we’re trying to gauge the share of working-age adults that can’t find employment. However, dramatic economic shocks like the Great Recession have a nasty habit of forcing otherwise willing workers onto the sidelines because of lack of jobs and prolonged unemployment. The result is that many people who would like to work stop showing up in the official unemployment rate. This is a point confirmed as well by labor force flow data at the national level which also shows that new employees are at least as likely to come from out of the labor force as they are to have been previously officially unemployed.
Calculating the missing workers, and controlling for demographic trends like aging populations or growing student enrollment, provides a window into our state’s workforce is underutilized. The reality of a shrinking labor force driven by too few jobs is holding back more robust job growth and preventing wages from improving. To see how the number of missing workers in North Carolina is estimated, read the BTC Brief Lack of Jobs Drives Exodus from Workforce in North Carolina.
Incomplete data beget insufficient policy. When the people who were hurt the most by the recession disappear from the unemployment rate, they often become invisible in the policy conversation. The policy choices we have made since the start of the Great Recession have not fixed our economy, and we can’t get lulled into complacency by statistics that make it look like we’re doing just fine.
Patrick McHugh is the economic analyst for the N.C. Budget & Tax Center.