You decide: Is there occupational churning?


By Dr. Mike Walden - N.C. State Professor of Economics



I’m up to my neck in jobs. However, don’t contact me for a job; I don’t actually have any to hand out! Instead, I’ve been looking closely at jobs in North Carolina — what kinds they are and how they have been changing.

Our job market is constantly churning, meaning there are always some existing jobs being cut while new jobs are being created. Even during recessions, there are some new jobs added. It’s just that in an economic downturn, many more jobs get the ax compared to those placed in the want ads.

My focus has been in looking at jobs in terms of what workers do – that is, their occupation. Specifically, I’ve looked at how North Carolina’s occupational mix has changed since the early 2000s (2002). While much of what I have found was expected, I was also hit with a couple of surprises.

I divided the state’s occupations into two groups – occupations gaining jobs and occupations losing jobs. Over the entire time period I examined (2002-2015), there were actually more occupations in the state that added jobs than that cut jobs, with the margin of gainers over cutters being 15 percent. The average annual rate of employment change for both groups was actually quite close, with gainers increasing jobs by 3.4 percent annually and cutters reducing jobs by 3.7 percent annually.

But there was a stark difference in the pay of gaining occupations and shrinking occupations. The median hourly wage of occupations adding jobs between 2002 and 2015 was 10 percent lower than the median hourly of occupations reducing jobs.

Between 2002 and 2015 there were three distinct economic periods. From 2002 to 2007 and again from 2010 to 2015, the economy was growing and jobs overall were being added. From 2007 to 2010, the economy was in an official recession or was very sluggish – the net result being total employment was declining. I wanted to see if occupational change in North Carolina was different in these three time spans.

The short answer is – yes, very much! During the two growth periods (2002-2007 and 2010-2015), the number of occupations adding jobs exceeded the number of occupations decreasing jobs by a good margin – by 44 percent in 2002-2007 and by 27 percent from 2010 to 2015. Interestingly, the average yearly rates at which jobs increased for growing occupations and jobs declined for shrinking occupations were almost the same.

However, there was one big difference between the two growth periods. Occupations shrinking jobs paid 10 percent more in their hourly wage than occupations adding jobs during the earlier 2002-2007 growth period. But during the recent growth period (2010-2015), the declining and growing occupations have paid about the same.

The big surprise for me was what happened to the occupational mix during the recessionary years (2007-2010). I had two pre-conceived expectations. One was that very few occupations would have added employment during this dismal period. The second was that those occupations that did add jobs would not be very good paying.

I was wrong on both counts! While the number of declining occupations exceeded the number of expanding occupations by 34 percent, still almost 300 occupations in North Carolina increased their employment during the recession. But here was the real shocker to me: The average wage rate of occupations adding jobs between 2007 and 2010 was 24 percent higher than the wage for occupations cutting jobs! In short, if an individual landed a job in an expanding occupation during the recession, on average the wage rate was relatively good.

While both of these findings may be counterintuitive to many, there are actually some logical explanations. Recessions are disruptive periods that force many people and companies to think outside the box to survive. Adversity breeds new thinking. Economic historians tell us that bad economic times — like the Great Depression of the 1930s — can be very innovative and entrepreneurial periods. If successful, these actions can create new businesses and jobs.

Also, even businesses cutting production and jobs may find it beneficial to hire more highly trained workers who might have a plan for navigating the company through the treacherous waters of the recession. The idea may be to hire people who are really good in order to keep the firm afloat, even if those employees cost more.

Much has been made about advances in technology being job-killers, so I was interested in exploring this possibility with North Carolina’s occupations. Using a widely cited index of technological replacement developed by two British economists, I did find a link between the index and occupational change in our state. Specifically, occupations with high measures on the index – meaning there was a high likelihood the occupation could eventually be done by technology rather than humans – were more likely to have lost jobs since 2002.

What’s the bottom line from my research? First, occupational churning is occurring in North Carolina, meaning some occupations are expanding, while others are contracting. Second, even in the darkest days of a recession, there are some occupations that add jobs and pay well. And third, technology seems to be related to recent occupational change in our state.

The past can often help us prepare for the future. We know from the past that some occupations rise and others fall. How can this help us in the decades ahead? You decide!

Dr. Mike Walden is a William Neal Reynolds Distinguished Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of North Carolina State University’s College of Agriculture and Life Sciences.

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By Dr. Mike Walden

N.C. State Professor of Economics

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