Publisher's Note: This post appears here courtesy of the Carolina Journal. The author of this post is Theresa Opeka.
North Carolina's labor force participation rate is showing some steady improvement, according to the latest figures released by the U.S. Bureau of Labor Statistics. The rate of 60.6% for September is an improvement over the 59.7% rate from January but still below the 61.3% rate pre-COVID.
However, the unemployment rate has been inching its way up, with a 3.6% rate for September, compared to 3.5% in August and a 3.4% for most of the summer and spring. For comparison, the rate in January was 3.9%.
"North Carolina's unemployment rate ticked up for the second straight month, reflecting a small increase in the number of unemployed,"
said Brian Balfour, senior vice president of research for the John Locke Foundation. "Meanwhile, the labor force participation rate remained the same at 60.6%, down from the pre-pandemic rate of 61.3% in February 2020. The figure represents nearly 60,000 North Carolinians who never re-entered the labor force after the Covid shutdowns. Although still slight, the rise in unemployment may be a precursor to more troubling economic times on the horizon."
There is a distinction between the unemployment and labor force participation rates, which sometimes gets confusing to follow in the media.
"The media oftentimes is not careful in making this distinction,"
said Mike Walden, William Neal Reynolds distinguished professor emeritus of economics at NC State.
"They will look at the unemployment rate, which comes from the household survey, then they'll look at the number of jobs which comes from the establishment survey, they'll mix and match, and you can get the two measures going in different directions. You can have an unemployment rate, for example, go up while the establishment survey shows the number of jobs going up, which perplexes a lot of folks in the media."
Walden says the federal government takes the household survey by asking a sample of people to see if they meet the definition of unemployment, which is the number of people who don't have a job but want and are looking for a job. If they say they have a job, they are not counted. If people say they don't have a job or want a job, they aren't counted, either.
The federal government surveying businesses conduct the establishment survey about how many filled positions they currently have. Walden said the number will always be more significant than the household survey, which is only concerned if someone is working or not, not by how many jobs they may be working.
The labor force participation rate is defined as the percentage of the civilian noninstitutional population 16 years and older working or actively looking for work, which is considered the base. The federal government takes the number of people employed plus those not employed but looking for a job. They divide that number by that base (people over 16 and over who aren't in the military or institutionalized).
Walden said there might be some indication of people taking on multiple jobs in the current volatile economic state the country is in with high inflation.
"The growth in employment that's from the household survey has been smaller in the growth than the jobs that come from the business (establishment) survey, which implies that maybe what we're seeing is more people who are employed having to take on extra jobs, which makes sense if we're in a situation where the economic situation for many people is a struggle."
He said that trend also has some economists concerned as well.
Walden said Federal Reserve Chair Jay Powell was late in realizing such a significant inflation problem before tackling it and trying to get it down to 2% from its current rate of 8.2%.
"I think the takeaway from this is we're going to see continued rate hikes,"
he said. "Every time the Federal Reserve raises interest rates, it is more expensive, not just for people to borrow money, but most businesses that have to regularly borrow money just to operate normally. It's going to make it more expensive, and that's the whole point of the Federal Reserve doing this. They want to slow things down."
Walden said we are not currently in a recession, despite many in the media saying we are.
"One of the problems with saying we're in a recession now with two consecutive quarters of negative growth is it's not in the labor market yet,"
he said. "You have the labor market slowing down, but we're still having job growth. We're still having reductions in the unemployment rate. I'm not ready to say we're in a recession now, but I think we will be sometime next year."
Walden said there is plenty of blame on both sides of the political aisle for the $5.5 trillion that was pumped into the economy after the pandemic. He said the first infusion at the beginning of 2020 was understandable. The country initially didn't know how to deal with COVID-19, and there weren't any vaccines to fight it. But the last Trump stimulus package in December 2020 and the Biden stimulus package in March 2021 are questionable.
"Those are the two that I think raised the most questions because it was clear that by the end of 2020, the economy was on the mend. The vaccines had already been developed, and they were starting to get deployed, etc.,"
He thinks those actions may be questioned in the years to come.
"Was that $5.5 trillion worth it?"
Walden noted. "Should it have been that amount, or should it have been less, and could it have been done more effectively? Congress is going to wrap themselves up in debates all the time. Certainly, targeting would have been better, but again I think urgency was the message."