State Politics

NC economy a mixed bag

Josh Outlaw (left) uses a plasma torch to cut a piece of steel as fellow students look on during the metal working class at Scotland County High School in Laurenburg, N.C. Friday, September 23, 2016. At right is Mick Davis who will grab the hot metal before it hits the floor. The high school has a vocational program second to none to help students get real life skills that can provide work as soon as they graduate.
Josh Outlaw (left) uses a plasma torch to cut a piece of steel as fellow students look on during the metal working class at Scotland County High School in Laurenburg, N.C. Friday, September 23, 2016. At right is Mick Davis who will grab the hot metal before it hits the floor. The high school has a vocational program second to none to help students get real life skills that can provide work as soon as they graduate. cliddy@newsobserver.com

As the recovery from the Great Recession kicks into gear, North Carolina has been adding jobs at a pace of about 7,000 a month over the past few years. Unemployment is down and wages are up.

But the benefits from the recovery are not evenly distributed.

The state had above-average job growth from July 2015 to July 2016, driven by the Triangle and to a lesser extent the Charlotte and Fayetteville metropolitan areas. But rural areas are not faring as well — and North Carolina is much more rural than most states its size.

And in both urban and rural areas there’s a sense that the jobs of the future will require more education and training than the jobs that traditionally helped provide a comfortable, middle-class lifestyle for North Carolinians.

So whether it’s in high-performing Wake County or in Scotland County, home of the state’s highest unemployment rate, work is underway to give teenagers a leg up with skills that today’s workforce is often lacking.

“There are jobs,” said Mark Ward, director of the Scotland County Economic Development Corp. “Just no one to fill them.”

As part of an assessment of how the state is doing on several fronts heading into the Nov. 8 elections, The News & Observer examined North Carolina’s economy and how it stacks up to other states. We analyzed economic data, especially five key measures of income, poverty, unemployment, home ownership and productivity — and interviewed people both in academia and on the ground.

What we found:

▪ North Carolina’s economy performs similarly to Georgia’s and worse than Virginia’s. Virginia beats the national average in all five of the economic measures The N&O examined — partly on the strength of the federal government and all the lobbyists, lawyers, consultants working in politics and government — although Virginia’s wages and productivity are now on the decline. In the various metrics, North Carolina is typically right around the national average.

▪ There are signs that the fast-paced growth of recent years is slowing. Employment in North Carolina grew 2.1 percent between July 2015 and July 2016, but the state has actually lost jobs every month since May.

▪ While things are better now than during or just after the recession, North Carolinians are more likely to be unemployed than they were in 1995 or 2000. Wages are back to pre-recession levels, but people are also more likely to be in poverty. North Carolinians are still more likely than average to own their own homes, but less likely than at any point in decades.

▪ Employment in North Carolina is better than average — but only if people who have given up on job hunts aren’t counted. A smaller share of North Carolina adults are in the labor force than Americans as a whole.

▪ Rural North Carolina is struggling to deal with a loss of population — about half of counties have lost people — and an especially acute shortage of skilled workers.

N.C. Report Card

The News & Observer, the Charlotte Observer and McClatchy assessed the state of North Carolina as the Nov. 8 election approaches, with a particular focus on 20 measures of how the state is doing compared to previous years and compared to Georgia, Virginia and the rest of the nation. This week, The N&O looks at the state of North Carolina’s economy.

Sources: US Census Bureau; Bureau of Labor Statistics

Home ownership

U.S. home ownership in 2015 was at its lowest level since at least 1990, but people in 2015 were more likely to own homes in North Carolina than they were nationally.

Median household income

North Carolina is following a national trend showing that people were generally poorer in 2015 than they were in 2000 but improving from the depths of the recession.

Per capital real GDP

We're producing as much as we ever have nationwide, even more than pre-recession. North Carolina was hurt more than most states during the recession because of its dependence on manufacturing and as of 2015 hadn't caught back up.

Percent of population below poverty line

North Carolina poverty levels closely matched the national average in the 1990s and early 2000s, but in recent years were worse than the national figures.

Unemployment rate

This is the "real" unemployment rate, which is higher than the one that's usually reported. It takes into account people who have stopped looking for work and those who have found part-time work but would like to work full time. North Carolina's rate was slightly worse in 2015 than the national rate.

The skills gap

For each of the last 20 months, companies in both North and South Carolina have reported being unable to fill open jobs, according to the regional Federal Reserve Bank in Richmond. This is called a skills gap.

In the Carolinas, according to a Fed report released this month, “executives reported difficulty finding engineers, construction workers, skilled tradespeople, warehouse and production workers, truck drivers, physicians, nurses, managers, and advanced technicians.”

Even in high-unemployment Scotland County, there are dozens of recent job postings on the state-run website ncworks.gov. Local leaders like Ward say unemployed people in town simply don’t have the needed education or training.

The area lost several thousand factory jobs over the last 20 years, many of them making golf club grips, towels, yarn or fabric – low-skill work that doesn’t transfer over to the jobs available now like driving trucks or nursing.

So Scotland High School is thinking outside the box to better prepare this generation of students. It opened a coin-operated laundry, car wash and two restaurants on campus that are staffed by students and open to the public.

Students can also take classes in nursing, plumbing, welding, machining and drafting. Others can practice with a 3-D printer or industrial robots.

“There’s these robots taking people’s jobs, but you still need people to run the robots,” said 17-year-old Natalie Gover, a senior whose classwork on one recent day involved making a robotic arm move a small ball from target to target.

Even in booming Wake County, with one of the state’s lowest unemployment rates, there’s still a skills gap for the tech jobs that define much of the local economy.

Saul Flores knows how education can bridge that gap. The son of Central American immigrants, Flores grew up in Brooklyn. Then, after his family moved to Charlotte, he won a scholarship to attend N.C. State.

He studied business and design, graduated in 2012 and started his own web design and marketing company (formerly called Pixbit, now Azul) shortly afterward.

“I went from scrubbing floors as a kid with my mom in New York, having bleach irritate your skin, to having all this technology at my fingertips,” he said.

Now the 26-year-old wants to pay it forward. He’s expanding the scope of his company to offer programming and coding classes for minority teens – giving them a head start he never had.

Urban-rural divide

The Triangle is often referred to as the second-best place in the United States for tech jobs outside Silicon Valley, so those kids Flores is reaching out to could go far. And even if they don’t, the skills gap in urban areas isn’t quite as dire as in rural areas, since fast growth creates jobs at all skill levels.

Michael Walden, an economics professor at N.C. State University, said the skills gap is what’s driving the increasing urban-rural divide perhaps more than anything else, as companies shift to the big cities in search of highly educated workers.

All throughout the Triangle, developers can’t build new homes fast enough. Drive through the suburbs – especially western Wake County – and you’ll see people moving into homes with construction sites on either side of them. In rural North Carolina, however, many counties are shrinking.

“I’ve been here 40 years now and this (skills gap) has been an ongoing issue,” Walden said. “And it’s an issue in most states. It’s due to structural changes in the economy to a shift toward more brain-powered jobs, where firms like to be close to universities.”

Rural struggles are especially significant here because North Carolina is much more rural than the country as a whole.

About 66 percent of the population here lives in urban areas, compared with 80 percent nationwide. Georgia and Virginia are about 75 percent urban, while North Carolina’s 66 percent compares to states like Alaska, Wyoming and South Carolina.

In Scotland County (population 35,000) the official unemployment rate is 9 percent, nearly double the state average. In Wake County (population 1 million) it’s just above 4 percent.

In 2010, much of the state looked more like Scotland County. Now much of the state looks more like Wake County, at least on paper. The official unemployment rate has dropped in all 100 counties since the start of 2013 – a fact Gov. Pat McCrory, who took office then, frequently cites in touting a “Carolina Comeback.”

But that doesn’t tell the whole story. In rural North Carolina, people are having to move away to find work.

Employment vs. unemployment

Half of North Carolina’s 100 counties lost population since 2010, and most of them are expected to continue shrinking.

Furthermore, more than a dozen counties have fewer jobs now than in January 2013, when McCrory took office — including medium-size counties like Edgecombe and Wilson as well as smaller places — and far more haven’t made it back to their pre-recession employment levels.

So while McCrory is right that unemployment is down in all 100 counties that’s not the same as saying employment is up in all 100 counties.

At 4.6 percent, the state’s unemployment rate is better than the national average. The state has 290,000 more jobs than it did in 2007.

But those new jobs don’t fully explain the lower rate of joblessness. North Carolina workers have also dropped out of the workforce at a greater-than-average rate.

A more expansive measure of unemployment, which counts all adults who aren’t working or who are underemployed, shows North Carolina at 11 percent. The national average is 10 percent.

Fewer own homes

While the economy is on the rise, the recovery has largely skipped over the poor.

North Carolina incomes improved in 2015 nearly to their levels from a decade earlier, but the poverty rate didn’t make the same rebound. The poverty rate did drop slightly, getting closer to average, but more than 16 percent of North Carolina’s 10 million residents remained in poverty.

It’s important to note that the poverty threshold (around $24,000 for a family of four) is a national figure, and it’s much cheaper to live in North Carolina than New York or California – or, for that matter, Northern Virginia.

People have been less likely to make the traditional jump into the middle class – buying their own homes.

North Carolina’s home ownership rate remains higher than the national rate but has dropped more than 5 percentage points in the last 10 years.

Walden, the economist, said that’s not necessarily bad. Norms are changing. People in their 20s and 30s aren’t buying homes as much as those in past generations for three main reasons, he said: They grew up during the housing crisis and are skeptical of real estate, they want to live in dense urban areas where renting is more common, and they’ve often chosen to take on student debt instead of a mortgage.

But even for people who do want to buy a house, there are still obstacles. Housing prices are increasing faster than wages, and they’re especially pricey in places with the most growth. Homes in the Raleigh area have a median sale price around $260,000 this year. Asheville, Durham and Charlotte are between $208,000 and $234,000. In Fayetteville, it’s $130,000.

Even so, no industry in North Carolina is creating jobs at a faster rate than construction, mostly due to the two main metro areas. In July, the Triangle area issued about 2,000 building permits, according to the Federal Reserve Bank in Richmond. The Charlotte area had about 2,300. The rest of the state combined for less than 1,600.

Population loss

One shrinking city that’s trying to turn the tide is Rocky Mount, which straddles Nash and Edgecombe counties. Since the recovery began in 2010, the two counties have lost a combined 4,321 people.

Recently, a church in town bought an abandoned Home Depot building to turn it into a hub for gatherings, community service and education. An abandoned textile mill sat empty from 1996 until last year; now it’s a mixed-use development with apartments and the city’s first two craft breweries.

And a networking group for entrepreneurs, SpringBoardNC, is doing its best to stop Rocky Mount’s most ambitious natives from leaving for bigger cities.

“Small businesses, historically, that’s where the job creation really comes from,” said Jeff Tobias, a banker who co-founded the group. It sponsors a co-working space at a formerly abandoned textile mill and hosts events to help would-be small business owners find mentors, friends and connections.

“What I’m saying is, Raleigh and Durham don’t have a monopoly on this cool stuff,” Tobias said.

They do have a lot, though. Raleigh was recently named the best big city in the Southeast by Money magazine, beating Charlotte as well as places like Miami, Atlanta and Nashville. The magazine also ranked Cary as North Carolina’s best medium-sized city, and last year it declared neighboring Apex the best small town in the country.

So why are the rural areas and smaller towns struggling? Walden, the economist, said companies ranging from tech to pharmaceuticals to finance want to be near large public universities, due to the large and highly educated workforce.

Consider Rocky Mount. It doesn’t have a large university, and Nash and Edgecombe counties have 8,000 fewer jobs now than in 2008. Yet nearby Pitt County, which is about the same size as the Rocky Mount area but is home to East Carolina University, has 1,000 more jobs than before the recession. And Buncombe County, home to UNC-Asheville and several private colleges, has added more than 10,000 jobs since 2008.

Mark Little, the director of N.C. Growth and executive director of the Kenan Institute, both based at UNC-Chapel Hill, helps rural leaders with economic development. He said the industries that made North Carolina a manufacturing powerhouse half a century ago – tobacco, furniture, textiles and apparel – needed large pieces of land and a steady supply of unskilled labor. Both were cheap and abundant outside the major cities.

But foreign competition and technological advances have killed many of those jobs. Little said modern industries, like health care and tech, don’t need as much space but require more educated workers, which can be found in larger supply in the bigger cities.

He said SpringBoardNC is a good example of how medium-sized communities should focus on the philosophy that: “We’re not going to be a major industrial center anymore. But we can still make this a thriving place for our residents.”

Policy solutions

Republicans took over the General Assembly in 2011 for the first time since the 19th century. The GOP is expected to retain control of both House and Senate after next month’s election, but is fighting to keep its veto-proof majority as well as a Republican governor.

North Carolina is a key state in the contests for the White House and control of the U.S. Senate. Voters’ perception of the economy and who they credit or blame – a Democrat in the White House or Republicans in Congress and the state capital – could play a major role in both state and national contests.

People we spoke with for this article had a wide range of views on what policies could improve the state’s economy.

Little said more tourism attention for rural areas could help, as could increased state incentives funding to lure business growth to small towns.

“One thing I don’t think the state does a good job of is illuminating the rural assets of the state,” Little said.

Lew Ebert, president and CEO of the N.C. Chamber of Commerce, said the skills gap is the biggest problem in the state right now, and the solution is more education funding. After that, he said, is infrastructure. He praised several policy changes in the last few years, especially GOP-led tax changes, but said what the state needs next is investment in its roads and bridges.

“It’s a never-ending process to stay competitive, but I think the net of the last five years is North Carolina has become a lot more competitive,” Ebert said.

Walden said the state should invest more in public schools.

“It all starts at K-12,” he said. “Especially in the rural areas. One reason businesses don’t go to rural areas is they just don’t have the talent.”

He said North Carolina should also simplify the tax code to get rid of many loopholes and deductions while also moving to only an income tax or sales tax, but not both.

Flores, the Raleigh entrepreneur, said immigration reform would help boost the economy by giving thousands of undocumented workers more opportunities. . He also wants to see more funding for college scholarships like the one that enabled him to get an education.

In Scotland County, leaders tout a partnership with the local community college to help high school students get free work certificates in fields like welding and nursing – which they say can and should be copied in other areas. More than 400 students earned at least one certificate last year.

“The low-skill jobs left town,” said Jonathan McRae, the school system’s director of secondary education. “... The businesses that are coming to our community are hiring fewer people and people with more skills.”

N.C. Report Card

The News & Observer, the Charlotte Observer and McClatchy assessed the state of North Carolina as the Nov. 8 election approaches, with a focus on 20 measures of how the state is doing compared with previous years and compared with Georgia, Virginia and the rest of the nation. This week, The N&O looks at the state of North Carolina’s economy. Coming soon: health, quality of life and education.

5 measures

Income: In 2015, the typical North Carolina household made about $50,800. Adjusted for inflation, that’s an improvement from 2010 but still less than in 2000. In 2015, national median household income was $56,500 and in Virginia it was $61,500.

Poverty: North Carolina’s poverty rate was average in the 1990s and early 2000s. But as manufacturing jobs began to leave in larger numbers, the share of families living in poverty rose above average. It has dropped slightly since 2010, getting closer to average, but more than 16 percent of North Carolina’s 10 million residents remained in poverty. The poverty threshold is $24,300 for a family of four, or $11,880 for a single person.

Unemployment: The state’s official unemployment rate is 4.6 percent, which is slightly better than the national average. But that only counts people as unemployed if they’re actively seeking work. A more informative measure – which also counts people who have given up on job-hunting, or who are working part-time but want to work full-time – shows North Carolina (11 percent) is worse than the national average (10 percent).

Home ownership: Two-thirds of households own their house, a decline from 70 percent in 2010 and 71 percent in 2005. This is the only one of the five measures in which North Carolina beats the national average.

Productivity: Per-capita GDP measures the value of all goods and services a place produces, adjusted for its population. It’s how economists typically measure the strength of national economies and can be applied to states, too. In North Carolina it grew quickly between 1995 and 2005, dropped during the recession and has been slowly climbing back.

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