Shrinking the unemployment divide

It is well known that unemployment rates are not similar across North Carolina. For example, in March of this year, Buncombe County had the lowest jobless rate at 3.7 percent, whereas Hyde County had the highest rate at 12.3 percent. Differences in county unemployment rates are indicative of the economic divides we see in our the state.

While such jobless rate variations are not new, it is useful to periodically take a fresh look at them to see what factors are behind the differences. Recently I did this through a statistical analysis of annual county unemployment rates in 2014, 2015 and 2016.

Many think a big reason explaining jobless rates across counties is workforce education. With the nature of work changing as a result of machines and technology replacing humans in many tasks, industries increasingly hire workers for their cognitive skills in decision-making, creativity and management. Often these skills require college degrees.

I found a strong statistical association between a county’s educational attainment – measured by the percentage of adults with a bachelor’s degree – and the county’s jobless rate. Interestingly, however, the strength of the relationship weakened between 2014 and 2016. The likely reason was that the improving North Carolina economy between those years caused employers to broaden their hiring of workers as the labor market tightened.

It is expected that counties adding population at faster rates also will have lower unemployment rates. This too was confirmed in my analysis.

The economic structure of counties also should impact their job markets. My research showed North Carolina counties with a greater presence of manufacturing were associated with lower unemployment rates in 2014, 2015 and 2016. With so many jobs lost in manufacturing in recent decades, this finding may appear to be counterintuitive. But after taking a battering during the Great Recession, manufacturing has staged a comeback. Whether this will continue is another question.

Perhaps the most interesting – and possibly controversial – of my findings had to do with worker characteristics. Employers not only preferred workers who were trained in needed skills, but they also wanted workers who would not increase their costs through absenteeism and higher health care expenditures.

I tested two available countywide measures of potential adverse worker characteristics – the average obesity level in the county and the percentage of county residents in alcohol- and drug-treatment centers – for their relationship to the county jobless rate. Higher readings on both were associated with higher county unemployment rates, although the impact from the alcohol/drug treatment measure weakened as the economy improved.

A valid question is whether the causality runs from the obesity and treatment factors to unemployment or the reverse. It can be argued the lack of jobs in a county motivates some despondency among residences that could lead to counterproductive behaviors.

Still, whichever way the cause and effect run, reducing obesity and alcohol/drug overuse should be considered an economic development objective in addition to a health objective.

Unfortunately, North Carolina faces headwinds in narrowing the gap in jobless rates between counties. Increasingly, individuals with college degrees are being attracted to the big urban counties with high-paying jobs and a variety of entertainment and amenity options. Also, a third of North Carolina’s counties are forecast to lose population in coming decades as both workers and retirees continue to concentrate in metropolitan areas.

But while jobs requiring college training are projected to be the fastest growing, the state will continue to need technically trained workers in both the manufacturing and service sectors. Manufacturing facilities needing large sites are often attracted to rural and low-density counties where land prices are lower.

The agriculture and agribusiness sectors in the state are poised to help meet growing food consumption in developing countries as long as environmental issues can be solved. Also, small towns and rural regions in North Carolina make great destinations for out-of-state households – including retirees – moving to the state. Each of these developments could narrow the unemployment gap.

Then again, some futurists see technologies like virtualization, artificial intelligence and 3D manufacturing ultimately creating a landscape of small villages and towns knitted together by high-speed driverless transportation. If true, the future could be a new version of the past.

Michael Walden is a Reynolds Distinguished Professor at North Carolina State University. His newest book, “North Carolina Beyond the Connected Age: The Tar Heel State in 2050” will be published by The University of North Carolina Press in August.