We’re now about halfway through 2014. Soon it will be hot and humid, and memories of the cold winter will fade. My wife and I will spend a lot of time keeping our gardens alive and productive and the air-conditioning bill low.
This summer will also mark an economic anniversary. It will be five years since the bottom of the economic recession. In the summer of 2009, the collective production of the economy hit the low point of the economic downturn. Since then, this measure has moved higher.
Does this mean the economy is better today than it was five years ago, and, if so, how much better? Let’s take a look at some of the key economic measures to see if we can come to a conclusion, particularly for North Carolina.
Production: The value of everything produced in the economy – including both goods and services – is called “gross domestic product” or GDP for short. This measure is considered the broadest indicator of any economy. For example, it is commonly used to rank world economies by size. Also, if this measure drops for at least half a year, this is often enough to declare a that recession is occurring.
Unfortunately, GDP numbers come out with a time lag, so the most recent annual numbers for states are for 2012. Between 2009 and 2012, North Carolina’s GDP increased 5.6 percent, slightly lower than the national 6.7 percent rate. Yet for 2012, our state’s growth rate of 2.7 percent exceeded the national increase of 2.5 percent. So our economic engine may have taken a little longer to get going.
However, our recent improvement in GDP is well below our long-run average. For example, in the 20-year period from 1987 to 2007, North Carolina’s GDP increased at an average yearly rate of 4.8 percent. So our collective production is increasing, but slowly.
Jobs: Of course, for most people, jobs are the No.1 economic statistic. There’s no doubt the recession hit jobs hard – very hard. The nation lost 8.7 million jobs during the recession, and North Carolina saw 335,000 jobs disappear. On a percentage basis, the job loss in our state was greater: 8 percent compared to 6 percent for the country.
The good news is that jobs have come back. Nationally, as of April (latest available data as I write this column), we are only 100,000 jobs short of the pre-recession high. In North Carolina we’re 60,000 jobs short. I expect both of these gaps to be made up this year.
Still, as with GDP, job growth has been slow by historic standards. In the last four years, annual job growth has averaged 1.6 percent in North Carolina, slightly better than the national 1.5 percent rate. However, this is well below North Carolina’s usual pace. For example, in the decade of the 1990s (1990-2000), jobs increased an average of 2.4 percent each year. The conclusion once again is slow progress.
Unemployment Rate: The so-called “headline” unemployment rate in North Carolina was 4.6 percent prior to the recession, peaked at 11.3 percent and had declined over the last four years to April’s rate of 6.2 percent. Yet it is well known this rate has an issue. Individuals who want a job but have recently not “actively” looked for work are not counted as unemployed.
Fortunately, there is an alternative jobless rate which does include these individuals as unemployed. The latest reading, which is an average for the latter part of 2013 and first part of 2014, stands at 8.6 percent, close to the comparable national rate of 8.5 percent. This measure topped out at 11.9 percent, a full percentage point higher than the national peak. So the improvement in North Carolina has been somewhat faster. Both the North Carolina and national rates were near 5.5 percent prior to the recession.
Pay: The news on what we earn is not good. From the bottom of the recession in 2009 to today, average hourly earnings for private jobs in North Carolina rose 6.5 percent. This may sound OK, but, over the same time period, inflation (the increase in prices of goods and services we buy) rose 11.2 percent. So after subtracting inflation, private sector workers in North Carolina are earning 4.7 percent less than they did five years ago. If it’s any consolation, workers in the nation have also fallen behind inflation in their pay.
A key reason for this outcome is the slow pace of recovery in the job market. Whenever the supply of individuals looking for work exceeds job openings, workers will be in a weak position for higher pay.
Regional Differences: While most regions of the state have seen economic improvement, they are certainly not on the “same page,” economically speaking. The March unemployment rate was near 5 percent in Asheville and the Triangle, and not much higher in Charlotte, Burlington and Winston-Salem. But the rate was still more than 9 percent in Rocky Mount, Henderson, Lumberton and Roanoke Rapids.
So the answer to “How are we doing?” is “Better, but … ” Can we change the answer to “Much better”? You decide.
— 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.