Putting N.C. growth in context

By John Hood | Apr 23, 2014

RALEIGH — Where are America’s economic hotspots?

If you answer that question based solely on what politicians or pundits say, you might well get it wrong. You might think that Sunbelt states consistently outperform Frostbelt states, or that California’s economy is a basket case. And if your media diet is limited enough, you might think that North Carolina’s recent economic performance has been lackluster or even poor.

None of these propositions is supported by the facts.

There are many different ways to measure economic growth. Each has its pros and cons. Some years ago, researchers at the Federal Reserve Bank of Philadelphia came up with a useful way to communicate the available data. They constructed a monthly “Coincident Index” of four measures: the unemployment rate, the number of jobs, average wages and salaries, and the hours worked in manufacturing (which is a proxy for overall hours of employment). The Philly Fed’s index was then adjusted for trends in total state output. Over time, then, changes in each state’s Coincident Index track closely with changes in the state’s gross domestic product (GDP).

The result is a useful indicator of economic activity published monthly, just after the statistics come out from the federal government. So which states are experiencing the strongest economic performance? Let’s look first at the year-to-year changes in the index.

From March 2013 to March 2014, the U.S. as a whole posted index growth of about 3 percent. Faster growth rates were found in 21 states, including North Carolina (3.6 percent). The top 10 were North Dakota (6.4 percent), Oregon (5.7 percent), South Carolina (4.9 percent), Maine (4.8 percent), Nevada (4.7 percent), Massachusetts (4.5 percent), Colorado (4.3 percent), Texas (4.2 percent), Indiana (4.2 percent), and Rhode Island (3.9 percent).

A fair objection would be that a single 12-month period isn’t enough of an answer to the question. Some states may have outperformed the nation for years while others are only now making up lost ground from the Great Recession. So I also examined the index trends over three years (since March 2011) and over five years (since March 2009). Expanding the scope of analysis does yield different conclusions.

For example, over the five-year span, Maine, Nevada, Colorado, and Rhode Island drop out of the top 10, to be replaced by Utah, Ohio, Michigan, and California. It’s certainly true, as partisans of the Lone Star State point, that Texas has far surpassed California in job growth and most other economic measures in recent times. But California still performs better than the average state, given its attractive location, physical and human assets, and role in international trade.

Also notice that the economies of Indiana, Ohio, and Michigan are doing relatively well. Plenty of economic potential remains in the country’s industrial heartland, as long as adverse state policies don’t get in the way (see “Illinois, state of.”)

As for North Carolina, our index growth was far worse than the national average from 2009 to 2011. It has exceeded the national average since 2011. Some critics question the relevance of standard measures to describe North Carolina’s economy given a large, unexpected drop in labor-force participation that began in early 2013. But they overstate their case.

The U.S. Bureau of Labor Statistics computes a measure of labor utilization that includes people who have dropped out of the labor force. It’s called the U-5 unemployment rate. North Carolina’s U-5 rate averaged 9.3 percent during 2013, significantly higher than the familiar U-3 unemployment rate, which averaged 7. 9 percent. But that’s true in every state. From 2011 to 2013, North Carolina’s U-5 rate dropped 2.5 percentage points — one of the largest declines in the country. In other words, even if you account for people dropping out of the labor force, North Carolina’s labor market has improved faster than those of most other states.

Why are some states doing better than others? That’s a fascinating debate for another day. The place to start, however, is with a clear understanding of which states are, in fact, doing better.

Comments (1)
Posted by: Charles Zimmerman | Apr 24, 2014 09:45

                 Looking over one's shoulder at someone else's work to find an answer can be unproductive, at best.

                  States that are failing to equally protect "All persons" from oppression while not providing for the "General Wellfare" of "All persons", are not good examples that need to be emulated.

                   Recent N.C. regulations establishing flat taxes, restricting voting laws, restricting woman's right of self-determination, etc, etc, are not anything to be proud of. Flat taxes whereby those alreddy well-off pay less than their share of the legislative bill for OUR state, will result in great oppression of those not alreddy well-off. Bribery of tax incentives will bring new business into OUR state, until another state offers more. A never ending spiral resulting in workers paying to go to work as well as the taxpayer subsidizing the job. An ethical government does not engage in bribery. Women's right of self-determination was guaranteed by the protection of OUR Bill of Rights and subsequent Amendments. 7Th Amendment adoption of "common law" established that abortion was any woman's right up to "quickening". 14Th Amendment extended this protection until birth.("All persons born....") Refusing to expand Medicare/caid even though paid for by US resulted in many thousands not being covered by an expansion they paid for. This is resulting in many leaving N.C. and many others being enticed not to come here. Restricting the availability of We the people to represent themselves by vote, will eventually backfire!

 

              C.Z. 



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