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North Carolina: Where Is the Job Growth? WELLS FARGO SECURITIES, LLC May 26, 2011 ECONOMICS GROUP role in the state's economy, actual economic growth will likely be somewhat stronger than the index suggests. The downward In terms of the labor market for North Carolina, the unemployment rate has begun to fall; trend in the however, the slow pace of decline is a direct result of individuals returning to the labor force as unemployment rate opposed to slower job growth. The downward trend in the unemployment rate is a good sign that is a good sign that there is gradual improvement in the job market. Figure 2 above reflects the pattern of there is gradual employment during recent recoveries. As can be clearly seen, there is a long way to go before the improvement in the job market within North Carolina returns to pre- recessionary employment levels. The pickup in job market. job growth in recent months signals a faster pace of improvement than was occurring toward the end of last year. The sluggish pace of job growth is tied, in large part, to the structural shift in the state's economy that we presented in our last report. As we discuss in the next section, there are some industries and regions that are improving at a much faster pace than others. Key Industries Lead Job Growth Employment growth in the Tar Heel State has been slow and uneven across industry sectors. The greatest job growth has been concentrated in the professional, technical, and business services sectors along with the leisure and hospitality, finance, trade and transportation, and other services. North Carolina's initial unemployment claims, a leading indicator of future job growth, continues to decline and is nearing its pre - recessionary levels. This should be good news for the job growth picture over the next few quarters. One clear trend There are, however, a handful of industries that continue to pare back hiring. One clear trend that that has emerged has emerged after the recession is the continual loss of manufacturing jobs. As firms adopt greater after the recession levels of technology, less labor is needed to produce greater output. This is the basis for the is the continual loss structural unemployment we explored in our December 2010 report .2 The manufacturing jobs of manufacturing lost during the recession are not likely to return anytime soon. Thus, regions and individuals that jobs. previously depended on this industry for income will continue to struggle without further enhancement of their skill sets. The hard reality is that even in the areas where manufacturing employment recovers, the jobs that return will have very different job skill requirements than in the past. The accelerated pace of technology adoption in these facilities has led to increased demand for a different type of factory worker. The new post- recession factory worker is one with technical skills and in some cases, an engineering background to effectively operate these new re- tooled factories. Figure 3 Figure 4 North Carolina Employment by Industry Year - over -Year Percent Change, 3 -Month Moving Average Government - Goods Producing Educ. & Health Svcs. Information Other Services Trade, Trans. & Utilities Financial Activities Leisure and Hospitality Prof. & Bus. Svcs. Total Nonfarm April 2011 -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% North Carolina Relative Employment January 2000 = 100 124 120 116 112 108 104 100 96 92 —North Carolina: Apr @ 100.3 — Raleigh: Apr @ 117.1 — Charlotte: Apr @ 106.8 Asheville: Apr @ 104.1 — Greensboro: Apr @ 93.7 00 01 02 03 04 05 06 07 08 09 10 11 124 120 116 112 108 104 100 Source: U.S. Department of Labor and Wells Fargo Securities, LLC 2 Silvia, J., and Brown, M.A. (December 2oio). North Carolina Economic Outlook: Growth. Wells Fargo Securities, LLC 2 Attachment number 1 1 -1 Page 609