Jobs coming back unevenly

By George Shaw

There has been a resurgence in jobs since the low point last April. However, the recovery in employment has been uneven. The rate of unemployment for the Raleigh area dropped to 4.7% in February. Meanwhile, the unemployment rate for North Carolina declined from 5.7% in February to 5.2% in March. This means that the unemployment rate in Wake County was probably less than 4.5% in March.

Yet, total employment in our area is down 3.4% compared to a year ago, about 24,600 workers.  Meanwhile, unemployment is still 34,500 as of February, up from 22,000 the previous February. In addition, many left the labor force last year. These were primarily women and minorities who had to focus on child care while many schools educated virtually. If you adjust the data to add back these discouraged workers, a broader measure of unemployment is nearly 59,000.  This is nearly 8%. The table below illustrates how the official and alternative unemployment rates have varied over the last year.

Segments of employment paying above average wages have grown 1% over the last twelve months; those with wages below average have declined nearly 6%.  Leisure and Hospitality is the segment that has the lowest average wages. It still lags employment from last March by 19%.

Yet, our area compares well to a group of a dozen peer metropolitan areas.  The Raleigh area had the top performance for employment in the private sector over the last year.  It also has the third highest growth rate for segments with wages that is above average.  And it has experienced the least decline in segments with pay that is below average.  However, its performance for the lowest paying segment (Leisure and Hospitality) is only average.

Overall Unemployment

The unemployment rate in North Carolina was 3.6% in February and peaked at 12.9% in April.  It was 5.9% in January and slid to 5.7% in February.  Employment grew by a modest 4800 while unemployment decreased by 10.900.  Employment has rebounded 692,000 since April; the figure remains 175,000 lower than before COVID-19 impacted our state.  Unemployment was 287,000 last month vs.183,000 a year ago.

The percentage of the population participating in the labor force was 59.8% in February compared to 61.3% a year before. This means that the labor force is 72,000 smaller in February than it was a year before despite an increasing population.  Adding this figure to the official number for unemployment, the total unemployed in our state is more than 350,000.

The trend for Wake County is similar to those of North Carolina.  February 2020’s unemployment rate for our state was 3.2% and it rose to 11.5% by May.  The rate for this February was 4.7%, down from 5.0% the previous month.

Unemployment in the Raleigh area was 23,600 in February 2020 and spiked at 77,000 in May. It was 34,500 this past February, virtually unchanged since last October.  In addition, approximately 17,000 residents of our county have left the labor force compared to a year ago. This makes the gross figure for unemployment around 40,000 for Wake County, a rate of nearly 6%.

Unemployment by Category

The progress in the overall rate masks a bigger issue.  Which categories of employment are growing and which are not?  The only labor categories with year-over-year growth through March 2021 are Professional and Business Services (one of the highest paying categories) which is up 5.1% and for Trade, Transportation and Utilities which has increased 5.0% (one of the lower paying categories because of the large number of drivers as well as retail sales jobs).

The steepest decline over the last year has been Leisure & Hospitality, the lowest paying category.  The number of jobs for this area is down 19.0% over the last year to March. Other significant decreases year-over-year include Government (-5.5%), Manufacturing (-4.2%) and Education & Health (-4.2%).

The table below divides job categories paying higher and lower average wages. Total non-farm employment has declined by 2.3% in the year since March 2020 compared to a 3.3% reduction in the twelve months from February 2020.  Segments paying above average wages have come completely out of the recession – they have grown 1.4% in the March 2020-1 timeframe. However, segments paying below average wages remain down 4.6% year over year to March. And employment in Leisure and Hospitality is still 19% below a year ago.

How Does Raleigh Compare to Other High Growth Hubs?

Raleigh has been grouped by McKinsey as a high performance hub with a dozen other mid-size metro areas.  Raleigh’s performance in the last month was below average for overall employment but on par for more detailed segments.

Raleigh is among the top performers among the 13 hubs on a year-to-year basis through March.  Although Leisure and Hospitality employment is nearly 20% lower than in March 2020, that is significantly better than the average of a 25% decline for the 13 hubs.

States with Democratic Governors have witnessed a 23% decrease in jobs in Leisure and Hospitality; those with Republican Governors have shown a 13% reduction compared to a year ago.  In general, states with Democratic Governors enacted more stringent measures such as lockdowns.  This impacted more workers in lower income categories who could not work remotely.

What is the Outlook for Recovery in Employment?

The outlook for recovery of the economy is improving rapidly because of additional stimulus checks and other incentives.  In addition, many states continue to loosen their constraints on gatherings.  U.S. Gross Domestic Product had been forecast to grow 3-4% in inflation adjusted terms for 2021 several months ago.  The range of estimates for this year is now 6-8%. This year is likely to have the fastest economic growth since 1984.   And forecasts for the next several years are also encouraging.

All this is increasingly good news for increasing employment as well as decreasing the unemployment rate.  The national rate of unemployment stood at 6.0% in March, significantly higher than the 5.2% for North Carolina and the estimated 4.5% for the Raleigh area.

What would full recovery look like?  Most economists believe a rate of 3.5% to 4.5% would mean full unemployment in the country.  The rate dropped nationally to 3.5% in February 2020, the lowest percentage in fifty years.

The corresponding rate declined to around 3.0% here in the Raleigh area in the months preceding the impact of COVID-19.  This compares to an unemployment rate of 1.8-3.0% in our area from 1993 until the Dot.com bust hit the local economy in 2000.  Therefore, full recovery locally is probably a return to 3.0% unemployment.

Significant increases in hiring both locally and nationally are forecast for the next several quarters of 2021 as the economy continues to reopen.  Weekly stimulus payments are scheduled to end on September 6, 2021.  All this is likely to reduce unemployment significantly while bringing people who left the workforce back into employment.  If the economy gets back to its pre-COVID levels by late 2021 or early 2022, a return to an unemployment rate of 3.0% in the Raleigh area is possible by sometime in 2022.  This is a remarkably rapid return to normal compared to recent recessions.

However, the devil is in the details. Our area has already seen resumed growth in higher earning wage categories such as Professional and Business services.  And this is likely to continue to grow significantly as more technological and other advanced jobs move to this area.

At the other end of the pay spectrum, Leisure and Hospitality will probably never fully recover due to the closure of smaller restaurants and stores.  Although this category has recovered more than 50% of its losses since April 2020, 10% or more of the lowest paying jobs probably will come back.

This means that the number of area residents in poverty or who are working poor will remain large in the future.  The portion eligible for food assistance locally will probably remain 20% or even higher even as our population continues to grow.

What does this mean for our food security?  As will be discussed in next week’s column, the number of clients at our pantries and feeding program remains extremely high.  Although these numbers will decline as the economy opens up more, the figures are likely to remain well able pre-COVID demand.

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