by John Hood
Raleigh, NC – For inveterate optimists, the past several months have been excruciating. A global pandemic has produced great suffering and death. A protest movement that began with righteous anger about the death of George Floyd has devolved in all too many locations into vandalism, looting, and violence. Reeling from these blows, economies sank into recession as businesses bled money, shed jobs, and, in some cases, shut down for good. Families struggled. Social ties frayed. Partisan divides widened.
To be an inveterate optimist, however, is to reject despair as unhelpful and, in the end, unrealistic. You champion context. You look for unforeseen opportunities. You counsel patience. And you spotlight outcomes that aren’t as bad as worse-case scenarios had predicted.
Consider the latest economic and fiscal trends here in North Carolina. After a combination of consumer behavior and government mandates shoved the state into recession, tens of thousands of North Carolinians lost their jobs in March, followed by hundreds of thousands in April.
Something comparable happened across our region, as well. But during the month of May, most labor markets in the Southeast rebounded more strongly than North Carolina’s did. Indeed, our state’s headline unemployment rate barely changed from April (12.9%) to May (12.8%).
In June, though, North Carolina began to catch up. Employers added back some 173,000 jobs last month — one of the largest monthly gains in employment in state history. Sectors with notably large increases included accommodation and food service (56,000), retail trade (18,000), entertainment and recreation (13,000), health care (11,000), and local government (26,000, including employees of summer camps and other local offerings).
Does Gov. Roy Cooper’s slower approach to phased reopening explain these events? Surely to some extent. In many cases, jobs that other state economies recovered in May, North Carolina’s recovered in June.
But that’s not the whole story. Individuals are also making their own decisions, quite apart from public officials are doing. In a study just posted by the National Bureau of Economic Research, two University of Notre Dame economists found that the relative importance of the two factors — government regulation and private choice — differ by type and sector. Using GPS tracking, they discovered that stay-at-home orders had a surprisingly small effect on overall mobility, for example, while restrictions on restaurants and retail matter a great deal.
To be sure, one good monthly jobs report does not a recovery make. North Carolina has still lost a net 377,000 jobs since the beginning of the crisis. And while our headline jobless rate for June (7.6%) now compares more favorably with our regional peers, some of the decline in measured unemployment occurred not because jobless North Carolinians found jobs but because they stopped looking. Our labor-force participation rate was 57.4% in June, compared to 61.6% in February. Among the 12 Southeastern states, only Kentucky has experienced a worse decline.
Still, as more North Carolinians manage to get and stay employed, our immediate economic future becomes less gloomy. The same could be said for the fiscal outlook of state and local government.
Another piece of relative good news, to my mind, was that state government’s General Fund revenue for the first 11 months of the 2019-20 fiscal year came in $973 million below what was originally projected. Given the economic devastation of March, April, and May, I had expected a larger revenue hit. If the positive economic momentum of June can be sustained into the fall, state and local budget deficits will become more manageable.
The headwinds are daunting, admittedly. People continue to be worried, understandably, about daily reports of COVID-19 cases and deaths. And Cooper’s decision to limit access to public schools, and subsequent decisions by many districts to deliver only online education this semester, will put a substantial strain on parents — potentially forcing some to cut back hours or exit their jobs entirely to care for their children.
North Carolinians will need all their resilience and inventiveness to get through this. As an inveterate optimist, I wouldn’t bet against them.