John Hood John Locke Foundation
June 30, 2014
Gov. Pat McCrory and the GOP-led state legislature are at odds over the budget, Medicaid reform, Common Core, and other issues. Conservatives are disappointed with the McCrory administration’s continued defense of corporate incentives. Senators disagree with the House budget’s reliance on optimistic projections for lottery revenues and Medicaid growth. Representatives disagree with the Senate budget’s reliance on optimistic assumptions about the ability to shift some Medicaid recipients to the Obamacare exchange.
And yet, despite these internal tensions, Republican leaders aren’t in a panic. McCrory’s approval rating is ticking upward. GOP prospects for November are improving. Is this a case of irrational exuberance?
No. The single most important trend affecting any election cycle is the performance of the economy — and the latest news for North Carolina’s economy has been good.
During the height of the legislative session last year, with liberal media outlets and Moral Monday protesters predicting gloom and doom, the state legislature adopted several key conservative reforms. Gov. McCrory signed them. They included an end to extended benefits for unemployment insurance, a sweeping regulatory-reform bill, a lean state budget, and a major reduction and rewrite of state taxes, including the adoption of a pro-growth Flat Tax.
Critics didn’t just argue that these measures would fail to improve North Carolina’s economy. They forecast that the legislature’s actions would make the economy worse by reducing consumer demand, starving crucial public services, and giving the state a bad national reputation.
Well, let’s check the numbers. Here are the trends since the passage of UI reform, regulatory reform, tax reform, and the state budget in mid-2013:
• Job creation in North Carolina has exceeded the national average, according to the monthly payroll survey conducted by the Bureau of Labor Statistics. If we had merely matched the national average from June 2013 to May 2014, North Carolina would have created about 13,000 fewer jobs than actually occurred.
• North Carolina has also done better than the nation as a whole in unemployment declines and employment gains, according to the separate BLS household survey. There were 85,000 more North Carolinians were working in May 2014 than in June 2013, while 87,000 fewer North Carolinians were unemployed. If the state had merely matched the national average since mid-2013, there would have been 33,000 fewer employed North Carolinians and 23,000 more jobless North Carolinians looking for work in May.
• North Carolina’s better-than-average performance is not the result of people dropping out of the labor force, as some partisan critics and lazy journalists allege. In fact, North Carolina experienced a smaller decline in its labor force from June 2013 to May 2014 (just 0.04 percent) than the nation as a whole did (0.1 percent).
• Here’s another way to look at it. North Carolina’s employment-population ratio — which takes into consideration both people dropping out of the labor force and the need for job creation to keep up with population growth — rose from 56.8 percent in June 2013 to 57.4 percent in May 2014. During the same period, the nation’s employment-population ratio rose by only two-tenths of a percentage point.
• Beyond the labor market, the most-familiar measure of the economy is gross domestic product (GDP). The federal government produces the national measure on a quarterly basis but releases only annual estimates for states. According to the just-released figures for 2013, North Carolina’s economy grew by 4.2 percent, faster than the national (3.5 percent) and regional (3.2 percent) averages. Adjusting for inflation and population growth, North Carolina’s real per-capita GDP grew by 1.3 percent in 2013, again faster than the national and regional averages.
The nation’s recovery from the Great Recession has been slow and weak by historical standards. Rightly or wrongly, voters mostly blame Congress and President Obama for that. Within North Carolina, however, there is a growing sense of economic momentum over the past year — an impression based on real, measurable trends.
However messy politics in Raleigh may look at the moment, these trends don’t portend electoral calamity for the party in power. And Republicans know it.
Hood is president of the John Locke Foundation. For more information, visit www.johnlocke.org.