In the most recent quarter tracked by the U.S. Bureau of Labor Statistics, North Carolina’s private sector lost a staggering 414,000 jobs. Are we on the brink of an economic cataclysm? Should I buy gold and run?
No, there’s no need to panic. Even though that’s a slight increase from the previous quarter, 414,000 jobs lost doesn’t mean 414,000 people are suddenly out of work. In the same quarter, North Carolina businesses Added 496,000 positions, which means a net increase of about 82,000.
Most government reports and media coverage of their releases focus on net changes. That’s understandable. Net changes convey important information about the past, as well as data that has a bearing on planning for the future. For example, a large increase in the percentage of North Carolinians who are unemployed and looking for work could suggest an economic downturn is underway.
But net change doesn’t include the volume of change in the economy. Every year, quarter, and even month, many jobs are created and lost. Many people enter and leave the labor market. Many businesses start, expand, shrink, or disappear.
The BLS’ Business Employment Dynamics series fills these gaps. The data has some time lag — the unemployment numbers cited above are the most recent, for the third quarter of 2023 — but they’re essential to understanding how the modern economy works.
Another example: In the same quarter, 12,568 businesses statewide reopened and created at least one job, while 14,070 businesses closed and lost at least one job. A bad sign? Not necessarily.
Entrepreneurship is the process of testing ideas. Some succeed and create long-lived businesses that create great value for consumers, employees, and investors. But most new ventures don’t last long. That’s unfortunate for the people who founded or profited from them. But for the economy as a whole, a business’s failure means a hypothesis has been tested.
Contrary to expectations, perhaps locating a sandwich shop at a busy intersection was not the best use of that land. Or perhaps the innovative approaches you came up with for mortgages, discount retailing, or chemical engineering turn out to be unnecessary, unpopular, or impossible to manage effectively. This is information that others can take advantage of, and now your fellow innovators who know what’s going on can take advantage of it. do not have The answer is yes. It’s an iterative process. Over time, competitive markets will redirect our limited time and resources to more productive uses. Our standards of living will improve.
North Carolina economist Thomas Sowell once offered a succinct explanation of how this works: “To those who run a business, profits are obviously desirable and losses are deplorable,” he wrote in his textbook. Basic Economics“But economics is not the science of management. From the perspective of the economy as a whole, and from the perspective of the allocation of scarce resources with alternative uses, which is economics’ central concern, profits and losses play an equally important role in maintaining and improving the standard of living of the population as a whole.”
Now, to say that this process is in the public interest does not deny the dire consequences of job loss. People whose businesses fail or whose skills become obsolete deserve sympathy and assistance. Community colleges and other public and private institutions have a key role to play in helping job-leavers find new ways to support themselves and their families.
Generally speaking, the key statistics indicate little dramatic change in North Carolina’s economy. Over the trailing 12 months, North Carolina’s gross domestic product expanded by 3.2% in real terms, a growth rate indistinguishable from the national and regional averages. The headline unemployment rate in April (3.5%) was little changed from 3.3% in April 2023. Over the same period, North Carolina employers added net new jobs at an average rate of 1.2%, which is solid but unspectacular (job creation was higher in Georgia, South Carolina, and Virginia, but lower in Tennessee).
Keep in mind that the net gain or loss can be a significant amount. Many people have lost jobs and gained jobs. Our economy is constantly fluctuating.
John Hood is a trustee of the John Locke Foundation. His latest book is Mountain People and Forest people, cAn epic fantasy about early American history.