Carolina Journal | Daily Journal

John Hood Daily Journal
August 16, 2013

RALEIGH — Will North Carolina’s unemployment rate, currently 8.8 percent, drop to 6.8 percent by the end of 2014?

That’s one way to interpret the current trend of the Index of North Carolina Leading Economic Indicators. Produced every month by N.C. State University economist Michael Walden, the index combines five indicators that tend to correlate with economic growth over time: initial unemployment-insurance claims, building permits, average weekly hours of manufacturing employment, average weekly earnings of manufacturing employees, and a set of national data provided by the Economic Cycle Research Institute (ECRI).

Through June, the index is up 2.7 percent from the same period in 2012. WhenTriangle Business Journal asked Walden to comment on the implications of the state index, he said that since North Carolina added about 90,000 payroll jobs last year and the 2013 index is predicting somewhat-stronger growth this year, that suggests a job gain of about 100,000 positions in 2013 and 2014 might be in the offing. If that happened, the unemployment rate would likely fall below 7 percent by the end of the trend.

But when I called Walden for additional analysis of the numbers, he was a bit more cautious. While leading indicators historically track with employment growth, the correlation isn’t anywhere close to perfect. So far in 2013, North Carolina has actually experienced much lower job growth than during the same period in 2012, despite a similar track in the Index of North Carolina Leading Economic Indicators. It would take a sudden spurt of job creation from now until December to get to 100,000 new jobs for 2013. I speculated that a lower estimate this year, closer to the 50,000 job gain of 2011 than to the 90,000 job gain of 2012, seemed more likely. Walden agreed.

This measurement, position counts from the Bureau of Labor Statistics’ monthly payroll survey of establishments, is only one of many potential signals of economic growth. BLS also conducts a monthly household survey. It is used to compute the “standard” U-3 unemployment rate every month for North Carolina and other states, as well as a broader set of labor-market statistics every quarter. Another agency, the Bureau of Economic Analysis, uses surveys and other data to compute quarterly and annual changes in personal income and gross domestic product.

Using these statistics, here’s what we can say about North Carolina’ recent economic performance:

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