RALEIGH – North Carolina’s unemployment situation has worsened so much since mid-March that data shows there are more people out of work across the state than are on the job in the Raleigh-Cary metro And the job situation is only going to get worse, says NC State economist Dr. Mike Walden as well as other economic experts.
In fact, as the COVID-19 pandemic continues, Walden projects the unemployment rate in coming months will more than double because of the state’s economic mix, including a surge of relatively new businesses drawn to NC or created here during the post-2009 “Great Recession” recovery.
“North Carolina’s labor market will likely do slightly worse than the nation’s during the coronavirus crisis,” Walden tells WRAL TechWire.
“There are a couple of reasons. We have a larger footprint than many states in manufacturing and tourism, and these are two industries that have been hard hit by the virus crisis.
“But also – and this is ironic – our faster growth in recent years has attracted numerous small businesses and start-ups. With many of these businesses not being well-established, they don’t have the resources to fall back on during an economic shutdown. Their only option is to dramatically scale back or close.”
How bad is NC’s situation? A study this week from financial information site WalletHub found the state was the fifth hardest hit in terms of job losses yet the state is ninth largest in population.
As of Wednesday, more than 719,000 jobless claims had been filed with the state Department of Employment Services. Of those, more than 617,000 were linked to the COVID-19 pandemic. How bad are the numbers? In mid-march, the entire unemployment total in the state was 217,600.
To put these numbers in perspective, last month in Raleigh-Cary, some 653,000 people were working in non-farm related jobs, according to US Department of Labor statistics.
April figures won’t be available until sometime in May. Twice since this pandemic began he has estimated what NC’s unemployed statistics would be – and both times his estimates have fallen short as other factors have compounded the impact on the job market. For that reason, he said he won’t be surprised if his estimates for April turn out to be conservative as well.
“The virus crisis has been more devastating than initially expected,” Walden explains.
“Both the national and state jobless rates will reach into the double digits – the only question is if the number will be closer to 10% or to 20%.”
Post-Great Recession jobs erased
Paul Ashworth, chief U.S. economist at Capital Economics, doesn’t see a 20% rate but still expects 10-15%.
“A surge in the unemployment rate to more than 15% would invite comparisons with the Great Depression, but we think those are misplaced because many of the unemployed will return to paid employment when the lockdowns are lifted,” Ashworth said in a note quoted by CNBC. “Nearly all of the increase in unemployment in March was due to temporary layoffs rather than permanent job losses.”
Duke economics professor Dr. John Campbell told WRAL TechWire recently that he doesn’t expect a depression even as business optimism has plunged to levels not seen since the Great Recession of 2009.
“We are experiencing a sharp and rapid decline, and I expect the recovery (or at least the bottoming out) to be faster too. Most depressions and deep recessions take longer to occur and also take longer to recover,” he explained.
“Plus, we know in this case that the ‘end date’ is at most 18 months out (versus a depression, when there is no clear end date, so when you are in the middle of it, it’s hard to see any light at the end of the tunnel).”
But with more than 26 million people out of work across the country, the numbers are reaching Great Depression impact. Net new jobs created since the Great Recression have been erased.
And just how many people aren’t working in North Carolina as well as nationally could worsen now that self-employed, independent contrators and others not eligible for benefits in the past can as of today apply for benefits through the new Pandemic Unemployment Assistance program.
“The second quarter (April, May, and June) will be the worst.,” Walden now predicts.
“NC’s GDP (gross domestic product, a measure of aggregate production) will lose between $25 and $40 billion.”
The state’s GDP for 2019 came in at $587 billion, according to St. Louis Federal Reserve statistics.
Open jobs shrink
As the economy has slowed, it’s no surprise that job openings have shrunk. Before COVID-19 there were more open jobs than unemployed.
Now, jobs site Glassdoor reports available jobs are becoming increasingly scarce.
“As the coronavirus pandemic stretches from weeks into months, it’s reshaping the U.S. job market at lightning speed. Job openings on Glassdoor have dropped to 4.8 million as of April 6, marking the lowest level since February 2017 and a precipitous drop from its mid-March 2020 peak of 6.1 million,” Glassdoor notes.
“The rapid drop represents a shocking 20.5 percent decline in job openings since March 9, meaning that 1 in 5 job openings on Glassdoor have closed since the crisis began.”
What about a recovery?
NC Gov. Roy Cooper on Thursday extended his “stay at home” order to early May but numerous other states are planning to begin phased reopenings of their economies.
Walden says projecting a comeback depends on what happens with COVID-19.
“Assuming the virus is ultimately contained and a treatment is found, the economy should begin to improve by June,” he says. “Then, both the third and fourth quarters will see continued improvement, with quarterly GDP growth in the 4% to 5% range. ”
Walden, however, doesn’t expect a race for a return to a pre-pandemic economy.
“This does not suggest a rapid recovery,” he explains. “The reason is the slow and careful relaxation of restrictions will restrain growth.
“Also – even with federal help – household income will have been battered.”
“So full recovery in the economy is likely at least a year away,” Walden says.