Editor’s note: This is the first of a five-part special report, “Jobs Conundrum,” focusing on the multiple challenges facing North Carolina’s economy: Not enough jobs, too many jobs not filled, an influx of jobs coming through economic development, finding and training talent.
RALEIGH – To say the North Carolina jobs climate is confusing is to really understate what’s going on. Perplexing might be a better description.
Here’s what’s happening:
- New jobs announcements from tech giants Apple and Google plus Fidelity Investments, Red Hat and a host of life science companies are good news for the Triangle economy – and North Carolina overall. But most of those opportunities are years away from being realized. And as good as the jobs may be they won’t come close to replacing jobs wiped out by the 2020 pandemic.
- Making the situation more difficult to understand is the fact that thousands of jobs – from tech to hospitality – remain unfilled across the state.
- And North Carolina’s population continues to surge, according to US Census data. That means the need for more jobs will only intensify.
It’s enough to make one’s mind spin. So WRAL TechWire reached out to a variety of economists and experts in an attempt to explain what in the world is going on.
Brooks Raiford, CEO of the N.C. Technology Association, says numerous factors are contributing to the workforce situation.
“There is a difference between hourly jobs (heavily retail, hospitality, laborers, etc.) and salaried jobs (skilled workers, tech workers, more). There is speculation that enhanced unemployment benefits as well as discomfort among potential workers about COVID exposure is suppressing the candidate pool for hourly jobs,” Raiford says. “For more highly skilled professions, the surge associated with the “re-opening” of the economy may be creating heightened demand in a demographic that frankly wasn’t as hard hit by the pandemic (from a job stability standpoint), so it may be more a function of a boost in demand rather than a reduction in the candidate pool.”
Yet some companies, such as fast-growing software firm Pendo in Raleigh which is looking to add 400 jobs, are finding considerable success in recruiting.
Jobs Conudrum report
“We hired 120 new ‘Pendozers’ in [the first quarter] so we are on track to achieve that goal,” says founder and CEO Todd Olson. “The large quantity of openings—from entry level sales and new grad engineers to VPs in some areas—means we are also getting record numbers of applications. We had over 18,000 applicants last quarter. So we certainly aren’t having trouble drawing applicants, but certain positions are harder to fill than others. We spend more time actively searching for candidates for those roles and of course, we support relocation for the right person.”
Deal flow continues to surge
There’s no doubting that new jobs are coming.
Since the beginning of 2020, companies have promised the creation of nearly 30,000 new jobs in North Carolina, with more than half of those roles expected to be located in Wake, Mecklenburg, or Durham Counties. That’s according to Christopher Chung, CEO of the Economic Development Partnership of North Carolina, or EDPNC.
He also said the pandemic was unlikely to have changed job targets for companies to the point where they would attempt to renegotiate an incentive agreement with the North Carolina Department of Commerce.
Those jobs will come to North Carolina on a variety of timelines, as stipulated in their agreements, said Chung. Some firms scaling rapidly at the outset while others have a more steady growth trajectory expected.
The EDPNC is also aware of 176 potential projects, either expansion projects or relocation projects, for companies considering at least one site in North Carolina, Chung added. Those represent 68,000 potential jobs and $43 billion in potentially announced new investment, though it’s unlikely that North Carolina will be chosen for all of those projects.
Still, if 25 percent of those projects come to North Carolina, said Chung, an achievable though still very impressive result, that’s another 17,000 jobs coming to the state in the next few years.
But who will fill those jobs?
Talent shortage was already a challenge for growing companies prior to the pandemic, said Chung, and it’s likely to remain a challenge, due to how the talent market is currently structured.
“There is still very much nationally a skills gap in these high-demand fields that will take years to address because producing these educational credentials and training,” he added. “That takes years of building up the talent pipeline.”
A jobs deficit
All the economic recruiting won’t – as yet – generate enough jobs to restore North Carolina to pre-pandemic employment levels, however.
The recession caused by the COVID-19 pandemic is unlike any other recent downturn in the economy, explained professor John Quinterno of Duke University. He pointed out that between February and April 2020, the number of payroll jobs in North Carolina fell by 12 percent, or about 575,000 jobs.
Since, North Carolina steadily gained jobs, increasing from April 2020 through April 2021 by 418,000 positions. According to the latest jobs report from the North Carolina Department of Commerce, North Carolina businesses have added 44,472 jobs to the state’s economy between January and March 2021.
Still, the data shows that the state has 157,000 fewer jobs than it did in February 2020.
And the jobs picture really is worse. Accounting for the jobs that otherwise would have been created by normal growth in the working-age population during the same time period, but weren’t, the state faces an estimated deficit of 223,000 payroll jobs.
Job losses weren’t equal across industries, either, Quinterno added. “During both the initial wave of closures and the subsequent recovery, industries that require direct face-to-face interaction with customers have fared much worse than those that don’t.”
Leisure and hospitality jobs, relative to February 2020 levels, remain down 16 percent, and government-sector jobs like public school teachers, firefighters, and office administrators, remain down 5 percent, for instance.
Henry McKoy, director of entrepreneurship at North Carolina Central University, says a “K-shaped” recovery is hampering overall job growth. [A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes. This is in contrast to an even, uniform recovery across sectors, industries, or groups of people, according to Investopedia.]
“The K-shaped recovery in North Carolina is driven by the differential impact that the pandemic has on certain sectors,” he explained. “The job losses in the immediate months of the pandemic was a direct impact from the shutdown of the economy. What we have learned as an economy is certain jobs can be done from home just as effectively as from an office building. As a new normal kicked in, certain industries were able to return to full capacity, or above previous levels, while others are more tethered to the service side of the economy. Hospitality and Leisure are reliant on people being able to travel or gather. There are still some restrictions around those activities. Until there are no restrictions on traveling and gathering, and people feel safe in crowded spaces, certain sectors will remain truncated.”
Opportunities still exist
Those wanting to find work, however, do have opportunities – at least to apply for.
Right now, the state has nearly 190,000 positions are currently listed on LinkedIn as open and available in North Carolina, which includes more than 49,000 open positions in Charlotte, more than 40,400 open positions in the Triangle, and more than 26,000 jobs in the Triad.
So, what’s happening?
Despite still having the biggest job deficit in relative terms, the leisure and hospitality sector has grown rapidly in recent months, said Quinterno. For instance, in March that sector generated nearly one out of every four net jobs in the state, and since the start of 2021, about one out of every five net jobs originated in the leisure and hospitality sector.
Jobs are coming back to the hospitality and leisure sector, but the sector may not reach pre-pandemic levels in 2021, said Mike Walden, an economist at North Carolina State University. Other sectors of the state’s economy have reached pre-pandemic employment levels, or exceeded it, such as in the broad trade, transportation, and utilities sector and the professional and business services sector.
“Expiring benefits, more confidence in the economy, and children back to school in the fall, should lead to an improving hiring environment in hospitality and leisure after summer,” Walden noted. “Still, over the long run, as a percentage of total employment, I would expect a drop in hospitality and leisure [employment] as employers move to techniques and technology that reduce their need for human workers.”
Instead, Walden explained, there will be increased demand on jobs that require different skill sets or different training.
“The tech sector, especially, is an industry that has thrived during the pandemic, and will likely continue to thrive in the post-pandemic economy,” he said. That’s because the sector took full advantage of structuring their workflows and implementing remote-work policies and practices. Now, said Walden, many of those practices are expected to continue to some degree after the pandemic, thereby creating optimism about growth in the tech sector.
One leading indicator of company optimism comes from the job and talent market, and technology firms are hiring in North Carolina, as a recent report from the NC Technology Association that recently reported a 22 percent increase in available technology jobs year-over-year.
Yet many of these open roles remain unfilled.
“The job shortage story always is a complicated one with many fine nuances that vary by industry and geography,” said Quinterno. “During recoveries, claims of job shortages are common, but often, when employers say ‘we can’t find workers,’ they leave unspoken the phrase ‘at the wages I want to pay,’ as those are two different things.”
In some industries, like financial and professional services, there is fewer than one unemployed worker for every job opening, whereas in others, like construction, there are about two unemployed workers for every opening.
One telling aspect of talent markets is the behavior of employers.
“If firms were facing labor shortages, you would expect them to increase the hours of existing employees, but there isn’t much evidence of that happening in a widespread way,” Quinterno explained. “You also would expect firms to start raising wages or offering improved benefits. When you adjust for composition effects, we aren’t seeing that, even in the leisure and hospitality sector.”
8 Million open jobs
The jobs conondrum isn’t a challenge only in North Carolijna but across the country.
Nationally, about 8 million people remain out of the workforce compared to pre-pandemic employment levels. The majority of these workers left the labor force primarily because of health concerns or family issues, such as needing to take care of children at home, said Greg Brown, UNC Kenan Institute Professor of Finance.
It’s not unreasonable for workers to expect higher wages, added Quinterno, especially for roles that do rely on direct person-to-person contact, as the nature of that work has changed due to the pandemic.
“Restaurant workers now have to engage in more tasks like enhanced cleaning, deal with masking requirements, handle unpleasant customers, and cope with capacity restrictions and diminished sales that reduce their tips and overall income,” said Quinterno. “They may have a job, but they may be earning considerably less. Plus, these workers run an elevated risk of contracting a deadly airborne disease by virtue of having to work in enclosed, poor ventilated spaces with unmasked patrons.”
A “new normal” for the post-pandemic economy
It’s helpful to keep perspective, said Dr. Anne York, professor of economics at Meredith College. “This pandemic is causing shocks to our economy unlike our most recent recessions.”
For instance, this recession was sparked by an incredibly rapid shut down, then a relatively quick reopening of businesses. “That typically happens gradually with normal fluctuations of the business cycle,” said York. “Certain sectors were hit in the same way, such as restaurants and hospitality, and now they are all competing against each other for the same pool of labor.”
That puts pressure on the talent market, even as the economy seeks to normalize. On the way there, employment will continue to grow and reach the previous peak, predicted Brown, and part of that growth may be due to increasing rates of vaccination that in turn allows additional sectors of the economy to return.
“We can expect acceleration in labor force participation as child care options return, summer camps re-open and fall school return to typical operations,” he said.
The economy of the future may not look like the economy that pre-dated COVID-19, despite facing similar challenges. Take, for instance, the hospitality and leisure services industry, where workers in the industry faced massive layoffs or furloughs in 2020 at the height of the COVID-19 pandemic.
While some of those jobs may again exist, not all of them will, as consumer behavior may have changed as methods of shopping, of gathering, or how business is conducted may not return to a pre-pandemic normal.
“We are seeing a huge increase in demand for workers with the same skill set that an industry needs,” said York. “But some of their previous employees have moved on to other jobs, some have had to exit the labor market due to caregiving needs, and it is possible some potential workers are trying to stay on unemployment benefits.”
“This fairly sudden large increase in labor demand without an accompanying large increase in labor supply is causing this shortage of workers,” she added.
Where people work is changing, too.
It’s possible that the workplaces of the future will operate differently, and a physical location will be less critical. That could open doors to more workers accessing high-paying jobs in exurban, rural areas, said Walden. “If remote working continues and is used by a significant share of the workforce, rural areas may experience faster growth as households seek less expensive and less hectic areas to live,” he said.
And if that’s the case, another problem arises, Walden added.
Reliable high-speed internet access would need to be accessible to rural communities, a current digital divide that is only being bridged very slowly.