Economic Recovery Still Leaves Many Behind

Sep 26, 2017

Credit NCDOTcommunications / Flickr, Creative Commons, https://flic.kr/p/bbmA6K

By several measures, the North Carolina economy is humming along nicely. But a deeper look at the data shows the benefits of the strong economy are concentrated among fewer people, leaving more winners and losers and an ever widening gap of income inequality.

The latest data from the Census Bureau show a rise in median income and a decline in poverty. But numbers also show a rise in income inequality, and stubbornly high unemployment and poverty rates in certain areas of the state.

Put simply: Compared with the past half decade, North Carolina is doing better almost everywhere. But in some places, it's doing a lot better than in others.

Income and Poverty

Median family income for all households in North Carolina increased to more than $50,000 in 2016, according to the recently released estimates. But the geographical divide is stark. The median income in Wake County, for example, was more than $76,000, according to the Census, while the median income in Robeson County was just over $34,000. In Caldwell County, the 2016 median household income of $36,000 was still 16 percent lower than it was 2008.

Patrick Conway, Professor and Department Chair Department of Economics, University of North Carolina at Chapel Hill
Credit UNC-Chapel Hill

"I always consider it a shame when we have a recovery but the benefits of that recovery are concentrated in one group," said Patrick Conway, UNC-Chapel Hill Economics Department chairman. "This recovery does not seem to lift all the boats, instead leaving low-income people little better off.”

A yawning racial divide still separates incomes as well. White families had a median household income of close to $57,000 while Black and Hispanic families had median incomes of closer to $37,000 in 2016.

Median household incomed by family race.
Credit Census Bureau

Poverty rates matched these trends, with urban areas and Whites showing lower poverty rates while rural counties and minorities had higher rates of poverty.

"We've had two years in which the promise of recovery has become more than a promise. At least for some," said Conway. "I'd be quick to point out though that the recovery is hitting a limited number of people, and that one of the major difficulties we face is that we still have a relatively large portion of the population that is out of the labor force."

Employment

The unemployment rate in North Carolina has been dropping for years, but economists say there are more to the numbers and that the unemployment rate by itself is too blunt a tool to fully gauge an economy.

The seasonally adjusted unemployment rate for North Carolina was 4.1 percent for both July and August. That's the lowest rate since November, 2000, almost 17 years ago. But that drop has coincided with a decline in the labor force participation rate. That means a greater percentage of the overall population has given up looking for work. In looking at a measure of employment to overall population, employment growth has grown more slowly and flattened out in 2017.

Overall, the number of people employed in North Carolina has hovered around 4.7 million since the beginning of this year. But since the labor force has shrunk, the unemployment rate has come down. The employment rate measures the number of those with jobs as a percentage of those actively looking for jobs. If someone isn't looking for work – a stay at home parent, student or retiree, for example – that person is not included in the labor force and not counted as unemployed. Therefore, the unemployment rate can come down, even if total employment isn't increasing.

The percentage of North Carolinians participating in the Labor Force is still below historic levels.
Credit N.C. Department of Commerce

“In 2017, North Carolina’s unemployment rate has fallen to the lowest one recorded in 17 years despite a slowdown in job creation,” said John Quinterno, a principal with South by North Strategies, a Chapel Hill research firm specializing in economic and social policy. “While the low unemployment rate seems promising, the underlying dynamics are much less so, which explains why low rates of unemployment are not occurring alongside improvements in wages, incomes, and living standards.” 

As the overall Labor Force has leveled off, it has allowed the unemployment rate to fall even as overall employment has not increased as fast.
Credit N.C. Department of Commerce

Income Inequality

These factors have led to a higher income inequality in North Carolina. The census calculates inequality through its Gini Index, which ranges from 0 to 1, with 1 being perfect inequality – a situation where one household holds all the income while the others hold none.

While below the national average, inequality in North Carolina has been on the rise.

Income Inequality in North Carolina and the United States.
Credit Census Bureau

Anne York, a professor in the Meredith College School of Business, said that North Carolina's diverse economy played a role in keeping inequality lower than the national average. "Not all states have a very diverse economy," she said. "Our high is not as high as some other states, and our low is not as low as other states."

Anne York, professor of business at Meredith College.
Credit Meredith College

Looking more granularly, Wake County had a relatively low Gini Index score. Wake's low inequality score is notable because it also ranked high in median income. York said state government, an educated workforce and diverse economy all played roles.

"Really the story is education. In places where there is lower education, not as much opportunity, that location is going to have high poverty and a lot of income inequality," York said. "For people without a bachelor's degree, there's just a limit on what jobs are available to them today."

Income Inequality in select North Carolina counties.
Credit Census Bureau