Carolina Comeback is very real

Over the next 12 months, expect to hear a great deal about the “Carolina Comeback.” It will be the reelection theme for Gov. Pat McCrory and other Republicans. And it will be the subject of withering assault by McCrory’s likely Democratic opponent, Roy Cooper, aided by a host of liberal activists and media outlets.

The latter group has a big problem, however: North Carolina has outperformed most states on most measures of economic growth since the passage of McCrory’s first budget, tax cuts, regulatory reforms, and other conservative policies in 2013. These measures come from the U.S. Bureau of Labor Statistics and the U.S. Bureau of Economic Analysis. They are not Republican concoctions. They are products of the Obama administration. And they are highly inconvenient for North Carolina Democrats and liberals.

Look at job creation, for example. Since mid-2013, North Carolina employers have added some 234,000 net new jobs. That’s a growth rate of 5.8 percent, higher than the national (4.9 percent) and regional (5.2 percent) averages.

Now look at income growth. Since mid-2013, per-capita income in North Carolina has grown by an annual average rate of 3.6 percent, again higher than the national and regional averages. On a separate measure, median household income, North Carolina grew faster than the national average in 2014 but slower in 2013.

On the broadest economic measure, gross domestic product, North Carolina has also posted impressive results. From the second quarter of 2013 to the second quarter of 2015 (the latest available), our state posted an annual inflation-adjusted growth rate of 3.2 percent. That’s the 12th-highest GDP growth in the country, and in the Southeast is exceeded only by Florida’s 3.5 percent.

Confronted with these facts, Carolina Comeback deniers clutch desperately at the unemployment rate to salvage their rhetorical case. But it won’t work. State unemployment rates derive from smaller, less reliable surveys than those producing the other measures. The numerical noise involved is so large than, according to the very officials who produce the unemployment rates, North Carolina estimated 5.7 percent rate for November 2015 is statistically indistinguishable from the nation’s 5 percent.

Experts caution that if state comparisons of unemployment rates are desired, a better approach would be to look at broader measures that include discouraged, marginally attached, and part-time workers, and that compare 12 months of data at a time instead of just one.

As of June 2013, this broadest measure of unemployment, called U-6, stood at 15.6 percent in North Carolina. By September 2015, it had dropped by 4.1 points to 11.5 percent. During the same period, the national U-6 rate dropped 3.5 points to 10.8 percent. Again, North Carolina’s trend looks good by comparison.

That is, of course, the relevant question when it comes to assessing the effects of state policies on state economic growth. No governor or legislature can fully offset the effects of poor decisions made at the national level. America as a whole has had a lackluster recovery since the end of the Great Recession. It is simply incoherent for politicians and analysts who label Barack Obama’s economic record as good to attack Pat McCrory’s economic record as bad.

It is also incoherent for liberals who dismissed the significance of the headline unemployment rate back in 2013, when North Carolina’s rate was dropping fast, to be resting their case on the rate now that it has been flat-lining in 2015. Even a cursory look at the data reveals that previously discouraged North Carolinians have been returning to the labor market at far higher rates than the national average during the past few months. Indeed, North Carolina’s labor force participation rate is now 61.1 percent. Among the 12 Southeastern states, only Virginia’s participation rate is higher.

Liberals can still argue that our economy would have outperformed the rest of the region and country anyway, without the Republican turn to the right in Raleigh. Causality is always difficult to prove in such cases. But is there a Carolina Comeback? The factual answer is clearly yes.

John Locke Foundation chairman John Hood is the author of Catalyst: Jim Martin and the Rise of North Carolina Republicans.
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