NORTH CAROLINA’S ANEMIC RECOVERY

CAROLINA JOURNAL

John Hood’s Daily Journal
Carolina, Look North
By John Hood , John Locke Foundation

Monday 14th, 2011

RALEIGH – The Old North State’s economy is in a shambles. The New North State’s economy isn’t.

North Carolina, the Old North State, has posted the nation’s weakest recovery from the 2007-08 recession, according to the Bloomberg Economic Evaluation of the States (BEES). The index includes measurements of unemployment, income growth, home prices, mortgage foreclosures, government finances, and the stock performance of public companies based in the state.

From the fourth quarter of 2008 to the third quarter of 2011, North Carolina ranked dead last in performance on the BEES index. North Dakota ranked first – in fact, it was the only state that posted significant economic growth during the period.

One reason for North Dakota’s success is, of course, its energy industry. Rising worldwide demand for energy has pushed up prices for oil and natural gas. As far as we known, North Carolina does not hold any significant oil reserves, onshore or offshore. But the situation is entirely different when it comes to natural gas. There is no good reason for North Carolina not to allow additional private exploration of natural gas, which will create jobs, boost incomes, and reduce long-term energy costs.

The energy sector isn’t the only bright spot in North Dakota’s economic climate, however. Consider these facts:

• North Dakota’s unemployment rate was just 3.5 percent in September, vs. 10.5 percent in North Carolina. Jobs are relatively abundant in North Dakota across a range of occupations, not just in energy. On the broader U-6 measure that includes discouraged workers no longer looking for work and those involuntarily working part-time, North Dakota’s “underemployment” rate is 7.2 percent, compared to North Carolina’s 17.5 percent.

• While North Carolina ranks a dismal 40th on the Tax Foundation’s State Business Climate Index, North Dakota ranks 20th. If you want to create or invest in a business in North Dakota will charge you a top income-tax rate of 4.89 percent on your potential earnings, while North Carolina will charge you a top income tax rate of 7.75 percent.

• North Dakota’s workforce is better educated than North Carolina’s. North Dakota students have long exceeded the national average in reading, math, and science proficiency, while North Carolina has better-than-average performance only in math.

Admittedly, North Dakota is a much less populated state – about 675,000 residents, vs. North Carolina’s 9.5 million. Our economic history, demographics, industry mix, climate, and natural resources are dissimilar. But not all these factors work against North Carolina. In which place would you rather spend the winter? In which place would your business be closer to large urban and suburban markets?

The truth is that whatever economic cards the two states have been dealt, North Dakota has played its hand more skillfully. North Carolina is dead last in economic recovery. No more happy talk or boosterism. It’s time to get serious about changing the facts on the ground – and that means reforming and restructuring North Carolina governments so that they deliver better bang for the taxpayer buck.

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