It’s nothing but net


RALEIGH — According to the U.S. Bureau of Labor Statistics, North Carolina added some 11,000 jobs in April and nearly 107,000 jobs over the 12-month period. That’s a annual growth rate in payroll employment of 2.6 percent, which exceeds the national and Southeastern averages (each 2.2 percent).

It’s important to keep in mind, however, that these commonly reported data refer to the net change in employment after adjusting for seasonal variation. The number of jobs created in North Carolina in April wasn’t actually 11,000. Employers added many, many more new employees than that during the month. But other employees lost their jobs, moved away, or retired.

Why is the distinction important? Because if all we think about are the net figures, we will vastly underestimate the amount of change in the labor market. It is constantly churning. New businesses pop up. Old businesses expand, contract, or disappear. Employment opportunities follow suit.

The federal government counts this kind of thing, too. For example, BLS produces the Job Openings and Labor Turnover Survey (JOLTS). For the most recent month, in March, it found that 5.1 million Americans obtained new jobs while 5 million Americans left their jobs for various reasons. Over the past year, total hires were 59.7 million and total job separations 56.7 million. The difference, 3 million, represents the net change in employment.

Another BLS tool is called the Quarterly Census of Employment and Wages. It is an actual count of all the workplaces and employees in each state. The core reason the federal government does this is to assess unemployment-insurance taxes, so you can be sure it’s a pretty thorough job. But the statistics also come in handy for adjusting previous survey estimates and for producing all sort of other labor-market information.

The count takes a while to complete and compile, so the most recent statistics available by state are for the third quarter of 2014. By that count, North Carolina employers as a whole added about 207,000 new jobs in July, August, and September of last year while eliminating about 194,000 previously existing jobs. If all you did was look at the net change, most of the real action in the labor market would escape your notice.

While the performance of North Carolina’s labor market is better than average, there are some states with faster rates of job growth. Here’s something else I noticed when I looked carefully at the data: those top performers don’t all get there the same way.

As of last fall, for instance, both Georgia and Texas were adding net new jobs at a faster pace than North Carolina. In Georgia, there were more business startups and expansions, and a higher churn rate in the labor market. North Carolina had about 253,000 private business establishments, up 2 percent from the same time in the previous year. That rate of growth exceeded the Southeastern average of 1.5 percent. But it was significantly lower than that of the regional leader, Georgia, which experienced a 3.4 percent rise in business establishments. You can see the effect in the gross numbers. Georgia exceeded North Carolina in both jobs created and jobs lost. Still, the net effect on Peach State employment was quite positive.

In Texas, however, there were fewer business establishments and new jobs created than in North Carolina during the period in question. But its job-loss rate was much lower, too. Again, the net effect on Texas employment was quite positive.

Governors, state legislators, and other policymakers need not choose any particular model. Let the market for labor and capital sort itself out. But I would note that both Georgia and Texas exceed North Carolina in most measures of economic freedom, including the First in Freedom Index published earlier this year by the John Locke Foundation.

If lower taxes, lighter regulatory burdens, and the effective provision of core public services induce more entrepreneurs to start businesses and create jobs in North Carolina, great. And if these policies help existing businesses survive and prosper, that’s also great. Either way, North Carolinians win.

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