Mixed messages on the state of the economy

by Patrick Gannon, The Insider, March 17, 2015.

One of the toughest things about covering state government is trying to get a handle on the true state of North Carolina's economy at any given time. If anyone ever figures it out, let me know.

Confusing the issue is that we often hear mixed messages – sometimes even from the same side.

That happened recently.

In an email to his supporters after releasing his state budget proposal for 2015-17, Republican Gov. Pat McCrory touted that the unemployment rate since he took office has dropped from nearly 9 percent to 5.5 percent and that the state has created 200,000 new jobs.

"The Carolina Comeback is real," McCrory started his message. At the end was a "Donate" button for his 2016 re-election campaign.

A few days later, in a Senate Finance Committee meeting, legislators heard a presentation from counsel to the Senate Finance Committee, Michael Hannah. It was titled, "The Economic Case for Continued Tax Reform in North Carolina."

The first slide in his presentation – with the headline "Surprising Statistics" – was jarring. According to Hannah, even though publications consistently rank North Carolina among the top states for business climate, job creation hasn't kept up with workforce growth, while wage growth, income growth and poverty in North Carolina all are worse than the U.S. average. Hannah noted that North Carolina's poverty rate in 2013 was 18 percent, up from 16 percent three decades earlier.

Another slide in Hannah's presentation suggests why more tax reform is needed – "pitiful job growth" and increasing poverty, as well as under-performing per capita income growth, despite billions of dollars spent on economic incentives in recent years.

So from one state leader who wants your money, everything's looking up. From another who believes the Republican-led tax reform effort of the past two years must continue, the state still has big problems economically.

Sen. Bob Rucho, a Mecklenburg County Republican and one of the architects of the GOP tax-reform efforts of the past couple of years, explained the disparity this way.

"Is it there yet? Not yet," he said of the economy. "We've taken steps. ...It's not something you can just flick a switch on. It takes time to get there."

McCrory's message to his supporters includes the official unemployment rate. It doesn't include the people who have given up looking for jobs or are underemployed. If you add in those groups, the number was roughly 12.1 percent in 2014, according to a recent column by Mike Walden, a respected economics professor at N.C. State University.

The moral of the story: Always take reports about the economy with a grain of salt, especially if they're coming from politicians, and consider the sources and motives behind the reports. Someone might be trying to sell you a bill of goods.

For me, I'll decide from what I see. Raleigh is clearly burgeoning, with new construction and activity and plenty of traffic. But on a recent drive through rural North Carolina, the opposite was true – few businesses, ramshackle old houses and little activity or traffic.

Perhaps this is the "Two North Carolinas" we keep hearing about here in the capital.