Full employment in Winston-Salem area still four years off, study projects

The Triad's economic recovery is projected to stay on a positive, but plodding, pace over the next three to four years, according to a recent study prepared for the U.S. Conference of Mayors.

However, IHS Global Impact Inc. estimates it will take the Winston-Salem metropolitan statistical area four more years – or the second quarter of 2015 – to reach its pre-recession employment level of 227,577 from the first quarter of 2008.

The MSA consists of Davie, Forsyth, Stokes and Yadkin counties. The employment level was at 214,948 in May 2011.

By comparison, the group said it would take the Greensboro-High Point MSA until the first quarter of 2016, to reach its pre-recession level of 349,917. The employment level for Guilford, Randolph and Rockingham counties was at 321,227 in May 2011.

"The implications of this protracted slowdown are worrisome," the authors said.

"Large numbers of young entrants to the labor force not gaining job skills and work experience necessary for career advancement, millions of workers are suffering the long-term effects of unemployment and atrophied skills, and older workers are delaying retirement after suffering the shock of home-equity losses."

A report issued in June by the Employment Policies Institute, a conservative think tank, found that one out of every three working-age teens in North Carolina is unemployed, many experiencing the same harsh job-market realities as their parents and older siblings. According to the N.C. Employment Security Commission, the jobless rate for working-age teens was 27 percent in 2010.

IHS Global also estimates the Triad economy is unlikely to return to full employment, typically measured at 5 percent by economists, within the next five years.

Full employment is defined as every able-bodied adult wanting a job having a job.

The group projects the jobless rate in the Winston-Salem MSA – at 9.2 percent in April – will be at 8.8 percent at the end of 2011, 8.2 percent at the end of 2012, 7.5 percent at the end of 2013 and 6.7 percent at the end of 2014.

As high as those rates are, they are nearly a percentage point lower than the projections for the Greensboro-High Point MSA – 9.7 percent in 2011, 9 percent in 2012, 8.2 percent in 2013 and 7.7 percent in 2014.

When the recession began in December 2007, the jobless rate was 4.4 percent for the Winston-Salem MSA and 4.7 percent for the Triad.

In recent months, debate has increased among economists about whether a 5 percent jobless rate is a realistic representation of full employment, given the massive loss of manufacturing jobs in the Triad, North Carolina and the country, as well as technological advances and companies' hesitancy to expand and hire.

Most economists surveyed by the Winston-Salem Journal believe full employment now ranges between 6.5 percent and 7.5 percent.

"We believe a large proportion of today's high unemployment is structural in nature, resulting from a huge skill mismatch between the jobs being created and the existing skill sets of jobseekers," said Mark Vitner, a senior economist with Wells Fargo Securities.

Vitner said his "conservative" estimate of full employment is at 7.1 percent.

"Just a casual glance at long-term unemployment or the unemployment rate for teenagers would suggest something momentous has changed," he said.

Allen Joines, the mayor of Winston-Salem, said he is among the group that believes a structural change has been done to the local economy. "I am hopeful the U.S. Conference of Mayors forecast is accurate, and we can get back to the pre-recession numbers," he said.

John Quinterno, a principal with South by North Strategies Ltd., a research firm focused on economic and social policy, said he "does not see any sound reason why we could not return to an employment level similar to the one recorded in 2007."

"If we were dealing with a structural employment issue, you would see certain patterns in employment and wage data that just are not there currently. This does not mean that individual workers and firms are not dealing with structural issues, but rather, the evidence for that claim does not appear in the aggregate data."

Quinterno said to keep in mind that "a return to pre-recession payroll employment isn't the same as a return to full employment. Even with a return to peak employment, there likely still would be a jobs gap in the community."

Vitner credits "the relentless pressures from globalization" for widening the gap between the skills employers are demanding and the skills workers possess.

"That is discouraging labor-intensive activities and encouraging growth in more capital-intensive industries," Vitner said.

"Public policy, the housing bust and the persistence of high unemployment itself have all added to a higher structural unemployment rate in the U.S. labor market."

Two ways to reduce the unemployment rate carry a Castor oil taste to them, Vitner said.

"Around 0.8 percentage points of the increase is due to the extension of unemployment insurance benefits," Vitner said. "Scaling back unemployment insurance benefits should push the structural unemployment rate down to between 6.0 percent and 6.5 percent."

He also suggested allowing the minimum wage to go lower, particularly for teen-agers, so employers of minimum-wage workers would have more money for new hires. The $7.25 federal minimum wage began in North Carolina in July 2009.

"Reductions beyond that point will require much more significant actions, such as improving primary and secondary education, increasing funding for higher education and reducing the regulatory burden for starting and growing a business in the United States," Vitner said.