Author: Andrew Berger-Gross
Welcome to the March 2023 edition of NC Economy Watch: an update on what’s happening in the North Carolina economy and what it means for you, brought to you by the Labor & Economic Analysis Division (LEAD) of the NC Department of Commerce.
In this edition of NC Economy Watch, we examine the employment data revisions just released by the US Bureau of Labor Statistics. These revisions change what we thought we knew about conditions in certain sectors of the economy. Overall, however, the revised data continue to demonstrate that, although our economy is slowing, it’s still growing.
Data Revisions Confirm North Carolina’s Economy Is Slowing, but Still Growing
Many people are familiar with the economic numbers reported in the business news, such as weekly jobless claims, monthly unemployment rates, and quarterly gross domestic product figures. But few are aware that, behind the scenes, the government agencies and private organizations that produce these numbers are continuously revising them to incorporate new information that wasn’t available when they were first reported.
This month, the US Bureau of Labor Statistics published revised historical data on unemployment and job growth for every state in the nation, including North Carolina.
It can be easy to overlook these revisions. For one thing, they tend to receive limited coverage in the news media. Also, while the impact of these data revisions is often quite meaningful, this year’s revisions didn’t measurably change our understanding of where the economy is headed.
These revisions had relatively little impact on North Carolina’s unemployment rate, which ended 2022 at 3.8%, compared to 3.9% in the preliminary estimates, after rising from a low of 3.3% in April [Figure 1]. Likewise, revised data show that over-the-year job growth in North Carolina ended the year at 3.4%, compared to 4.1% in the preliminary estimates—slower than we initially thought, and slower than the frenetic growth rates that were common during 2021, but still much faster than the pre-pandemic norm. Both data points depict an economy that is slowing, but still expanding, and certainly not experiencing a much-feared recession.
We find more notable data discrepancies in certain sectors of our economy when we scratch beneath the surface. For instance, revised data for the Management of Companies and Enterprises sector, which includes corporate offices and headquarters, tell a substantially different story than the preliminary estimates. The initially reported figures had this sector contracting throughout 2020 and 2021 and remaining around 10% below pre-pandemic employment levels during much of 2022 [Figure 2]. The revisions released today reveal that, after bottoming out in 2021, this sector began to grow again and, as of the end of 2022, is gradually recovering the jobs it shed earlier in the pandemic. This has important implications for economic developers, who often target corporate headquarters in their business recruitment efforts: although the shift to hybrid and remote work may have slowed growth in corporate headquarters projects in North Carolina, this sector’s employment decline was nowhere near as large as initially estimated.
The data revisions for the Employment Services sector are a bit more troubling. This sector, which consists of temporary help services and other staffing firms, is closely watched by economists because it tends to grow when the economy is ramping up and often declines at the onset of economic recessions. The revised data for North Carolina show that our Employment Services sector plummeted toward the end of 2022 [Figure 3]. This adds to concerns that, although the economy proved resilient during the turmoil of the past year, we may be headed for a deeper economic slowdown, or even a recession, in the year to come.
In our fast-paced information age with a fragmented media landscape and more data sources than ever, we are flooded with seemingly contradictory data points about the economy. The fact that these figures are often subject to revision can add another layer of confusion. As always, we encourage data users to avoid relying too much on any one data point and instead use their judgement when evaluating the broad scope of available evidence. Taken as a whole, what are these numbers telling us? What storylines can we be confident about, and what storylines should be interpreted with a healthy dose of skepticism?
While the revised data released today change what we thought we knew about conditions in certain sectors of our economy, overall, our understanding of the current economic situation is much as it was before:
North Carolina’s economy is slowing, but for now, it’s still growing. The labor market remains as tight as ever, and prices continue to rise faster than they have in decades. While signs of economic weakness such as a declining Employment Services sector are beginning to accumulate, the fate of the economy in the months ahead will be determined largely by the course of price inflation and how the Federal Reserve responds to it. And through it all—the ups and downs, the twists and turns, the shocks and surprises—LEAD will be here to help you better understand what’s happening in the economy and what it means for you.
For inquiries and requests, please contact:
Meihui Bodane, Assistant Secretary for Policy, Research and Strategy
NC Department of Commerce, Labor & Economic Analysis Division (LEAD)