Author: Andrew Berger-Gross
Our post-recession economy is somewhat of an enigma. On one hand, economic statistics and ground-level anecdotes from business owners continue to provide evidence of a growing economy. On the other hand, wages remain stagnant and workers continue to express pessimism about the state of the economy. Some economists are now asking whether the underlying dynamics of the labor market may be playing a role in this apparent contradiction.
One noteworthy trend has been the overall decline in job creation and job destruction by employers. The “creative destruction” entailed by eliminating obsolete jobs and creating new jobs that meet market needs is thought to contribute to economic growth. Estimates from the Bureau of Labor Statistics’ Business Employment Dynamics (BED) program show that employers in North Carolina have created jobs at a faster pace than they have eliminated them in recent years, resulting in net job growth. However, overall employment “churn” (the share of jobs created plus jobs destroyed) has been trending downward for over a decade, which may have negative implications for the state’s economy.
Another significant trend has been a slowdown in the process of turnover as workers pass from one job to another. This job-to-job hopping is considered to be an important way for young workers to climb the wage ladder. Estimates from the Census Bureau’s Quarterly Workforce Indicators (QWI) show that employee turnover (the share of stable job hires plus stable job separations) is declining in North Carolina. Although turnover improved slightly after each of the two previous recessions, turnover rates in 2012 (the most recent year for which we have data) remained substantially lower than rates seen in the late 1990s or mid-2000s.
Finally, data from the Current Population Survey (CPS) indicate that smaller shares of North Carolinians are moving from employer to employer. In addition, the share of workers changing job duties has declined, suggesting that North Carolinians may be encountering fewer opportunities to ascend to higher pay grades at their current jobs.
These movements are not unique to North Carolina; recent research shows that labor market dynamism is also declining in the broader U.S. Attentive readers may note that these trends are occurring alongside a similar national and state-level decline in new business formation, as recently covered in the LEAD Feed (Where Have All the Entrepreneurs Gone?). However, we cannot say for sure what is causing these developments, or to what extent they are responsible for the slow pace of the economic recovery or the absence of wage gains at this point in the business cycle.
Although its causes and effects are not fully understood, the recent decline in the dynamism of our nation’s economy has attracted intense attention from labor market watchers and policymakers as an issue to monitor closely over the coming years. Stay tuned to the LEAD Feed as we continue to follow these emerging trends and explore their significance for North Carolina’s labor market.
General disclaimers:
Estimates from the CPS are derived from a survey, while BED and QWI estimates are derived from both survey and administrative data; all three are subject to sampling and nonsampling error. Any mistakes in data management, analysis, or presentation are the author’s.