|Thursday, October 21, 2004|
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Corporate profits are up, but businesses worry over foreign competition, cost of fuel, health care.
North Carolina's economy shows signs of hope. Corporate profits are up, more people own homes, and layoffs have slowed.
But for many workers, a full recovery is still far off.
In a News & Observer Voter's Voice survey last month, residents said the economy was the most important issue facing the state. Now, two weeks before the 2004 elections, we ask: Is our economy better than it was four years ago?
If you measure the economy in terms of corporate profits and the gross state product, you're probably encouraged.
But if your concerns are more basic -- Do I have a job? Am I making more money? -- you're less likely to feel good.
The state had nearly 73,600 more jobs in January 2001 than in August of this year. That's the eighth-worst job loss in the nation over that period. So workers now have less bargaining power. The average weekly wage in North Carolina increased only $7.24 in inflation-adjusted dollars from the first quarter of 2001 to the first quarter of 2004, according to an analysis of data collected by the state Employment Security Commission.
Economists say the state must add 10,000 jobs a month during the next decade to significantly improve workers' prospects. It has missed that mark four of the past seven months, including August.
On Friday, North Carolina's economic leaders will release their last jobs report before the elections. It's not likely to be rosy. Nationally, employers added fewer jobs in September than in August.
Why the slow job growth? It's not that businesses lack money. Corporate profits in North Carolina rose 16.5 percent in the past year, according to the General Assembly's fiscal research division.
The short answer: Businesses are worried. Their health insurance costs are rising. So is foreign competition. There's the threat of another terror attack. And fuel prices are soaring.
Workers may have to get used to slow hiring and small raises.
"Companies realize that their labor costs are high on a global basis, and the only way around that is to become more productive or move jobs overseas," said Campbell Harvey, a Duke University economist. "This is the new reality."
The number of businesses moving jobs to low-wage countries is small, but it could multiply. Forrester Research, a technology consulting firm in Massachusetts, predicts that 3.4 million white-collar jobs will leave the United States between 2003 and 2015.
Federal trade policy and outsourcing are contentious issues this political season. Senate candidates Erskine Bowles, a Democrat, and Richard Burr, a Republican, have spent much of their campaigns trading barbs over who was a bigger booster of the trade agreements now blamed for thousands of layoffs in the state.
Since January 2001, more than 24,000 North Carolinians have lost their jobs because of foreign competition, according to the U.S. Labor Department.
Meanwhile, Democratic presidential candidate John Kerry says he wants to eliminate tax rules that benefit companies that send jobs overseas. But President Bush says such rules would leave the country's tax laws noncompetitive.
Even Kerry concedes that the problem can't be eliminated.
"Outsourcing is going to happen," he said during the final presidential debate Wednesday. "I've acknowledged that in union halls across the country. I've had shop stewards stand up and say, 'Will you promise me you're going to stop all this outsourcing?' And I've looked them in the eye and I've said, 'No, I can't do that.' "
To be fair, some payrolls were unusually high to begin with. During the dot-com boom of the 1990s, technology companies couldn't find enough qualified workers -- and the workers could demand excellent pay.
The nation fell into recession in March 2001, and North Carolina's unemployment rate went from one of the nation's lowest to one of its highest for a while.
It's not just the sheer number of job losses, but also the types of jobs being lost. The five industries that lost the most jobs in the past three years paid, on average, $272 more a week than those with the most job growth.
"When you travel the state, you see mile after mile of shut-down manufacturing plants," said Kenneth Ray Terry, 55, of Aulander, in Bertie County. "It doesn't take a rocket scientist to see what's going on. Jobs are moving overseas."
In January 2003, Terry lost his job managing an Emporia, Va., plant that makes wooden swing sets. He and his wife, Linda, are living on savings -- down from $60,000 to $30,000 -- and her meager earnings as a school bus driver. "I've sent out hundreds of resumes with no responses or opportunities for interviews," Terry said.
The state's manufacturing sector has shed one of every five jobs since the beginning of 2001, more than any other segment of the economy.
Here's why that's troubling for workers trying to support families: Hotels and restaurants, a growing source of jobs for displaced factory workers, don't pay a third as much as factory jobs. On average, factory jobs pay $803 a week.
As long as hiring remains sluggish, there's no incentive for employers to offer better pay. Wages were also stagnant after the 1990-91 recession.
But workers in many rural counties have seen wages actually drop since 2001. In Brunswick County, a farming community in the Southeast, the average weekly wage declined by $64.53 -- enough for a monthly car payment or a year of state college tuition and fees.
In the Triangle, the average wage fell 20 cents in inflation-adjusted dollars, to $807. In the Triad, the weekly average rose just 5 cents.
Only Charlotte has experienced significant wage growth, mainly because of financial services companies such as New York-based TIAA-CREF, which opened a 1,600-worker office in 2001.
The decline in manufacturing is nowhere more apparent than in Catawba County, which lost 14,000 jobs in three years. Textile and apparel makers, including Pillowtex, Gold Toe Brands and Carolina Mills, announced 10 sets of layoffs affecting 1,185 workers. The telecommunications companies CommScope, Corning and Alcatel let go of more than 3,500 workers.
The worst may not be over for textile mills. The United States is scheduled to lift all textile quotas on Jan. 1, probably leading to a surge in inexpensive imports from China and other countries with low labor costs.
Gary L. Shoesmith, an economist at Wake Forest University, says the state's mills will eliminate 40,000 jobs -- about half of their payroll -- in the next five to 10 years.
Replacing those jobs is a central issue in the governor's race. Democratic Gov. Mike Easley and Republican challenger Patrick Ballantine agree on a couple of points: The state must invest more in education to prepare workers for better-paying jobs; and the state must use costly incentives to lure employers here.
But while Ballantine blames high state taxes for much of the job loss, Easley blames federal trade policy. And though Ballantine proposes cutting more than $1 billion in taxes to spur growth, Easley says that's not possible without hurting the public schools and community colleges, which businesses need for a qualified work force.
"It's going to be a constant chase to provide the level of education that the rapidly moving economy is going to demand," Easley said in a recent interview.
Meanwhile, some technology companies have started hiring again in the Triangle, but workers face a future of lower expectations. Economists say technology jobs will never be as plentiful as they were in the late 1990s and won't pay as well.
"You had people working for companies that didn't sell anything or have any profits. It was an unusual time," said Mark Vitner, a Wachovia economist in Charlotte.
Debt and its effects
Although jobs and wages dominate political discussions about the economy, consumer debt also looms large as a potential problem for businesses.
It's already a problem for families who've turned to credit cards to maintain the same living standard. Foreclosures and bankruptcies in North Carolina are up significantly since 2001.
Kim Stamegna, a single mother living in Wake Forest, went two years without a pay raise. Now, she owes $4,400 on her CitiCard, up from less than $1,000 three years ago. She had intended to use the card only in emergencies, but she found herself paying more for gas and groceries. "It just seems like the cost of everything has gone up," said Stamegna, 37, a Web page designer for the state Department of Transportation.
"Unless I get some kind of raise, I'll have to take out another loan to pay off my debt -- and try not to use my card," she said.
The state's median household income has declined in each of the past four years, from $40,302 to $38,234. That's a reflection not only of layoffs and stagnant wages, but also diminished stock dividends and interest payments.
Economists caution that spending may slow as consumers pare their debt, and that could cause businesses to pull back even more on hiring.
Consumer spending accounts for two-thirds of all economic activity. It's also credited with lifting the nation out of recession three years ago. But consumers may soon be tapped out.
"Consumers have to get their balance sheets in order, and the way to do that is to spend less," said Harvey, the Duke economist. "It's naive to think there's going to be substantial growth in consumer spending over the next three years."
(News researcher Denise Jones contributed to this report.)
Staff writer Amy Martinez can be reached at 829-4884 or mailto:firstname.lastname@example.org
News researcher Denise Jones contributed to this report.