North Carolina

North Carolina's labor market recovery took a hit in May. Payroll employment fell again and the state's unemployment rate showed no improvement from April. Moreover, our Carolinas Survey of Business Activity suggested that the region's economic expansion slowed somewhat.

May's data made it clear that North Carolina's labor market recovery stalled in recent months. On a seasonally adjusted basis, total payroll employment fell by 16,500, marking the third straight monthly decline. Over the last three months, the state lost more than 21,000 jobs. The most notable, and perhaps most disappointing, decline was recorded in the professional and business services segment. This industry, which had been a stalwart of job creation in the state over the last year, saw employment drop by roughly 7,000 in May. North Carolina's battered construction market accounted for a large share of net losses as well, as firms in this industry shed nearly 5,000 workers. After flattening out in 2011, job losses in construction resumed over the past four months. Both the leisure and hospitality and the education and health services segments also experienced material job losses in May. It is likely that some of the decline in leisure and hospitality was payback for an atypical boost in hiring earlier in the year that resulted from unseasonably warm winter weather. In other words, some of the hiring that would be expected in April and May was "pulled forward" into January and February as warm weather drew travelers to coastal and mountain destinations. Public sector employment contracted for the third straight month in May. Trade, transportation, and utilities was the only sector to show a significant rise in employment during the month, although manufacturing firms added a few net new workers to their payrolls.

Regionally, the biggest contributor to the statewide job losses in May was a drop of nearly 5,000 in the Charlotte area, which had been experiencing relatively healthy growth so far in 2012. Significant declines were also reported for the Wilmington and Hickory-Lenoir-Morganton areas. Raleigh led the gainers, with about 1,000 net new jobs in May.

The recent job losses pared North Carolina's year-over-year job growth to 11,000, or just 0.3 percent. That left the state well behind the nationwide average of 1.3 percent. Moreover, job growth in most of the state's major industry breakouts underperformed the comparable national averages. The only two exceptions were the information industry (which is very small) and the public sector (which expanded slightly in the state, while declining at the national level).

North Carolina's seasonally adjusted unemployment rate was unchanged in May, at 9.4 percent. Between September 2011 and April 2012, the state's unemployment rate fell by 1.3 percentage points, due to the combination of modest increases in employment and a slight decline in the number of workers participating in the labor force. The softening in North Carolina's labor market indicators coincided with a generally slower economic expansion in the Carolinas, as evidenced by our monthly Carolinas Survey of Business Activity. The current conditions index fell to 20 in May from 31 in April. In spite of the decline, the index still showed that a larger share of responding firms in the region reported an increase in business activity than noted a decrease.