Report: NC jobless rate falls to 6.9 percent

RALEIGH, N.C. (AP) -- North Carolina's unemployment rate dropped to 6.9 percent in December, its lowest level in more than five years, but Tuesday's news came with signals that the rapid fall was related to thousands of discouraged people giving up on finding work.

December's unemployment rate, down from 7.4 percent the previous month, was the lowest since September 2008, when a building financial crisis shook the world's economy and brought on the risk of a new Depression.

Since July, North Carolina has dropped from being tied for the third-highest unemployment to near the middle of the pack and slightly above the national average of 6.7 percent. North Carolina's jobless measure improved by 2.5 percentage points over the course of a year, the best of any state, according to the U.S. Bureau of Labor Statistics.

Gov. Pat McCrory and state House Speaker Thom Tills, a fellow Republican from Mecklenburg County, on Tuesday credited tax cuts and fewer business regulations that GOP lawmakers approved this year for sparking an economic comeback.

"We continue to see that our pro-growth and pro-jobs policies enacted over the last year are having a positive impact and getting people into jobs. While this is welcome news, we will remain focused on policies that will encourage job growth," McCrory said in a statement, continuing a congratulatory theme he started earlier this month.

But economists warn the fast fall in the unemployment rate has a lot to do with thousands of jobless workers no longer counted because they have become discouraged about the prospects of finding work and have given up.

Since December 2012, 13,414 more people are on payrolls and more than 124,000 fewer people were listed as unemployed, the report shows. That suggests that just 11 percent of the drop in unemployed workers resulted from the jobless finding work, said Allan Freyer, an analyst with the Budget & Tax Center, a part of the liberal-leaning NC Justice Center.

The state's population of working-age adults who are looking for jobs also shrank by nearly 111,000 over the year. That means North Carolinians in the working-age population who are either employed or actively looking for jobs is the lowest since before the national recession started in December 2007.

As more people give up on finding work, that makes the unemployment rate look better because they're no longer being counted, said Patrick Conway, an economics professor at the University of North Carolina at Chapel Hill.

"It's good to see an increase in employment," Conway said. "But the unemployment rate decline, especially the magnitude of decline, is being driven by the number of people who drop out of the labor force. ... I don't think they've left the state. They've just stopped looking for work."

If those discouraged workers see job prospects improving and get back into the saddle again, the unemployment rate would be expected to fall more slowly or even rise temporarily.

"This discouraged worker is someone who is going to have to come back into the labor market soon," Conway said. "I'm just hopeful that we get enough positive news that those people start coming back. Once they do, the unemployment rate is not going to decline as quickly as it is right now."

The same trend of a shrinking labor force and declining unemployment rate has been noted nationally too. The end of extended unemployment benefits for the country's long-term jobless will lower the nation's unemployment rate by half a percentage point as people drop out of the job hunt, JPMorgan Chase analyst Michael Feroli said last month.

Still the falling unemployment numbers offer hope to people such as Lee Creighton, an unemployed statistician who has been in and out of work for more than a year.

"I'm often wondering, is the rate going down in North Carolina due to a national trend? Or, is there something that has changed fundamentally in North Carolina that has made new jobs open up? I haven't seen the second part yet," said Creighton, 46, of Cary.

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Emery Dalesio can be reached at http://twitter.com/emerydalesio.