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Job gains concentrated in urban counties

August 31, 2017 / Carolina Small Business / Economic inequality, Economy, Jobs & Employment, Rural

According to the headlines, job growth was very strong as of July– in fact, much stronger than economists predicted, adding 209,000 jobs. The unemployment rate went down and the labor market saw improvements as well. The economy seems to be headed in a positive direction. However, as we always point out, these gains are becoming increasingly concentrated.

A recent analysis by The Daily Yonder data from the Bureau of Labor Statistics, looking at job growth between June 2016 and June 2017, illustrates this trend.  A county map of the country shows that job gains have been concentrated in and around metropolitan areas (those with a population of 1 million or more), where the number of jobs increased by 2 percent. In rural counties, job growth was only 0.29 percent.

Rural areas have also seen the workforce decrease by 0.5 percent. The Daily Yonder notes that while this has helped keep the unemployment rate low, it also signals a “hollowing out” of rural economies.

The map above of North Carolina’s counties shows a very striking pattern of job loss in the eastern region and clear gains in and around Raleigh and Charlotte. The counties shaded green gained jobs at or above the national average, those shaded orange gained jobs but lower than the national average, and red counties saw job loss.

This data provides further evidence that the eastern part of NC is facing an economic crisis. In a recent post, we described research from the UNC Carolina Population Center, which showed that eastern NC experienced population loss, high poverty, and economic distress. With the impacts of Hurricane Matthew, this area is even more vulnerable.

The solution for rural economies will not be an easy one. But one that we hear about often as a “silver bullet” to solve our economic problems is corporate tax cuts. The idea being that if companies have to pay lower taxes, they will invest more and create more jobs. At a state and local level, economic development programs offer a range of tax incentives to attract new companies. But does this approach really work?

An editorial in yesterday’s Roanoke Times took a look at this question, focusing on the concept of an “enterprise zone.” An enterprise zone provides tax breaks for companies that locate in underserved areas, such as rural, minority, and low-income communities. They are intended to serve as a vehicle for increasing investment in economically distressed areas.

But as the editorial notes, the research on the efficacy of enterprise zones is not promising. Studies by the Government Accountability Office show that enterprise zones do not make a significant difference in economic growth or job creation. Analysis by Good Jobs First also shows that many states have not targeted their enterprise zones enough and they have veered away from their original intent.

The reason why tax incentives and tax cuts can not be the only solution is that businesses have many reasons for choosing where they locate and what they invest in. Taxes are just one factor, and not necessarily a top factor. Businesses need a skilled labor force, infrastructure, resources, and so many other things in order to make their ventures viable.

As we continue to see our rural areas, like eastern NC, struggle with population loss, unemployment, job loss, poverty and other challenges, these studies and analyses should help direct our economic development strategy. If businesses are looking at a range of factors when making location decisions, then these are the areas that states and municipalities should invest in. Unfortunately much of economic development strategy focuses on incentives for business attraction and retention, without a deeper commitment to making long-term investments in our people and communities.