HomeMy WebLinkAboutAgenda - 11-02-2017 -12-5 - Memorandum - First Quarter FY2017-18 Financial Report- Period Ending September 30, 2017 INFORMATION ITEM 1
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FINANCE and ADMINISTRATIVE SERVICES
Gary Donaldson,CTP,Chief Financial Officer I gdonaldson @orangecountync.gov I 200 S.Cameron Street,Hillsborough,NC 27278 I 919.245.2151
MEMORANDUM
To: Board of County Commissioners
From: Gary Donaldson, Chief Financial Officer
Date: November 2, 2017
Re: First Quarter FY2017-18 Financial Report-Period Ending September 30, 2017
The First Quarter FY2017-18 report represents the Department of Finance and Administrative Services commitment to
providing important financial reporting to you,the County Manager,and our Residents.
The primary components of the County quarterly financial report are:
• General Fund Financial Performance
• Enterprise Funds (Solid Waste Fund and Sportsplex Fund) Financial Performance
• Economic Outlook Report by Dr. Michael Walden of NC State University
The quarterly financial performance report is presented with a detailed comparison of FY2017-18 Budget versus Actual
and FY2016-17 Budget versus Actual indicating year to date revenues and expenditures performance. The primary goal of
this quarterly report is to communicate a concise financial status of the County's major operating funds.
General Fund Performance
The FY2017-18 General Fund performance is consistent with historical performance. During the first three months of the
County's fiscal year, expenditures normally exceed revenues due to the timing of Property Tax revenues which are due
September 1. The County's cash flow and ability to cover expenditures during this period is attributed to a strong balance
sheet.
General Fund Revenues
First quarter FY2017-18 General Fund revenues total $23.6 million or 10.7%of budgeted revenues,which represents a
1.0%decrease when compared with 1Q FY2016-17 total of$25.4 million or 11.7%of budgeted revenues. This decrease
is primarily attributed to a timing variance as it relates to Property Tax collections, and to a reduction in Social Services
Intergovernmental revenues attributed to the State of North Carolina taking over Child Day Care payments to providers.
Note: The Intergovernmental revenues in Social Services are down approximately$1.1 million,but there is also a
corresponding decrease on the expenditure side in Social Services related to Child Day Care expenses. Property Tax
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revenues reflect a decrease of 1.0%over 1Q FY2016-17,but is consistent with the percentage collections when compared
to the first quarter collections for the past three fiscal years.
Summary of Major General Fund Revenues
FY2017-18 FY2017-18 YTD% FY2016-17 FY2016-17 YTD%
Category Original Budget Revised Budget YTD Actual Collected Category Original Budget Revised Budget YTD Actual Collected
Property Tax $ 151,557,768 $ 151,557,768 $ 19,440,277 12.8% Property Tax 149,498,811 $ 149,498,811 $ 20,614,060 13.8%
Local Option Sales Tax 23,566,784 23,566,784 - 0.0% Local Option Sales Tax 22,066,641 22,066,641 10 0.0%
Licenses and Permits 328,000 328,000 573 0.2% Licenses and Permits 328,000 328,000 1,601 0.5%
Charges for Services 11,551,045 11,475,323 2,493,435 21.7% Charges for Services 11,681,503 11,702,503 2,126,995 18.2%
Intergovernmental 16,035,147 16,854,603 1,352,500 8.0% Intergovernmental 15,787,579 17,300,131 2,391,920 13.8%
Transfers from Other Funds 3,765,600 3,765,600 - 0.0% Transfers from Other Funds 2,712,600 2,712,600 - 0.0%
Investment Earnings 265,000 265,000 101,794 38.4% Investment Earnings 155,000 155,000 25,603 16.5%
Miscellaneous 2,817,629 2,966,788 229,469 7.7% Miscellaneous 886,734 983,287 249,771 25.4%
Fund Balance Appropriatiol 9,769,060 9,769,060 - 0.0% Fund Balance Appropriatiol 12,726,944 12,726,944 - 0.0%
General Fund Revenues 219,656,033 220,548,926 23,618,049 10.7% General Fund Revenues 215,843,812 217,473,917 $ 25,409,960 11.7%
Property Tax Revenues
1Q FY2017-18 Property Tax revenues total $19.4 million or 12.8%of budgeted revenues as compared to $20.6 million or
13.8%in the prior year. This decrease is due to a timing variance as to when Property Taxes are paid, and this percentage
of 12.8%is consistent with the percentage collections in 1Q FY2015-16 and 1Q FY2014-15. It is important to note that
Property Tax revenues are due September 1,with interest and penalties accruing January 2018. The Tax Administration
office historical billing versus collection rate is 99%. Property Tax budgeted revenues accounts for more than 70%of the
total General Fund revenue budget. The property tax category includes real,personal, and motor vehicle taxes. Motor
vehicle taxes are payable on the vehicle renewal date and the tax is based on market value of the vehicle. The State remits
this tax to the County on a monthly basis.
Local Option Sales Tax Revenues
Sales Tax revenues normally total $0 in the first quarter of the new fiscal year. This is attributed to the timing of receipts
from the North Carolina Department of Revenue. The local government sales tax distributions in any given month reflect
actual sales comprised of up to three months prior collections. For example,August collections reflect July vendor sales,
which are processed and allocated in September,with a local government distribution made on or before October 20. The
October payment is the first month's sales tax distribution allocated to the July-June fiscal year. The second quarter
financial report will include Sales Tax revenues activity following the North Carolina Department of Revenue
computation and distribution to local governments.
The North Carolina Department of Revenue administers the following monthly disbursement of local option sales taxes
recorded in the County's General Fund:
• Article 39 (one-cent) -authorized in 1971, and is currently allocated on a point of delivery basis and proceeds are
allocated with local government units within the County. Food purchases are taxable. There is no restricted use.
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• Article 40 (half-cent) -authorized in 1983, and it is currently allocated on a per capita basis;based upon the
county's population in relation state population total; proceeds are allocated with local government units within
the County. Food purchases are taxable. Thirty percent of this tax is for school capital outlay or debt retirement.
• Article 42 (half-cent) -authorized in initially in 1986,the allocation changed from per capita to a point of delivery
basis;proceeds are allocated with local governments within the County. Food purchases are taxable. Sixty
percent of this tax is for school capital outlay or debt retirement.
• Article 43 (half-cent) -authorized in initially in 1997 for public transportation, and is currently allocated on a per
capita basis. Food purchases are exempt pursuant to G.S.105-164.13B. This tax is restricted to public transit and
is accounted for under inter-governmental revenue in the County General Fund.
Note: Article 46 (quarter-cent) -authorized in 2012 is accounted for in a Special Revenue Fund, and not the General
Fund. The allocation is on a point of delivery. Food purchases are exempt pursuant to G.S.105-164.13B.
Charges for Services
1Q FY2017-18 Charges for Services total $2.5 million or 21.7%of budgeted revenues, as compared with 1Q FY2016-17
total of$2.1 million or 18.2%of budgeted revenues with actual collections in FY2017-18 higher than FY2016-17 due to
higher collections in EMS fees which is based on successful collection efforts in reducing the backlog of billings. The
remainder of Charges for Services is comprised of various departmental fees for services including Planning and
Inspections, Environment,Agriculture, Parks and Recreation,Aging,Animal Services,Health, Cooperative Extension,
Library, and Register of Deeds.
Intergovernmental Revenues
1Q FY2017-18 Intergovernmental revenues total $1.4 million or 8.0%of budgeted revenues, as compared to 1Q FY2016-
17 total of revenues of$2.4 million or 13.8%of budgeted revenues. As noted in the revenue summary,this variance is
mostly attributed to a reduction in Child Day Care revenues due to the State paying Child Day Care benefits directly to
providers. This category of income includes revenue received from the Federal, State, and other local governments. The
Department of Social Services receives approximately 60%of the total budgeted revenues within this category.
General Fund Expenditures
1Q FY2017-18 General Fund expenditures total $53.9 million or 24.5%of budgeted expenditures, as compared with 1Q
FY2016-17 total expenditures of$52.1 million or 23.9%of budgeted expenditures,with actual expenditures in FY2017-
18 more than FY2016-17 expenditures by$1.8 million. The increase of 0.6%is mostly attributed to increased Debt
Service payments in the first quarter,the timing of payments to OPC Area Program, and an increase of approximately
$1.4 million to both school systems as it relates to Current Expense and One-Time Discretionary funding.
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Summary of Major General Fund Expenditures
FY2017-18 FY2017-18 YTD% FY2016-17 FY2016-17 YTD%
Category Original Budget Revised Budget YTD Actual Expended Category Original Budget Revised Budget YTD Actual Expended
Community Services $ 14,331,974 $ 14,354,827 $ 3,155,235 22.0% Community Services 13,654,700 $ 13,877,446 $ 3,281,490 23.6%
General Government 9,954,091 9,954,091 3,245,846 32.6% General Government 9,748,832 9,865,146 3,416,492 34.6%
Public Safety 25,583,899 25,586,399 5,270,461 20.6% Public Safety 24,942,554 25,113,983 5,047,121 20.1%
Human Services 37,508,468 38,179,508 8,151,624 21.4% Human Services 37,249,977 39,060,089 8,833,458 22.6%
Education 89,916,598 89,916,598 21,640,900 24.1% Education 84,259,340 84,259,340 20,226,335 24.0%
Support Services 14,101,197 14,101,197 3,354,125 23.8% Support Services 14,058,009 14,402,267 3,494,456 24.3%
Non-Departmental 28,259,806 28,456,306 9,135,117 32.1% Non-Departmental 31,930,400 32,025,400 7,851,241 24.5%
General Fund Expenditures 219,656,033 220,548,926 53,953,307 24.5% General Fund Expenditures 215,843,812 218,603,672 52,150,593 23.9%
Please note that the reporting of Budget versus Actual expenditures is reflected by the Functional Leadership
Teams.
Community Services-Animal Services,NC Cooperative Extension, DEAPR, Economic Development, Orange Public
Transportation, Planning and Inspections.
1Q FY2017-18 expenditures total $3.2 million or 22.0%of budgeted expenditures as compared with 1QFY2016-17 total
of$3.3 million or 23.6%of budgeted expenditures. The 1.6%reduction in budgeted expenditures reflects a decrease of
approximately$130,000 in the FY2017-18 budget, and is attributed to reductions in Non-Departmental expenditures due
to the timing of Solid Waste Program Fees assistance payments compared to 1Q FY2016-17, and expenditure reductions
in most all departments within this functional leadership team.
General Government- Board of Elections, Clerk to the Board, County Attorney, County Manager,Register of Deeds
and Tax Administration
1Q FY2017-18 General Government expenditures total $3.2 million or 32.6%of budgeted expenditures, as compared
with 1Q FY2016-17 total of$3.4 million or 34.6%of budgeted expenditures. The majority of this decrease is attributed to
contract services and temporary personnel expenditures that were incurred in 1Q FY2016-17 in preparation for the 2017
Revaluation that are non-recurring in 1Q FY2017-18, as well as reductions in Non-Departmental expenditures due to
Bond Referendum Education expenditures in 1Q FY2016-17 which are also non-recurring in 1Q FY2017-18 as well.
Public Safety-Courts, Emergency Services, Criminal Justice Resource Department, and Sheriff's Office
1Q FY2017-18 Public Safety expenditures total $5.3 million or 20.6%of budgeted expenditures,as compared with 1Q
FY2016-17 total of$5.1 million or 20.1%of budgeted expenditures. The increase is attributed to additional staff in the
Criminal Justice Resource Department, and to the timing of medical supplies, contract services, and recurring capital
payments in Emergency Services, and the timing of contract services payments in the Sheriff's Office.
Human Services-Department on Aging, Child Support,Housing,Human Rights, and Community Development,
Library, Public Health and Social Services
1Q FY2017-18 Human Services expenditures total $8.1 million or 21.4%of budgeted expenditures, as compared with 1Q
FY2016-17 total of$8.8 million or 22.6 of budgeted expenditures. The Department of Social Services comprises more
than 50%of the human services budget,and is the primary driver of the first quarter expenditure reduction. The reduction
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is attributed to less Child Day Care expenditures due to the State paying Child Day Care benefits directly to providers
during the 3Q of FY2016-17, and to the timing of payments to Outside Agencies and the OPC Area Program.
Support Services-Asset Management Services, Community Relations, Finance,Human Resources, and Information
Technology
1Q FY2017-18 Support Services expenditures total $3.4 million or 23.8%of budgeted expenditures, as compared with 1Q
FY2016-17 total of$3.5 million or 24.3%of budgeted expenditures. The 1Q FY2016-17 year to date spending rate is
slightly below the prior year. This reduction is mostly attributed to lower expenditures in Asset Management Services in
Building Repairs and in Contract Services, as well as lower encumbrances department-wide. Community Relations
reflects an increase in expenditures due to an additional staff position that was not in place in 1Q FY2016-17.
Education
1Q FY2017-18 Education expenditures total $21.6 million or 24.1%of budgeted expenditures, as compared with 1Q
FY2016-17 total of$20.2 million or 24.0%of budgeted expenditures. The FY2017-18 Education Current Expense budget
was increased by$3.5 million over the prior year's budget. The Education expenditures are comprised of Current
Expenses to the Chapel Hill-Carrboro City School District and Orange County School District. Current Expenses of$20.1
million or 25%of budgeted expenditures remitted to the school districts in the first quarter;this was $886,359 more than
the same period in FY2016-17. The remaining Education budget pertains to Recurring Capital, Other Related County
Support, specifically support to Durham Technical College (Orange County campus), and One-time Discretionary funds
approved in FY2017-18.
Non-Departmental
1Q FY2017-18 Non-Departmental expenditures total $9.1 million or 32.1%of budgeted expenditures,as compared with
1Q FY2016-17 total of$7.9 million or 24.5%of budgeted expenditures. The first quarter expenditures are 7.6%higher
than the same period in 1Q FY2016-17 due to increased debt service payments.
In summary, 1Q FY2017-18 General Fund Revenues and Expenditures are in line with the adopted FY2017-18 General
Fund Budget.
Enterprise Funds Performance
Solid Waste Fund
1Q FY2017-18 Solid Waste Fund performance is consistent with the adopted FY2017-18 budget. First quarter revenues of
$1.9 million or 14.7%of budgeted revenues and expenses are $4.5 million or 34.2%of budgeted expenses. This compares
with FY2016-17 first quarter revenues of$1.7 million or 11.3%of budgeted revenues and expenses of$4.6 million or
28.5%of budgeted expenses.
Sportsplex Fund
1Q FY2017-18 Sportsplex Fund performance is consistent with the adopted FY2017-18 budget. The revenue stream is
comprised of Ice Rink-35%of budgeted revenues, Membership and Fitness-31%of budgeted revenues,with the
remaining revenues comprised primarily of Aquatic and Kidsplex funds. First quarter Charges for Services revenues are
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$849,621 or 25.0%of budgeted revenues and expenses are $924,817 or 25.9%of expenses. This compares with FY2016-
17 first quarter Charges for Services revenues of$758,662 or 22.9%of budgeted revenues and expenses of$945,932 , or
19.8%of budgeted expenses.
Thanks to the Budget Division for their support in the preparation of this quarterly report.
cc: Bonnie Hammersley, County Manager
Travis Myren, Deputy County Manager
Enclosure
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Revenue by Category (1st Quarter)
Summary-General Fund
FY2017-18 FY2016-17
YTD% YTD
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended
Property Taxes
Property Taxes 139,606,313 139,606,313 16,196,151 11.6% 137,207,067 137,207,067 17,225,276 12.6%
Motor Vehicles 9,646,027 9,646,027 2,805,058 29.1% 10,064,360 10,064,360 2,846,416 28.3%
Gross Receipts 70,000 70,000 24,355 34.8% 64,634 64,634 26,374 40.8%
Gross Motor Vehicle 0 0 0 0.0% 0 0 0 0.0%
Motor Vehicles-Interest 0 0 2,388 0.0% 0 0 2,446 0.0%
Delinquent Taxes 1,180,000 1,180,000 286,610 24.3% 1,150,000 1,150,000 386,455 33.6%
Interest on Delinquent Taxes 500,000 500,000 63,591 12.7% 475,000 475,000 61,824 13.0%
Late List Penalties 100,000 100,000 13,433 13.4% 75,000 75,000 13,364 17.8%
Animal Taxes 185,000 185,000 48,691 26.3% 195,000 195,000 51,906 26.6%
Beer and Wine 270,428 270,428 0 0.0% 267,750 267,750 0 0.0%
Property Taxes Total 151,557,768 151,557,768 19,440,277 12.8% 149,498,811 149,498,811 20,614,060 13.8%
Sales Tax
Article 39 One Cent 10,770,001 10,770,001 0 0.0% 10,048,024 10,048,024 10 0.0%
Article 40 Half Cent 7,403,167 7,403,167 0 0.0% 6,995,840 6,995,840 0 0.0%
Article 42 Half Cent 5,393,616 5,393,616 0 0.0% 5,022,777 5,022,777 0 0.0%
Sales Tax Total 23,566,784 23,566,784 0 0.0% 22,066,641 22,066,641 10 0.0%
Licenses and Permits
Privilege License 13,000 13,000 573 4.4% 13,000 13,000 1,601 12.3%
Franchise Fee 315,000 315,000 0 0.0% 315,000 315,000 0 0.0%
Licenses and Permits Total 328,000 328,000 573 0.2% 328,000 328,000 1,601 0.5%
Charges for Services
Aging 80,100 80,100 14,323 17.9% 90,100 90,100 23,234 25.8%
Animal Services 189,150 189,150 52,500 27.8% 196,850 196,850 45,401 23.1%
Asset Management 2,000 2,000 125 6.3% 2,000 2,000 0 0.0%
Board Of Elections 59,900 59,900 60 0.1% 110 110 0 0.0%
Child Support 1,000 1,000 225 22.5% 1,100 1,100 300 27.3%
Cooperative Extension 20,500 20,500 200 1.0% 45,000 45,000 1,375 3.1%
DEAPR 406,186 406,186 39,228 9.7% 335,993 335,993 85,309 25.4%
Emergency Services 2,445,715 2,445,715 716,284 29.3% 2,642,215 2,642,215 295,924 11.2%
General Revenue 691,585 691,585 0 0.0% 629,890 629,890 0 0.0%
Health 1,858,817 1,783,095 435,009 24.4% 1,805,877 1,805,877 446,019 24.7%
Library 26,297 26,297 3,977 15.1% 27,550 27,550 6,824 24.8%
OPT 88,144 88,144 5,064 5.7% 105,100 105,100 7,927 7.5%
Planning&Inspections 1,413,050 1,413,050 336,249 23.8% 1,079,017 1,079,017 519,778 48.2%
Register Of Deeds 1,778,900 1,778,900 517,466 29.1% 1,552,000 1,552,000 476,232 30.7%
Sheriff 2,100,000 2,100,000 352,357 16.8% 2,785,000 2,785,000 199,932 7.2%
Social Serices 21,000 21,000 7,195 34.3% 0 21,000 7,690 36.6%
Tax 368,701 368,701 13,174 3.6% 383,701 383,701 11,048 2.9%
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FY2017-18 FY2016-17
YTD% YTD
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended
Charges for Services Total 11,551,045 11,475,323 2,493,435 21.7% 11,681,503 11,702,503 2,126,995 18.2%
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FY2017-18 FY2016-17
YTD% YTD
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended
Intergovernmental
Aging 570,510 597,420 99,675 16.7% 541,605 542,287 22,027 4.1%
Animal Services 223,993 223,993 21,441 9.6% 207,915 207,915 39,593 19.0%
Child Support 1,366,375 1,366,375 129,770 9.5% 1,322,766 1,322,766 143,246 10.8%
County Debt Services 322,164 322,164 0 0.0% 0 0 0 0.0%
County Manager 0 0 0 0.0% 30,000 30,000 0 0.0%
Criminal Justice Resource 334,120 334,120 83,530 0.0% 247,373 247,373 0 0.0%
DEAPR 145,701 149,372 0 0.0% 132,672 136,487 3,815 2.8%
Emergency Services 80,153 80,153 0 0.0% 0 0 0 0.0%
General Revenue 165,880 165,880 41,470 25.0% 152,627 152,627 0 0.0%
Health 1,259,609 1,514,539 195,497 12.9% 1,079,093 1,084,093 285,496 26.3%
Housing/Human Rights 31,650 31,650 0 0.0% 0 0 0 0.0%
Information Technologies 19,645 19,645 0 0.0% 19,645 19,645 0 0.0%
Library 100,000 100,000 26,063 26.1% 100,000 168,636 26,400 15.7%
OPC Mental Health 50,000 50,000 8,385 16.8% 40,000 40,000 7,994 20.0%
OPT 866,771 866,771 6,709 0.8% 849,783 849,783 45,141 5.3%
Planning&Inspections 24,000 24,000 0 0.0% 24,000 24,000 0 0.0%
Public Safety Non-Dept) 262,231 262,231 69,489 26.5% 277,731 277,731 69,423 25.0%
Lottery Proceeds 0 196,500 0 0.0% 0 95,000 0 0.0%
Sheriff 659,388 659,388 2,058 0.3% 646,469 646,469 2,064 0.3%
Social Services 9,483,957 9,821,402 668,412 6.8% 10,048,900 11,388,319 1,746,722 15.3%
Tax 69,000 69,000 0 0.0% 67,000 67,000 0 0.0%
Intergovernmental Total 16,035,147 16,854,603 1,352,500 8.0% 15,787,579 17,300,131 2,391,920 13.8%
Transfers from Other Funds
Impact Fees 3,353,000 3,353,000 0 0.0% 2,640,000 2,640,000 0 0.0%
Other 412,600 412,600 0 0.0% 72,600 72,600 0 0.0%
Transfers from Other Funds
Total 3,765,600 3,765,600 0 0.0% 2,712,600 2,712,600 0 0.0%
Investment Earnings Total 265,000 265,000 101,794 38.4% 155,000 155,000 25,603 16.5%
Miscellaneous Total 2,817,629 2,966,788 229,469 7.7% 886,734 983,287 249,771 25.4%
Appropriated Fund Balance
Total 9,769,060 9,769,060 0 0.0% 12,726,944 12,726,944 0 0.0%
Total General Fund Revenue 219,656,033 220,548,926 23,618,049 10.7% 215,843,812 217,473,917 25,409,960 11.7%
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Expenditures by Functional Leadership Team (1st Quarter)
Summary- General Fund
FY2017-18 FY2016-17
YTD% YTD%
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended
Community Services
Animal Services 2,095,292 2,095,292 407,223 19.4% 1,998,579 2,011,675 467,438 23.2%
Cooperative Extension 384,780 384,780 58,847 15.3% 394,843 398,343 62,975 15.8%
Department of Environment,
Agriculture,Parks&Recreation 4,073,800 4,095,653 1,002,722 24.5% 3,760,893 3,847,193 933,615 24.3%
Economic Development 578,725 578,725 124,569 21.5% 529,029 532,550 123,718 23.2%
Non-Departmental 2,352,465 2,353,465 607,990 25.8% 2,483,505 2,533,140 779,945 30.8%
Orange Public Transportation 1,586,943 1,586,943 284,754 17.9% 1,473,738 1,477,729 220,009 14.9%
Planning&Inspections 3,134,861 3,134,861 633,765 20.2% 2,889,005 2,951,709 658,426 22.3%
Recreation Municipal 125,108 125,108 35,365 28.3% 125,108 125,108 35,365 28.3%
Community Services Total 14,331,974 14,354,827 3,155,235 22.0% 13,654,700 13,877,446 3,281,490 23.6%
General Government
Board of County
Commissioners 913,708 913,708 294,409 32.2% 882,158 897,683 296,122 33.0%
Board of Elections 830,014 830,014 127,577 15.4% 692,777 693,547 134,366 19.4%
County Attorney's Office 590,669 590,669 129,570 21.9% 575,714 575,714 125,961 21.9%
County Manager's Office 2,821,481 2,821,481 1,503,525 53.3% 2,923,881 2,968,511 1,462,965 49.3%
Non-Departmental 102,500 102,500 73,050 71.3% 120,900 143,770 170,096 118.3%
Register of Deeds 985,215 985,215 271,302 27.5% 932,603 932,603 239,246 25.7%
Tax Administration 3,710,504 3,710,504 846,413 22.8% 3,620,799 3,653,317 987,736 27.0%
General Government Total 9,954,091 9,954,091 3,245,846 32.6% 9,748,832 9,865,146 3,416,492 34.6%
Public Safety
Courts 70,000 70,000 10,005 14.3% 81,455 81,455 11,362 13.9%
Criminal Justice Resource 481,432 483,932 84,204 17.4% 345,608 350,608 39,572 11.3%
Emergency Services 10,975,924 10,975,924 2,144,523 19.5% 10,499,901 10,559,836 2,038,168 19.3%
Non-Departmental 418,047 418,047 88,415 21.1% 411,052 412,052 91,088 22.1%
Sheriff 13,638,496 13,638,496 2,943,314 21.6% 13,604,538 13,710,033 2,866,931 20.9%
Public Safety Total 25,583,899 25,586,399 5,270,461 20.6% 24,942,554 25,113,983 5,047,121 20.1%
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FY2017-18 FY2016-17
YTD% YTD%
Original Budget Revised Budget YTD Actual* Expended Original Budget Revised Budget YTD Actual Expended
Human Services
Child Support Services 1,062,393 1,062,393 228,253 21.5% 990,868 990,868 215,161 21.7%
Department of Social Services 18,772,740 19,110,185 3,846,620 20.1% 19,001,659 20,461,929 5,214,229 25.5%
Department on Aging 2,092,869 2,239,684 543,960 24.3% 1,995,475 2,165,743 499,535 23.1%
Health Department 9,912,099 10,099,879 2,493,380 24.7% 9,206,976 9,313,821 2,224,040 23.9%
Housing,Human Rights,&
Community Development 386,298 386,298 37,141 9.6% 519,341 520,099 49,671 9.6%
Library Services 2,243,717 2,243,717 494,579 22.0% 2,146,214 2,218,186 474,587 21.4%
Library Municipal 568,839 568,839 142,735 25.1% 568,839 568,839 142,735 25.1%
Non-Departmental 1,419,326 1,418,326 102,408 7.2% 1,492,131 1,492,131 13,500 0.9%
OPC Area Program 1,050,187 1,050,187 262,547 25.0% 1,328,474 1,328,474 0 0.0%
Human Services Total 37,508,468 38,179,508 8,151,624 21.4% 37,249,977 39,060,089 8,833,458 22.6%
Education
Current Expenses 80,745,847 80,745,847 20,186,712 25.0% 77,201,412 77,201,412 19,300,353 25.0%
Health and Safety Contracts 3,354,000 3,354,000 0 0.0% 3,354,000 3,354,000 0 0.0%
One Time Discretionary 2,100,000 2,100,000 525,000 25.0% 0 0 0 0.0%
Other Related County Support 716,751 716,751 179,188 25.0% 703,928 703,928 175,982 25.0%
Recurring Capital 3,000,000 3,000,000 750,000 25.0% 3,000,000 3,000,000 750,000 25.0%
Education Total 89,916,598 89,916,598 21,640,900 24.1% 84,259,340 84,259,340 20,226,335 24.0%
Support Services
Asset Management Services 4,541,095 4,541,095 1,187,576 26.2% 4,347,271 4,574,463 1,426,355 31.2%
Community Relations 291,874 291,874 47,275 16.2% 211,430 212,680 23,546 11.1%
Finance&Administrative
Services 11405,885 1,405,885 285,406 20.3% 1,306,220 1,326,782 311,158 23.5%
Human Resources 935,443 935,443 190,232 20.3% 937,651 943,283 210,684 22.3%
Information Technologies 3,328,135 3,328,135 1,379,560 41.5% 3,209,342 3,290,132 1,288,152 39.2%
Non-Departmental 3,598,765 3,598,765 264,076 7.3% 4,046,095 4,054,928 234,561 5.8%
Support Services Total 14,101,197 14,101,197 3,354,125 23.8% 14,058,009 14,402,267 3,494,456 24.3%
Non-Departmental
Debt Service 26,759,536 26,759,536 9,135,117 34.1% 26,211,196 26,211,196 7,851,241 30.0%
Transfers to Other Funds 1,500,270 1,696,770 0 0.0% 5,719,204 5,814,204 0 0.0%
Non-Departmental Total 28,259,806 28,456,306 9,135,117 32.1% 31,930,400 32,025,400 7,851,241 24.5%
Total Expenditures 219,656,033 220,548,926 53,953,307 24.5% 215,843,812 218,603,672 52,150,593 23.9%
*YTD Actuals include Encumbrances
12
WA
VIII
� aro
� I �0 I� i 1�IIIIII� ��
THE NORTH CAROLINA ECONOMIC OUTLOOK, 3rd QUARTER 2017
Prepared by Dr. Michael L. Walden,William Neal Reynolds Distinguished Professor,
Department of Agricultural and Resource Economics,North Carolina State University
Contact Methods:phone: 919-219-8923, e-mail: michael walden(aancsu.edu
TEN NORTH CAROLINA ECONOMC HEADLINES FOR 2017 AND 2018
1. Sectors leading growth in the state economy during the current recovery have been
professional and business services,information, and leisure and food services,while the
state's manufacturing sector continues to shift out of non-durable production to durable
production.
2. The pace of job growth in North Carolina has exceeded the pace of national job growth in
six of the last seven years.
3. While the headline unemployment rate for North Carolina has fallen to under 5%, a
broader measure including underemployed workers and individuals who have left the labor
force is still above 9%.
4. Gains in labor productivity in North Carolina have lagged national gains.
5. North Carolina's average wage rates—after adjusting for inflation— have only increased
3.3%since 2009,lower than the national gain of 3.6%.
6. The "hollowing-out" of the job market—meaning fastest gains occurring for high-paying
and low-paying jobs—has been stronger in the North Carolina than in the nation.
7. The state's large metros—Charlotte and Raleigh—continue to be fast-growing and have
accounted for almost two-thirds of total job growth in the state since 2009.
8. Real Gross Domestic Product in North Carolina will expand 2% in 2017 and 2.1%
in 2018, the same rates as in the nation.
9. The annual average state unemployment rate will fall 0.3 percentage points in 2017
and 0.1 percentage points in 2018. Statewide,payroll jobs will increase by 75,000 in
2017 and by 70,000 in 2018.
10. A majority of North Carolina's metropolitan regions are at, or close to, their
expected lowest unemployment rate of the current recovery cycle.
1
13
Statewide Sector Trends
Using the broadest measure of economic growth —the growth rate in real Gross Domestic
Product (GDP) -North Carolina's economy continued its upward trend in 2016 (Figure 1).
With the exception of a drop in real GDP in 2012, the state's economy has expanded since
2010.1 In both 2015 and 2016 North Carolina's real GDP growth rate exceeded the national
growth rates. North Carolina's growth rate exceeded the Southeast states' growth rate in 2015
but not in 2016. Although state level GDP data were not available for the first quarter of 2017
at the time of this report's preparation, wage and salary data show growth continued in the first
quarter of 2017 at approximately the same rate for North Carolina, the US, and Southeast states.
Figure 2 shows changes in production (real GDP)in key sectors of the North Carolina
economy from the bottom of the recession in 2009 to 2015 (latest year available for state data).
The top four sectors in growth have been professional and business services, information, leisure
and food services, and durable manufacturing. Note, however, the decline in output of non-
durable manufacturing. The contrast in growth between durable and non-durable manufacturing
since the end of the Great Recession suggests the re-shaping of the North Carolina economy—
especially in manufacturing—is continuing. Relative downsizing is still occurring in non-
durable sectors like apparel and textiles, while durable manufacturing industries such as
machinery and metals are expanding.
Figure 1. Real GDP Annual Growth Rate (%)in the North Carolina, US, and Southeast
States' Economies, 2010-2016.
3
2.5
2.
2010 201...1.. 012 2013.. 2014.. 2015 2016..
0.5
N C US SF
Source: U.S. Bureau of Economic Analysis
1 The decline of real GDP in 2012 was mainly due to a contraction in the pharmaceutical industry.
2
14
Figure 2. Economic Sector Growth Rate (%)in North Carolina, 2009-2015.
Prof&busunsess sery
Infforrnatuon
I...eu:ure &food servuce
DurabOe rnanuff
Trade
franspp&warehousung
Funancual servuces
Educ&heaOth care
Farrnung&forestry
Constructuon
Euu 00000. 10100100oni 006 aiu
30 20 J..0 0 10 20 30 40 50
Source: U.S. Bureau of Economic Analysis.
Statewide Labor Market Trends
Figure 3 shows recent annual job growth rates in North Carolina and the U.S. In six of
the seven years from 2010 to 2016 North Carolina's annual job growth rate exceeded the
national job growth rate (the exception was 2011). For the first six months of 2017, both North
Carolina and the U.S. added jobs at an annual rate of 1.6%.
There's also a noticeable trend in the job growth rates for both the nation and North
Carolina. Job growth rates generally increased from 2010 to a peak in 2014 (for the U.S) or
2015 (for North Carolina) and then have dropped. Jobs are still being added in 2016 and 2017,
but just at slower rates. The state added over 99,000 payroll jobs in 2016, but if the current pace
continues, the gain will be closer to 75,000 in 2017.2 This trend could simply be a typical pattern
of accelerating growth immediately after a recession, then followed by more moderate growth as
2 Annual changes are measured on a June to June basis.
3
15
Figure 3. Annual Job Growth Rates (%) in North Carolina and the U.S., 2010-2017.
2.5
2
1.5
I I I I
0
2010 2011 201...2 2013 201...4 201...5 2016 2017
C NUS
Source: Nonfarm employment numbers from the U.S. Bureau of Labor Statistics.
Figure 4. Alternative Unemployment Rate (%) Measures for NC and the US, 2010 and
2016.
18
16
1111
14
12
10 1111
EIiJ I I 6 1111
0 0
4
1111
0 0
0 0 Mill 11 11
0
HeadOonn 05 1J6
11111111111NC 2010 MI NC 2016 IIIIIIIUS 2010 •US 2016
Source: U.S. Bureau of Labor Statistics; annual averages.
4
16
the economic recovery matures. Or it could indicate a more serious issue of underlying
problems with sustaining favorable job growth.3
Figure 4 illustrates alternative unemployment rate measures for North Carolina and the
U.S. in 2010 and 2016. The"Headline" rate is the rate commonly quoted in media outlets.
However, to be unemployed by this measure, an individual must be without work, must want to
work, and must have actively looked for work in the last month. Those who don't meet the last
condition are often termed"discouraged workers". The "U5" measure eliminates the condition
of looking for work and so includes discouraged workers. "U6" further counts as unemployed
individuals who indicate they are working part-time only because they cannot find full-time
work.
It is clear from the figure that both North Carolina and the U.S. have made progress in
reducing all three unemployment measures. In 2016 the Headline and U5 measures were slightly
lower for the U.S. than for North Carolina, while the U6 measure was marginally higher for the
U.S. than for North Carolina. The conclusion is that North Carolina has seen better
improvement for workers moving from part-time jobs to full-time work.
There has also been an increase in the labor force participation rate for North Carolina.
The rate gained almost a full percentage point from its recent low level in 2014 to 2016, a
significant improvement over the national trend. Still, North Carolina's participation rate is
almost a percentage point less than the national rate.4
Figure 5. Annual Real Wage Rate Changes (%), NC and the U.S., 2010-2017.
6
S
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3
II IIIIIIIIII
00 2 IIIIIII
IIIIIIII
1..
IIIII pllllllll"'IIIIIIIIIIIII II
0 11111111 pllllllllllllll
IIIIIIIIIIIII IIIIIII
IIIIIIIIIIII
3
2010.. 2011.. 2012.. 2013.. 2014 2015 2016.. 2017
imuuuuuuuuuuumuuuuuum N C V..J S
Source: U.S. Bureau of Labor Statistics, May of each year using the CPI deflator.
3 One such problem could be a lack of marketable skills among some jobless individuals.
4 The labor force participation is calculated as the percentage of individuals 16 years old and over who are in the
labor force, meaning they are working or actively looking for work. An aging population and an increase in the
number of individuals extending their education in college are two of the main reasons for the participation rate's
downward trend in recent decades.
5
17
The paths since the end of the Great Recession of annual changes in private sector real
(inflation-adjusted)wage rates (average hourly earnings) in North Carolina and the nation are
shown in Figure 5. In the five years from 2010 to 2014 real wage rate changes were negative in
North Carolina for four of those years, compared to one for the nation. However, in the three
years from 2015 to 2017, the state's wage rate gains have been the same or higher than the
nation's, suggesting better improvement in North Carolina's labor market in more recent years.
Between 2009 and 2017, real wage rates in North Carolina increased 3.3%, compared to 3.6%
for the U.S.
North Carolina's labor force (defined as individuals aged 20 to 59)has continued to
expand faster than the nation's, rising 8%between 2010 and 2016 compared to a gain of 2.3%
for the nations A major reason is greater in-migration of out-of-state households moving to
North Carolina. In every year from 2010 to 2016, North Carolina has ranked between 11th and
13th among states in the rate of net in-migration, defined as the difference between the number of
individuals moving to North Carolina from other states and the number of individuals moving
from North Carolina to other states, with the result expressed as a rate per 1000 North Carolina
residents.6
However, a continuing challenge for the state is its lag in labor productivity
improvement. In only one year since 2010 has labor productivity in North Carolina improved.
As a consequence, the state's aggregate labor productivity declined from 2010 to 2016.7 In
contrast, aggregate national labor productivity improved from 2010 to 2016.
One potential reason for this disparity is the distribution of job gains by income. From
2010 to 2016, almost half(48.4%) of the jobs added in North Carolina were in lower-paying
economic sectors. By comparison,just under 40% (39.6%) of jobs added at the national level
were in this category. Also, middle-paying jobs accounted for 31% of the job gains in North
Carolina from 2010 to 2016, much less than the national share of 44.4% for middle-paying jobs.
Since lower-paying jobs tend to have lower rates of labor productivity, the differences in the
income levels of jobs created in North Carolina and the country likely account for a large part of
the differences in productivity trends.8
The job trends for 2010 to 2016 are part of a longer run trend in North Carolina of a
"hollowing-out" of the labor force, implying faster growth in higher-paying and lower-paying
jobs and smaller or negative job growth in middle-paying jobs (Figure 6).
5 Rates are from the U.S. Bureau of the Census and the North Carolina Office of Management and Budget.
6 www.governing.com
'The decline in North Carolina labor productivity between 2010 and 2016 was led by double-digit drops in
productivity in the utilities, nondurable manufacturing,and transportation sectors.
$ High-paying jobs are those in professional and technical, management,financial services,and information
sectors; middle-paying jobs are in construction, manufacturing,education and health care,wholesale trade,and
transportation; and lower-paying jobs are in natural resources,administrative services, leisure and hospitality,
retail trade,and other services sectors. On the positive side, North Carolina did generate a higher percentage of
job growth during the 2010 to 2016 period from higher-paying jobs than the nation (20.6%versus 16%). Data are
from the U.S. Bureau of Labor Statistics.
6
18
Figure 6. The "Hollowing-Out" of the Labor Market, Percentage Change, 2001-2015
(Percentage Change in Jobs Classified by Level of Pay in North Carolina and the US).
30
20
I I 1111111
Q
10
Hugh Payung P` uddOe Payung I...ow Payung
IIIIIIIIII NC •US
Source: U.S. Bureau of Labor Statistics.
Hence, during the current economic recovery cycle, compared to the nation, more of
North Carolina's economic growth has been created by increases in the labor force than by
improvements in labor productivity.
Regional Trends
Figure 7 shows a clear trend of faster job growth continuing to occur in North Carolina's
larger regions during the current economic recovery. Indeed, the Charlotte and Raleigh
metropolitan areas accounted for 64% of the state's job growth during the period. Wilmington,
Asheville, and Durham also had above-state-average job growth. Two regions, Goldsboro and
Rocky Mount, lost jobs in the 2010-2017 time span.
The regional labor market trends reflect the differing impacts on localities of large
economic and social trends impacting the nation and state. Among these are the growth of
expanding industries in technology, research, and financial services in large metropolitan regions
7
19
Figure 7. Job Growth Rates (% Change)in North Carolina Regions, 2010-2017.
CharOotte 1IIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUIIUII
R a O e u g h 101111111111011111111101111111110111111111011111111101111111110111111111011111111101111111110111111111011111111101111111110111111111011111111101111111110111111111011111111101111111110111111111011111111101111111110111111111011111111101111111110111111111011111111101111111110111111111011111111101111111110111111111011111111101111111
VV u 0 rn u n gt o nIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
deshevu0Oe IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
Durham
State
Bur u n gt o nIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII
VV onstan Sa 0 101110MOMMOMMOMMOMMMO
Greensboro 10110MMOMMOMMOMMOMM
H ckory 10110UOMOMOMOMOMOMOMOMOMOMOMOMMIN
Creenvu0Oe 1000MOMMUMMUMMUMEME
Rura0 NC 1000MOMMUMMUMMUMI
New Bern 10110MERMOMOMOMINIE
lacks,onvo0OeI11II II
Fayettevu0On 1MMI
G. Fie 1
IIIIIIII or, » °opoi
1 » 0 5» 1 1 2.0 25
Source: U.S. Bureau of Labor Statistics, based nonfarm employment from February 2010(low point of job market)
to May 2017 (latest available data) using seasonally-adjusted data. Rural NC includes counties outside the listed
metropolitan areas.
and the on-going downsizing of nondurable manufacturing in small town and rural regions; the
popularity of large metropolitan areas to highly-educated millennial generation individuals
combined with the movement of college-bound youths out of small-town and rural areas; and the
gains from international trade to the economic sectors of large metropolitan areas contrasted with
the losses from international trade to the economic sectors of small town and rural areas.
Forecasts
The NCSU Index of North Carolina Leading Economic Indicators (Figure 8) has
followed a modest upward trend since late 2015, suggesting gradual improvement in economic
growth for the rest of 2017. Figure 9 shows recent real GDP growth in North Carolina has
closely tracked the national GDP growth rate. As previously discussed, North Carolina's faster-
than-the-nation labor force growth is being countered by its slower-than-the-nation productivity
improvements. Therefore, a reasonable forecast for real GDP growth in North Carolina in the
near term is real GDP growth in the nation.
8
20
Figure 8. NCSU Index of North Carolina Leading Economic Indicators
105
100
95 1IIIIIIII 1
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111„11,
1,1,1,1,1,0111,1,1,1,1,1„,
In ,,I' lo 11
90
116
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lo 0110111 IIIIII """"
85 1111111
/11
80 111111111111111111111
1111
75
70
_a >. tio > m >. 00 > ID >- 00 > ID >- 00 > ID >- 00 > ID >- 00 > ID >- 00 > ID >- 00 > " a j 0_ 0 " 1:1)
1:1) (0 = 0 1:1) (0 = 0 1:1) (0 = 0 1:1) (0 = 0 (1) (0 = 0 a) co = 0 (1) (0 = 0 (1) (0 = 0 (.0 = (1) (1) (0 a) c) (0 c
N N °() 00 00
N N (N "") 01 Cr-C1- .r .r Lni-nUlLrltp '—■tp Wi•-., .—
Or' 000° 000M00 —INs—IMs—II- c—lc—IT—is—is—lc—IT_I LO s—I c—IT_I h
° ° 0 0 ° ° 0 0 ° ° 0 0 ° T—I0 0 ° T—I0 0 ° T—I0 0 ° T—I0 0 ° T—I0 0 0 ° O 0 0 10 0 0 s—I
N A c9,, N N N s i c9,, N N N
s i 9 2 N s, r s, N s i c9,, N s, r s, N s i c9,, N s, N r A 9 CA rs1 rsi N N N rsi 0 N N N r9si
Source: calculations by Dr.Michael Walden
...................................................................................................................................................................................................................................................................................................................................
Figure 9. Real GDP Growth Rate Trends (Annual % Rate) for NC and the US, 1998-2016
6
5 vro In
4111 „,„ 1111111111
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4 .
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1
2
„P'' SIDI
Illif
el
'1'1'1'1'1 ■:':':':'
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
annummunNC rate .11..11S rate
Source: U.S. Bureau of Economic Analysis.
9
21
National real GDP growth began slowly in 2017, rising only 1.4% on an annualized basis
in the first quarter of 2017. However, forecasts by both the Federal Reserve and the
Congressional Budget Office predict annual growth of between 1.7% and 2.3%in 2017 and
1.7% and 2.4%in 2018.9 Even the Trump Administration, which has been more optimistic
about economic growth forecasts, sees the economy expanding at rates near this range,
specifically 2.3%in 2017 and 2.5%in 2018.1° Therefore, it is reasonable to accept the CBO and
Federal Reserve ranges for North Carolina and use a midpoint for each year, resulting in
forecasted annual growth rates of real state GDP of 2% in 2017 and 2.1% in 2018.
North Carolina's unemployment rate was traditionally lower than the national
unemployment rate. For example, from 1976 to 2000, the state's jobless rate averaged 1.4
percentage points under the U.S.jobless rate. However, likely as a result of the economic
impacts of globalization on small-town and rural regions of the state, this differential has
changed in the 21st century, and North Carolina's unemployment rate has averaged higher than
the national rate. Since 2014, the state's jobless rate has averaged 0.2 percentage points higher
than the national rate.
Figure 10. Long-Term Trends in the North Carolina Headline Unemployment Rate (%).
unemployment rate
L
10- �f
7.5-
fro.)
( r,S4 bL •Lr., y
\T"\
2.5-
2
1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
Month
Source: Bureau of Labor Statistics
9 Congressional Budget Office,An Update to the Budget and Economic Outlook:2017-2027,Washington, DC,June
29,2017; Board of Governors of the Federal Reserve System, Federal Open Market Committee Projections,
Washington, DC, March 15,2017.
to Office of Management and Budget, Budget of the U.S. Government, Fiscal Year 2018:A New Foundation for
American Greatness,Washington, DC, May 23,2017. The International Monetary Fund (IMF) projects the exact
same real GDP growth rates for 2017 and 2018 as the Trump Administration (IMF, World Economic Outlook
Update, Washington, DC,January 16,2017).
10
22
The headline North Carolina unemployment rate has already fallen to low point almost
equal to the low point in the previous economic expansion of 2001-2007 (Figure 10). However,
this low point is still higher than the low points in the headline unemployment rate in earlier
economic expansions. Yet the significant upgrading of labor force requirements during the last
twenty years and the increased automation of many job tasks means the lowest unemployment
rate associated with a growth cycle will likely be higher than during expansions of the 20th
century. The forecasts by the Federal Reserve suggest a 0.2 percentage point drop in 2017 and a
0.1 percentage point reduction in 2018 in the national annual average headline unemployment
rate, while the Congressional Budget Office predicts a 0.4 percentage point reduction in 2017
and a 0.1 percentage point drop in 2018. Taking an average of these two forecasts and applying
them to North Carolina gives a 0.3 percentage point reduction in 2017 and a 0.1 percentage
point fall in 2018 in the headline annual average unemployment rate for the state. Payroll
jobs will increase by 75,000 in 2017 and by 70,000 in 2016.
Economic conditions will continue to vary for the state's regions, meaning differing
regional forecasts for 2017 and 2018. Figure 11 shows the difference between the May 2017
headline unemployment rate in the state's major metropolitan regions and the lowest May
unemployment rate of the previous growth cycle in the region.11 The same month (May)is used
for the comparisons because the jobless rate data are not seasonally-adjusted at sub-state levels.
A positive number in Figure 11 means the regional jobless rate has not reached the low point of
the previous growth cycle, whereas a negative number in Figure 11 indicates the current regional
jobless rate has fallen below the low point of the previous growth cycle.
Based on this analysis, Rocky Mount, Goldsboro, and Jacksonville have the biggest drops
in their unemployment rates of at least 0.5 percentage points in order to reach the lows of the
previous cycle. A second set of regions -including Fayetteville, Wilmington, New Bern,
Raleigh, Durham, Asheville, Greensboro, and Greenville—have current jobless rates very close
to their lows in the previous cycle. A third group of four metros —Winston-Salem, Burlington,
Charlotte, and Hickory— currently have unemployment rates well below their lows in the
previous economic growth cycle.
There are several implications of these results. First, over half(eight of fifteen) of the
state's regions appear to be close to their low unemployment rate for this cycle.
Second, three other regions —all in the east—need 0.5 to 1 percentage point drops in their
jobless rate before reaching their previous cycle low. These three regions have all been
challenged by recent economic forces. However, as growth continues over the next two years,
tight labor markets in other regions should motivate greater business expansion in areas that have
lagged in the economic recovery.
Third, there are four regions —interestingly all in the western part of the state—that
already have unemployment rates below their previous lowest levels during the last growth
cycle. But there are some caveats —both positive and negative. Charlotte's lowest jobless rate
during the previous growth cycle may have been"artificially high" due to the slow recovery in
the region's significant financial services sector. This sector suffered major downsizing during
11 In most cases this was May,2007. In one case the date was May 2006,and in two cases the date was May 2008.
11
23
Figure 11. Difference Between May 2017 Unemployment Rate and Lowest May
Unemployment Rate in Previous Recovery Cycle (% point).
.A..5
1
1\ \1N \N. „In
2
��a joss ��\ oo <y. 6,0,3. �. \\ �® s,e, do
0 \64Q �„ate ��e �e ,z,\* e �.�” ear c (s2',., �° ��\Q \;\"`
Source: U.S. Bureau of Labor Statistics.
and after the Great Recession. So Charlotte's current unemployment rate may not be so low—
relative to the previous cycle's low—as it appears. Supporting this argument is that Charlotte's
current(May 2017)unemployment rate is very similar to the unemployment rate of its sister
rapid-growth region, Raleigh (4.0%versus 3.8%).
Hickory and Winston-Salem's relatively low jobless rates may be driven by another
factor— excessively slow or negative growth in the labor force. Between May 2010 and May
2017, Winston-Salem's labor force grew only 1.2%, while Hickory's declined by 3.3%. Slow or
negative growth in the labor force can be caused by workers without jobs giving up on job
searches, therefore not qualifying as officially unemployed by the definition of the headline
unemployment rate. If these individuals were included as unemployed, the regions'jobless rates
would be higher. Hence, among the four regions with current jobless rates well below their
lows of the previous growth cycle, Burlington appears to have made the most progress.
Key Conclusions
Based on both national and state trends, it is expected economic growth will continue in
2017 and into 2018. In North Carolina, real GDP growth in both years will be near 2%, between
70,000 and 75,000 net new payroll jobs will be added each year, and progress on reducing the
headline unemployment rate will be minor for the state as well as for most of the state's regions.
12
24
Economic challenges continue with uneven growth across the state, the hollowing-out of
the labor force, slow improvement in wages, and labor productivity gains that lag national gains.
13