Eastern North Carolina Businesses Weigh In On Labor Challenges

During the height of the Great Recession, workers in the eastern reaches of North Carolina actually fared a little better than both the state and nation. In 2009, the worst year of the downturn in terms of job losses, payroll employment in the combined Goldsboro, Greenville, Jacksonville, New Bern, and Rocky Mount MSAs declined by about 3.4 percent compared to around 5.5 percent in North Carolina and 4.3 percent in the U.S. (See chart below.) Yet, while the region’s job losses during the recession were less severe, data show that the region’s job growth has been much more sluggish than the state’s and nation’s since it ended. 

To learn more about why job growth in eastern North Carolina has been so tepid, the Federal Reserve Bank of Richmond worked with NCEast Alliance, the lead economic development organization serving eastern North Carolina, to facilitate a business and industry roundtable meeting in late October. The discussion group included representatives from a wide array of goods-producing and service-providing businesses from the five MSAs mentioned above.

The purpose of the meeting was twofold. First, we wanted to get a firsthand account of current economic conditions in the region by asking business leaders about what they were seeing in their own operations and how that related to the broader economy. Second, we sought to hear about the key challenges that business and economic development leaders in the region faced in growing the economy and, in particular, hiring.

On the first account, the participants were nearly unanimous in their assessment that business activity in the region was expanding. There was a broad array of business segments represented at the table – manufacturers of consumer and business goods, transportation and logistics firms, restaurants, real estate professionals, and a variety of business services firms (including legal, engineering, and finance). Generally, these business representatives indicated that demand for the goods and services they produce was robust, sales and revenues were increasing, and their expectations were for more of the same.

Moreover, the vast majority of meeting participants expressed their desire to hire workers to meet the increased demand for their products. Yet, despite the reportedly strong demand for labor, employment growth in the combined region lags the state considerably. Indeed, payroll employment in the region is still lower than it was prior to the recession, while in North Carolina and the U.S. payroll employment is about 6 percent above pre-recession peak levels. And over the past year, there has been virtually no job growth in the region.

What did the business leaders have to say about that? Nearly every participant in the meeting indicated that the biggest reason they weren’t hiring was an inability to find workers. While this dilemma is not unique to eastern North Carolina—we hear such reports in nearly every part of the Fifth District—the shortages appear to be more acute in the region. Many of the participants cited in-migration in other areas of the state (such as Charlotte, the Triangle, and Asheville) that simply isn’t taking place east of Raleigh. And an inability to attract labor is significantly constraining the region’s growth.

Trends in labor force data seem to support that argument. Beginning in 2011, labor force growth in eastern North Carolina has underperformed that of the nation and the state by a wide margin. And more often than not, that growth has been negative. Data show that there are fewer workers participating in the region’s labor force today than there were in 2011. (See chart below.) Without workers, these participants argued, open positions are going unfilled.

Unfortunately, meeting participants did not expect these trends to reverse course in the near future. Rather, some expressed concern that the problems may worsen for their companies as their existing workers get older and fewer younger workers enter the labor force. Thus, many are planning to incorporate more technology to increase efficiencies and reduce their reliance on labor.

While those business leaders in attendance remained optimistic that demand for their goods and services will continue to increase, they fully recognized that the region’s longer-term growth potential will be inexorably linked to the success it has in building its workforce.

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Views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Bank of Richmond or the Federal Reserve System.