Inter-Industry Trends

Main Trends

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North Carolina and the National Economy

North Carolina is the 11th largest state in the United States by population, with 8.5 million residents in 20041 and 4.4 million people in the labor force in 20052. 5.0% of the labor force is estimated to be unemployed, comparable to the 4.9% national rate. This overview of North Carolina and its role in the U.S. economy focuses on the seven industries covered in this web site. Of critical interest is the sheer magnitude of changes in the last decade and the ramifications of these changes for North Carolina's communities, industries, and people. In addition, how North Carolina has fared relative to other states will help to identify some of the strengths and weaknesses of NC industry. Finally, an assessment of the transition to new industries will help to indicate where special efforts may be needed to improve the outlook for North Carolina's economy.

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Positive Developments

Continued national strength in traditional manufacturing and resource-based industries,...

As indicated by Table 1, North Carolina continues to hold a disproportionately high percentage of national employment in most of the seven industries studied. Of particular interest are the traditional manufacturing and agricultural industries, as these have generally been located in North Carolina for some time. North Carolina houses 25% of US tobacco employment, 10.9% of US textile and apparel employment, over 9% of US furniture employment, and over 5% of US hog farming and processing employment. In 1996, these shares were 26.5%, 14.9%, 12.6%, and 5.2% respectively.

...historically among the largest industries in the state.

Table 2 displays a more detailed picture of the industries under study, including North Carolina's share of U.S. industry totals. In 1996, the textiles and apparel, furniture, tobacco, and hog farming industries together composed 11.7% of NC employment. However, this percentage declined to 5.1% by 2006. In part, this decline is due to the expansion of the state economy. However, the proportional decline of state employment is strongly tied to real declines in employment for the textiles and apparel, tobacco, and furniture industries.

Hog farming is a dynamic, resource-based industry.

The hog farming industry departs from the trend visible in the other manufacturing and agricultural industries in its growth over the 10-year period. Employment in this industry has increased by 6%, and North Carolina possesses 5.6% of national employment in this industry. While expansion has slowed since the early 1990s, growth rates exceed the national average in this decade. As shown in Table 4, North Carolina ranks sixth in employment growth for hog farming and processing in the United States, and it is one of two top states with significant employment growth outside the Midwest.

North Carolina has fared better than other important states in some declining industries,...

Though these industries are declining at the state and national levels, North Carolina has fared better than some states in weathering these changes. As shown in Table 3, North Carolina has the sixth fastest rate of job loss in the tobacco industry, third fastest for textiles and apparel (10th out of 15 states with at least 2% of national employment), and it has the second steepest employment decline in the US furniture industry. Thus, other states face even more severe economic dislocations.

...and continues as a national leader in production within these industries..

North Carolina also possesses lead positions in these industries in terms of the value of industry shipments. This may indicate the presence of high-value activities, high benefits to economies of scale, and/or highly productive workers, but further research is necessary in order to ascertain the relative importance of each of these factors. Table 5 indicates the importance of traditional industries to the overall US industry in terms of the value of shipments. Two industries have declined in real value between 1997 and 2006: tobacco and textiles and apparel

Though small relative to the newer manufacturing and service industries covered below, traditional manufacturing and resource-based industries are significant in size within North Carolina. Tobacco is relatively high value given the small number of jobs in the industry. Textiles and apparel declined in value from $31.9 billion to $23.4 billion between 1997 and 2002, while furniture rose slightly from $7.3 billion in 1997 to $7.4 billion in 2003. Hog farming also fell slightly from $4.5 billion to $3.8 billion in 2006.

As shown in Table 6, North Carolina retains its historical lead in the tobacco industry, with approximately 19% of total US value generated in the state in 2002, nearly double the share of its nearest competitor, Virginia. North Carolina also accounted for 8.9% of US textile and apparel shipments in 2002, 8.5% of furniture shipments in 2006, and 3.4% of hog farming shipments, also in 2006. In both furniture and tobacco, North Carolina held the lead position in 1997, and in furniture, North Carolina had fallen to third place by 2006. Finally, the hog farming industry has grown in North Carolina over the period, though its national prominence is still somewhat less than other industries.

...and in terms of the scale of operations.

Table 8 indicates that NC firms tend to be larger than the national average in traditional industries. In the tobacco, textiles and apparel, and furniture industries, the average establishment size in North Carolina is higher than the national average, though tobacco farming activities are slightly smaller in North Carolina than for the United States as a whole. For example, in 2006, tobacco farms captured by the data contained an average of 6.6 employees per establishment in North Carolina, compared with 7.5 employees per establishment for the United States. In addition, hog farming industry establishments are also larger in North Carolina than for the nation as a whole, though North Carolina's concentration in farming activities, more than 30% of employees, lowers the industry-wide establishment size average for all industry activities, not just those dedicated to farming, below the national average.

Large firms relative to the United States are also apparent in the newer industries of biotechnology and information technology. Biotechnology establishments in North Carolina are nearly three times larger than the national average. In the information technology industry, manufacturing establishments are larger than the national average in both 1996 and 2006, while information and professional services establishments are smaller. In conclusion, larger establishments may indicate potential advantages due to economies of scale. In addition, the presence of larger establishments may indicate qualitatively different activities are present in North Carolina compared with the United States as a whole.

North Carolina is one of the fastest growing locations for the biotechnology and banking and finance industries, but it is only a major employer in the biotechnology industry.

As shown in Table 1, North Carolina is the 10th largest employer in the biotechnology industry (5th in biotechnology manufacturing), the 10th largest employer in banking and finance, and the 13th largest in information technology. However, these industries have grown at the national level by 34%, 26%, and 5% respectively (Table 4). In biotechnology and banking and finance, North Carolina exceeded overall US growth rates in these industries.

North Carolina is the fifth fastest growing center for biotechnology in the United States, and the fourth fastest growing location for banking and finance activities, as shown in Table 4. Employment has grown by nearly 45% for NC biotechnology and 41% for NC banking over the 10-year period, raising North Carolina's national rank in these two industries.

North Carolina is also a location for high value, new economy activities.

Biotechnology stands apart from other service-oriented and new economy industries in its prominence at the national level within North Carolina. As shown in Table 7, North Carolina is ranked eight for biotechnology activities in the United States, as measured by value. In contrast, North Carolina has not achieved national prominence within the information technology or banking and finance industries.

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Negative Developments

North Carolina's traditional strength in agriculture and manufacturing lies in declining industries, and North Carolina has one of the highest rates of job loss for the furniture and tobacco industries.

As previously shown, the tobacco, textiles and apparel, and furniture industries have declined in size at the national and state levels. This decline is especially problematic due to the sheer size and prominence of these industries in North Carolina. Put simply, decline in these traditional industries will entail dramatic impacts across North Carolina. For example, in the textiles and apparel industry, absolute employment decline stands at 64%. Moreover, states that are declining more rapidly than North Carolina in these industries are relatively small, as indicated by their national rank and industry employment shares. For example, the fastest declining state for the tobacco industry, Kentucky, is ranked third in 1996 with 7% of national employment, while three other raipidly declining states in the furniture industry, Tennessee, Michigan, and Virginia, are respectively ranked fifth, third, and eighth in 1996. Though not necessarily a negative development in light of employment growth in new industries, these losses have the potential to bring economic dislocations, high unemployment in communities, and adjustment costs before the benefits of new industries can be fully realized.

North Carolina has not attained national prominence in the banking and finance or information technology industries, as evidenced by employment -

While North Carolina is a top location for manufacturing and agricultural industries, it lacks national prominence in some of the services and research components of the industries studied, especially in the information technology and banking and finance industries. These are among the fastest growing industries at the national level.

According to Table 1, North Carolina's proportion of national employment has increased in the banking and finance and biotechnology industries, but has declined slightly in the information technology industry. Within information technology, manufacturing declined in its share of US employment. Though these industries have grown in importance within North Carolina, they do not yet compensate for the employment losses in declining industries.

and industry value trends.

As shown in Table 7, North Carolina lags in the banking and finance and information technology industries. Banking and finance in North Carolina encompasses 2% of the value of the national industry in 1997 and 2.3% in 2002. Industry value produced in North Carolina has declined in both absolute and relative terms between 1997 and 2002 for information technology, and North Carolina has fallen from 9th to 14th in the nation. To a large extent, this corresponds to a decline in manufacturing, coupled with an inability to keep pace with national growth in the services and information components of the industry. This trend may reflect low value production or an inability to compete with other states, but further research is necessary in order to assess North Carolina's competitiveness.

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Wage Trends

Table 9 presents average annual wages for these seven industries for the United States and North Carolina. NC establishments, on average, paid lower wages in all but the textiles and apparel industry than US establishments as a group. Additionally, from 1996 to 2006, wages in the textiles and apparel, furniture, biotechnology, and hog farming industries grew more slowly in North Carolina than in the United States. By 2006, wages in all industries except tobacco were lower in North Carolina than in the United States as a whole, though the mix of activities, particularly in tobacco, impacts the picture.

At the level of individual industry products, North Carolina wages are higher in 2006 than the national average in the cases of apparel, hog farming activities, banking, and information technology manufacturing. Additionally, a comparison of wage growth rates shows NC wages rising faster than the national averages in only a handful of cases. The most consistent North Carolina advantage is in the banking and finance industry, where wages have increased by 102% in North Carolina, compared with 69% nationally.

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Conclusion

North Carolina possesses traditional strength in manufacturing activities and some resource-based industries, but many of these industries face decline in light of global changes in production and trade barriers. North Carolina has moved in a major way into new economy activities, such as biotechnology, information technology, and banking and finance, but it has not met uniform success in achieving national prominence. In sum, North Carolina possesses advantage in manufacturing activities, but the information and services components of the information technology and banking and finance industries have met with less success.

Wages have generally lagged behind national averages, though the growth of wages varies across industries. For example, banking and finance wages have grown more quickly in North Carolina than in the nation as a whole, and North Carolina is one of the fastest growing states in banking and finance employment in the United States. In addition, the information included in this analysis does not include information regarding the role of entrepreneurial activity, new investments, or foreign activity, all important indicators of growth and competitiveness. Both reason for optimism and concern exist for North Carolina's economic transition away from traditional manufacturing industries and continued economic development.

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Resources
  1. Bureau of Labor Statistics. Quarterly Census of Employment and Wages, various years. Bureau of Labor Statistics web site [downloaded April 20, 2006].
  2. Bureau of Labor Statistics. Local Area Unemployment Statistics data set, 2006. Bureau of Labor Statistics web site [downloaded May 8, 2006].
  3. US Census Bureau, Annual Survey of Manufacturers, 2003. US Census Bureau, American FactFinder web site [downloaded April 20, 2006].
  4. US Census Bureau, Economic Census, 1997 and 2002. US Census Bureau, American FactFinder web site [downloaded April 20, 2006].
  5. US Department of Agriculture, Census of Agriculture, various years [downloaded April 20, 2006].
  6. US Census Bureau. North Carolina Quick Facts. [downloaded May 8, 2006].

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References
  1. US Census Bureau. North Carolina QuickFacts.
  2. Bureau of Labor Statistics. Local Area Unemployment Statistics.

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LAST UPDATED: February 4, 2008