It’s often said we need to know where we’ve been to know where we’re going.
This adage can certainly be applied to the economy. Old timers like me, who have been around North Carolina for decades, know the state is a different place today than it was 30 or 40 years ago. Textiles, tobacco and furniture are still here, but are a much smaller part of the economy today than they were then. We’ve changed, but to what?
Many would say the “to what” has not been good. There’s an image of low-paying service jobs replacing well-compensated factory jobs. While some of this has certainly occurred, the reality of economic change is more complicated.
A couple of years ago I wrote a book about North Carolina’s economy called North Carolina in the Connected Age. In it, I detailed the transformation of the North Carolina economy. At its peak, the state’s legacy industries — the Big Three of tobacco, textiles and furniture — accounted for almost one-fourth of all of North Carolina’s economic activity. By the start of the 21stcentury, the Big Three’s share was down to less than 8 percent.
Fortunately for our state, we both imported and home-grew new industries. We imported motor vehicle parts manufacturing from the Midwest. We first imported and then expanded the technology and pharmaceutical sectors. Food processing expanded along with the shift in agriculture from crops to livestock. And banking — headquartered in Charlotte — grew to be the state’s largest single industry through mergers and acquisitions throughout the country.
New industries growing
Indeed, while the Big Three were shrinking, these new industries of technology, pharmaceuticals, banking, food processing and motor vehicle parts — the new Big Five as I call them — were growing to account for over 15 percent of the state’s economy by 2000.
But we’re now in 2011. What’s happened over the past decade? Is what makes North Carolina tick still changing?
The answer is an unqualified “yes.” The Big Three’s share of the state economy is now down to 4 percent, while the Big Five’s proportion is up to 20 percent. So the transformation of North Carolina’s economy from the traditional industries to the new industries continues.
Yet this doesn’t mean there haven’t been shake-ups. Among the new Big Five, banking and pharmaceuticals had the smallest gains, growing only slightly faster than the overall economy. Next were more rapid gains in food processing and motor vehicle parts.
The clear star in industry growth in North Carolina during the last decade was technology. Its production value increased at triple digit rates. Indeed, the value of all durable manufacturing in the state soared by over 40 percent, surpassing the national growth rate in durable manufacturing by three to two.
Was this continuing shift in industries in North Carolina good for the state? Change is always hard. Anytime one set of industries declines while others grow, some workers will benefit while others lose. Workers from the old jobs don’t necessarily have the skills for positions in the new industries. This is a continuing issue in North Carolina and the country.
But in the turbulent first decade of the 21stcentury, we can say that North Carolina out-performed the nation. From the start of the decade’s economic expansion beginning in late 2001 to its end in 2007, North Carolina’s job growth beat national job growth 8 percent to 5.5 percent, and the state’s value of economic production outpaced national production 18 percent to 16 percent. So we were able to grow and change at the same time.
Will our state’s economic transformation continue? Yes. Will the same industries dominate the state’s economy a decade in the future? Likely not! There’s already evidence from the last decade of new economic upstarts, specifically information and the military, both of which had fast growth in the 2000s. To these may be added alternative energy, tourism and possibly auto assembly in the future.
One thing I’ve learned from studying economics for almost 40 years is that change is the one constant. The North Carolina economy is an excellent example of this principle. The eternal question is, change to what? You decide!
EDITORS NOTE — Mike Walden is a William Neal Reynolds Professor and North Carolina Cooperative Extension economist in the Department of Agricultural and Resource Economics of North Carolina State University’s College of Agriculture and Life Sciences. He teaches and writes on personal finance, economic outlook and public policy. The College of Agriculture and Life Sciences communications unit provides his You Decide column every two weeks. Previous columns are available at http://www.cals.ncsu.edu/agcomm/news-center/tag/you-decide. Related audio files are at http://www.ncsu.edu/waldenradio/