Welcome to the Letter from the Chief Economist.
I can’t confess to knowing very much about North Carolina—when it comes to US culture and geography, the Boston area is really my wheelhouse. From where I sit further up the coast, I’ve heard the barbecue and beaches are good and the Hurricanes just started their hockey season. That’s about it.
But here’s what I’ve learned about North Carolina: it’s becoming one of the best states for attracting workers, and individual areas are doing even better, according to the Lightcast 2022 Talent Attraction Scorecard.
Among large counties (100,000 people or more), North Carolina has three in the top 20, and five more in the top 100, all on a steady climb, while the state itself ranks sixth. Throughout the state, new jobs are being added and finding new workers to fill them; the state is also fourth in net migration.
The Talent Attraction Scorecard project began at Emsi (before the merger with Burning Glass and rebrand to Lightcast) and is now in its seventh year. The research ranks all 50 states as well as every county, sorted into large, small (5,000–99,000 people) and micro (less than 5,000).
At the state level, the top performers were Florida and Texas, two of the biggest states n the country, but Idaho placed third—which I’m sure my colleagues at the Lightcast office In Moscow were proud to see.
Since the new data in this report covers the tumultuous pandemic years, the new rankings show how different communities fared in response to that disruption. There are two things I want to highlight from those findings:
Workers are looking for a place to call home. The availability and affordability of housing is one of the primary concerns facing the modern workforce. As remote work and other flexible arrangements have given employees the opportunity to live further from urban areas, they’re spreading out throughout the country—a trend we looked at a few months ago in a research report called “Rural’s Rise.”
2. Migration is key for the highest-performing areas, and engagement is key for everyone else. Seven of the top large counties in our rankings were among the top 10 for net migration gains in 2020, including all of the top five. More people means more jobs, which is a great deal for areas benefiting from that growth.
Everyone else will need to do more with less—and that means increasing labor force participation among the remaining workforce. This could include a richer system for identifying what skills the local workforce possesses and matching those skills to in-demand jobs.
Not every state can make the top ten or have its counties keep soaring in the rankings. But every place can benefit through better understanding how well they’re attracting the talent local employers need, and how that compares to similar communities.
US Gross Domestic Product grew at a 2.6% annual rate in the third quarter of 2022, a strong quarter of growth and higher than expected, especially after two quarters of negative growth to start out the year. (By comparison, the latest estimates show that China’s economy grew 3.9% from July to September, also above expectations).
From the detailed tables, residential investment (housing) dropped significantly at -26.4%, and there was also a small decrease in goods expenditures. On the other hand, services increased 2.8% and exports rose 14.4%, which is related to the ongoing strength of the dollar.
A few months ago, when the second-quarter GDP numbers came out showing two straight quarters of negative growth, I said that the tight labor market was keeping us out of traditional recession territory—”If this is a recession, it’s not like one we’ve ever seen before.” Now, I’m looking at it the other way. This is a recovery, but as the Federal Reserve continues to raise rates and consumer spending decelerates, I’m not sure it will last.
In The Papers
I was very interested this week in “What’s My Employee Worth? The Effects of Salary Benchmarking” by Zoe B. Cullen, Shengwu Li & Ricardo Perez-Truglia—and not just because it has a catchy title.
“Salary benchmarking” is the process of setting compensation based on aggregated salary data for similar jobs across employers (many Lightcast tools incorporate some form of benchmarking). It’s a widespread practice, but hadn’t been much studied by economists before this. The authors created a model for understanding the impact of the process, then compared their predictions to the real-world results.
The paper is mainly designed to provide a framework for further study on benchmarking, but it does have some interesting results on its own: more widespread access to benchmarking generally leads to modest salary gains, primarily for low-skill employees. There are benefits for employers, too: the evidence also suggests that salary gains are accompanied by gains in retention.
Better pay and better employee retention sound like a benefit for everyone, and if salary benchmarking makes them possible, then that’s a benefit, too. I’m glad to see this paper published and look forward, as its authors do, to seeing more research on salary benchmarks in the future.
Until next week,
Lightcast Chief Economist