NC’s labor market continues to weaken. Bad policy choices are to blame.

If you would like to access our general NC Labor Market page, “Work, Wages, and Well-Being,” click here.

North Carolina’s headline unemployment rate remains strong at 3.9 percent, sitting below the national unemployment rate of 4.4 percent. Although the US and NC unemployment rates have been increasing from the lows in mid-2023, the increase remains gradual and controlled.  

However, numbers like these don’t tell the full story. When we dig into the data, we find a number of concerning trends at national, state, and local levels, and the picture that emerges is one of an increasingly weak labor market, with more and more North Carolinians struggling to find work and make ends meet, and federal and state policy decisions that are compounding to make the situation worse.  

By understanding the realities faced by everyday North Carolinians and these policy decisions, we can identify avenues to improve lives and create a state where every North Carolinian can find fulfilling work and thrive. 

Headline unemployment doesn’t tell the whole story: the reality of the weak jobs market 

Although layoffs have been steadily on the rise ever since the COVID-19 pandemic recovery, they remain subdued, and unemployment remains relatively low. What is troubling is that the slow and steady rise in layoffs has coincided with a persistent decline in hiring at rates comparable to the 2008 financial crisis. Excluding recessions, 2025 proved to be the weakest year for job growth in the US in over two decades.

What this means is that it’s becoming increasingly difficult for those looking for work to find a job. Young people who are just entering the labor force for the first time are struggling to find employment. People who lose their job are finding it increasingly difficult to find new ones. As a result, under-employment is rising, as workers are forced to take jobs that they are overqualified for or to take part time jobs to pay for the essentials. 

Even in NC, which is relatively better situated than many states, 28 percent of workers who have lost their job and received unemployment benefits have not been able to find a job within a year after losing their job.  

Federal policy decisions are exacerbating these problems 

While public policy can act as a tool to improve the lives of everyday North Carolinians, the choices that are being made by lawmakers at the federal level are actively making the situation worse. 

• Federal Layoffs: Since President Trump’s inauguration in January 2025, federal employment has declined by over 9 percent — with hundreds of thousands of Americans out of a career. This reduction in federal employment has occurred through a series of job terminations, buyouts and intimidation tactics, sweeping restructuring of government agencies, and Executive Orders that severely limit federal hiring and the ability of agencies to fill vacancies. Reductions in federal employment at this rate and scale have not been seen since the post-WWII period, when millions of returning service members reentered the civilian workforce, leading masses of women who had entered the workforce during the war to leave it. Because the federal government is a major employer of Black workers, veterans, and those with disabilities, these layoffs are undermining peoples’ livelihoods, while also promoting inequity. 

• Attacks on Immigrant Workers: Similarly, the relentless terrorizing of immigrants across the country by ICE is not just inhumane, it’s also hurting the economy. In NC, 11 percent of all workers are immigrants, with immigrants making up one-third of all workers in the construction industry and in software development. But contrary to claims otherwise, the raids by ICE are not transferring jobs to non-immigrant workers; instead, they are creating gaps in essential sectors. Whereas employment growth in the construction sector in NC peaked in 2023 at a rate of nearly 5.5 percent, its growth slowed below 4 percent in 2025. This is in spite of all the construction being done to meet housing needs across the state and rebuild after Hurricane Helene. Employment in the information sector in NC, which includes software development, is actually negative for 2025, whereas it was growing at a rate of over 8 percent in 2022. 

• Tariffs and the Harmful Republican Megabill (aka HR1): Although NC has seen substantial investment in advanced manufacturing, especially in battery and electric vehicle production, these investments have stalled as a result of the sweeping cuts to the Inflation Reduction Act and the chaotic tariff policy, which has raised the cost of manufacturing inputs and created an uncertain business environment. In NC, manufacturing jobs are down by more than 1.5 percent in 2025 — nearly 7,500 jobs. Nationally, manufacturing jobs peaked in 2023. Since then, the US has lost over 300,000 manufacturing jobs. So, contrary to claims by the federal administration, these policies are not delivering on the promise to reshore manufacturing to the US. 

The steady increase in layoffs amidst declining hiring is a trend that pre-dates these federal policies. But these policies are acting as fuel that is being thrown on lite kindling — acting as an accelerant for recession. Although NC remains better situated than many states, if layoffs and federal unemployment spike, a negative feedback loop will begin and NC will not be insulated from the effects: Consumer demand will contract, business revenues and profitability will decline, and layoffs will continue to increase while hiring stops.  

Unemployment is especially dire in those counties hit hardest by Hurricane Helene 

Even with NC’s position of relative strength, in nearly every metropolitan area in the state, unemployment is still up over the past year.  

Asheville is the biggest outlier, but this is an artifact of the fact that last year, Asheville had just experienced Hurricane Helene — the deadliest storm in the contiguous US since Hurricane Katerina, and the costliest storm that has ever hit NC. Relative to this baseline of high unemployment, Asheville is doing much better.  

But if we look at the two-year percentage change in unemployment to compare the most recent data with data from the same month the year prior to Helene, the unemployment level is up 22 percent in the Asheville metropolitan area. The situation is even worse when we zoom out to look at Buncombe County and the surrounding counties that were hit hardest by Helene. 

Again, several policy choices at the federal and state levels have made the situation worse, not better, for Western North Carolinians.  

• Insufficient Federal Funding, Federal Cost-Shirts, and FEMA layoffs: Several federal policies choices have delayed the recovery effort in Western NC. The federal government has typically covered anywhere from 32 to 78 percent of damage caused by severe hurricanes, with the percentage of the damage covered generally increasing with the severity of the storm. Despite the severity of the damage caused by Helene, NC has received less than 10 percent of the total cost of the damage caused by Helene, and the federal administration is pushing even more costs onto NC, while raising requirements for states to qualify for federal disaster assistance. This is alongside the layoffs at FEMA that have reduced response capacity. 

• State Government Inaction: Meanwhile, state lawmakers haven’t passed a disaster recovery bill since June 2025, despite the ongoing need for small business grants to help stabilize the economy and respond to the unemployment crisis in Western NC. The grants that were available for small businesses were exhausted nearly a year ago, and the repeated requests for assistance from small businesses and workers have gone unanswered. The General Assembly has prioritized crop loss grants for farmers, but the economic interests of everyone else have been largely ignored over the past year.  

More generally, at the state level, the policy decisions exacerbating the economic problems in Western NC and across the state are a lack of action — we’re seeing very little urgency from our lawmakers regarding policies that improve people’s lives.  

The picture that emerges from the data is an economy that is leaving more and more North Carolinians behind 

In the context of a crisis of affordability for everyday North Carolinians, the data makes clear that a growing number of people are struggling with uncertainty. Meanwhile, lawmakers at the federal and state level are prioritizing tax cuts for corporations and the ultra-wealthy, so that the wealthiest can hoard more and more of our collective resources for themselves. This is what economists are calling a K-shaped economy — the select few see their assets climb in value, while the rest of us slide further down and struggle.  

While policy decisions are fueling these outcomes, public policy can serve as a tool for good. Instead of tax cuts, we could fund schools, child care, and other public services. Instead of terrorizing immigrants, we could embrace diversity and create an economy for all. Instead of climate inaction, we could invest in our communities and build them back better, more resilient and aligned with broader climate goals. Instead of leaving workers behind, we could raise the minimum wage, strengthen collective bargaining and workplace protections, and repeal right to work laws. These are choices within the power of lawmakers. What’s lacking is political will.   

Addendum: Delays in Release of Labor Market Data 

At the NC Budget & Tax Center, we’re committed to keeping the public updated about the most current labor market trends. However, federal government shutdowns have caused repeated delays in the release of labor market data. State and local data from November and December 2025 came in late in January and February 2026, and there is an absence of data for the month of October — something that has never occurred in the entire 50-year history of the Current Population Survey (CPS). Now, the CPS data from January and February is not expected until April. With the continued irregularity of data releases, our usual cadence may be delayed without prior notice.