The Triangle region of North Carolina may not be recession-proof, but it's surely cushioned by its mix of high-skilled jobs in fields such as the life sciences, pharmaceuticals, and math-intensive professions.Federal Reserve District, 5th ; Cities and towns ; Economic development ; Recessions

Betty Joyce Nash

English

Research Papers in Economics

24 Region Focus | Fourth Quarter | 2010 
Total 
C
onventional wisdom has it that the Research 
Triangle area enters recessions late and exits them
early, says Brenda Steen, of Apex, N.C. Steen
directs the Chamber of Commerce in Apex, a bedroom
community near Raleigh known as the “peak” of the 
Triangle. “My heart goes out to people in Florida and other
places where things are worse; 2008 and 2009 were really
scary and depressing.” 
The Research Triangle is a prosperous region bounded by
three major universities in north central North Carolina —
North Carolina State in Raleigh, Duke University in
Durham, and the University of North Carolina at Chapel
Hill. The area is home to jobs that require extensive educa-
tion, and it’s also got a healthy set of public employers at the
state schools and the capital in Raleigh. By many measures,
the region’s job mix helped buffer residents from the effects
of the most recent recession but it couldn’t protect them
entirely.
Steen can’t help having a keen awareness of the local busi-
ness climate in her job at the Apex Chamber. It’s where
people stop for information; she also gets resumes from job
hunters. Membership declined by 25 percent over the reces-
sion — small businesses, when polled, said they couldn’t
afford the dues. Area churches held resume-writing work-
shops in late 2008, as well as gatherings to get people out of
the house and give them somewhere to go. Steen’s husband
lost his job in a layoff. And in October 2008 Sony Ericsson
relocated its headquarters to Atlanta and laid off between
800 and 900 people. And there were even more layoffs. 
By the end of 2009, the Durham area had shed 7,800 jobs
since the recession started, and the larger Raleigh-Cary area,
27,500. The Triangle treaded water as the broader North
Carolina economy “went kerplunk,” says Bo Carson of 
the Research Triangle Regional Partnership (RTRP), the
region’s economic development organization.
Positive signs now loom: Over the first half of 2010, both
the Raleigh and Durham metros added jobs: 1,200 and
4,800 respectively. In May, RTRP announced a record $2
billion in 2009 investments for the region, expected to 
bring 11,000 jobs; in 2010, the group reported another 
$1.27 billion for the year. 
The Triangle may not be recession-proof, but it’s surely
cushioned by its mix of high-skilled jobs in fields such as the
life sciences, pharmaceuticals, and math-intensive professions.
Degree Production 
The Triangle region spreads across eight counties, with
about 1.7 million residents in the combined statistical area.
Duke anchors Durham, an old tobacco town, whose medical
center draws researchers and patients from around the
world. Just outside the city limits sits the 7,000-acre
Research Triangle Park. Spawned by the state more than a
half-century ago to leverage university research, it’s now
studded with private and public enterprises. In Raleigh,
North Carolina State University has its main campus and its
own research park, Centennial Campus. The Triangle’s third
point is the sprawling University of North Carolina in
Chapel Hill and its health center. 
The Triangle ranks 19th among the top 20 metro areas in
the United States, as measured by the number of degrees its
universities and colleges produce, nearly 19,000 in 2006,
according to a staff report by economists Jaison R. Abel and
Richard Deitz from the New York Fed. In North Carolina,
roughly a quarter of people over age 25 have a bachelor’s
degree, but the percentage jumps to between 40 percent
and 42 percent in the Triangle. In the Raleigh-Cary and the
Durham-Chapel Hill MSAs, about 19 percent and 14 per-
cent respectively have postgraduate degrees compared to 
8.5 percent statewide.
The region ranks even higher, sixth, in its academic
research and development expenditures, about $1.4 billion
in 2006, according to Abel and Deitz. Duke and its medical
center, for example, garnered grants worth $2.6 billion
between Dec. 1, 2007 and Oct. 31, 2010, according to Karl
Bates, director of research communications.
Abel and Deitz investigated the relationship between
academic research and development and the amount and
types of human capital in metro areas. Because college grad-
uates are mobile, they may not enter the labor market where
they attended college. The researchers found only a “small
positive relationship between a metropolitan area’s produc-
tion and stock of human capital.” The authors suggest that
migration redistributes educated workers, defined in the
paper as graduates with at least a bachelor’s degree. That’s
because most metro areas in the United States, 62 percent,
produce more graduates than they can employ. The remain-
ing 38 percent employ more graduates than they produce.
Even so, universities do influence demand for human capital
through R&D spillovers that help create firms and shape 
job formation. Abel and Deitz note that research efforts
ultimately “tilt the structure of local labor markets toward
occupations requiring innovation and technical training.”
All this human capital is associated with more growth as well
as higher wages and income.
Triangle Employment
During the recession, the Triangle’s unemployment rate
stayed below two digits, but barely. The rate peaked at 9.6
BY BETTY JOYCE NASH
Knowledge jobs lend resistance, but not immunity to downturn
 percent in the Raleigh-Cary MSA compared to 11.8 percent
statewide; the Durham MSA’s peaked at 8.6 percent. The
unemployment rate at the end of September 2010 was 
6.7 percent in the Durham MSA, down from 7.9 percent a 
year earlier, and 7.7 percent in Raleigh-Cary, down from 
8.8 percent a year earlier.
Given the recession’s depth and breadth, even in the
Triangle, it may take a while for firms to swell payrolls
enough to make a dent in unemployment numbers. As in the
recoveries of 1990 and 2001, hiring may lag as firms invest in
equipment, not people, to increase productivity.
Public employers in the Triangle have provided relative
stability, but that might not last, given the state’s $3 billion
projected deficit, says Jason Jolley, senior research director
of the Center for Competitive Economies at the University
of North Carolina. 
Jolley believes recovery will be slow in the Triangle.
Government and universities may be stabilizing influences
in the Triangle, he says, but they are likely to face cuts.
“We’ve had furloughs, we haven’t had raises in two or three
years, and so there’s not the spending associated with these
institutions as there has been in the past.” 
In both the Durham-Chapel Hill and Raleigh-Cary
MSAs, the government sector has grown in the past decade,
from 18 percent of employment to 21 percent in Durham and
16 percent to 18 percent in Raleigh. The share of jobs in edu-
cation and health services also has grown: from 14 percent to
19 percent in the Durham-Chapel Hill MSA and 9 percent
to 12 percent in Raleigh-Cary over the same period. 
The information technology job sector has shrunk over
the past decade, from about 2 percent of employment to 
1 percent in the Durham-Chapel Hill MSA (that is, from
5,400 people in 1999 to 3,900 in 2009); the sector went from
4 percent to 3 percent in Raleigh-Cary (from 17,100 in 1999
to 16,900 in 2009). The Triangle has shed jobs at companies
such as Sony Ericsson. Electronics company Aviat Networks
laid off 200 in the Triangle, consolidating its business in
Silicon Valley. 
Many remaining tech employers are cautious, a vestige of
the 2001 recession. “I think tech companies remember very
well the pullback and are constantly worrying about overex-
panding,” says economist Mike Walden of North Carolina
State. “So they are using more ‘just-in-time’ and part-time
labor to avoid heavy commitments to labor costs.” 
Corporate downsizing is also emptying office spaces. For
instance, Blue Cross and Blue Shield of North Carolina and
GlaxoSmithKline plan to shrink footprints in the region,
with consequences unclear for the labor market. 
Add to that the increased demands on counties for social
services, with less tax revenue, and the picture further dims.
Unemployment has declined, but that’s because of labor
force dropouts, Jolley says. And then there are the under-
employed. “Like the college students who have graduated
and have to keep working at the bar on Franklin Street.”
Economic conditions remain soft, though upbeat stories
are threaded through the statistics. In Apex, you may need
to wait in line at a restaurant on a Friday night, Steen says,
adding that congested traffic at Target is a good sign. These
reports, though, exist amid still-vacant commercial build-
ings and halted housing developments. 
More people are moving to Triangle area. While state-to-
state migration stagnated for the United States as a whole,
the number of people moving into Raleigh-Cary went up by
3.2 percent from July 1, 2008 through July 1, 2009 as the
recession ebbed; the Durham-Chapel Hill population grew
by 2.1 percent over the same period. 
Demand for labor will rise when demand for firms’ 
products and services does. Carson cites examples such as
IBM’s new cloud computing center, for which they are 
hiring 600 people. And the region’s life sciences cluster
attracts more and more contract pharmaceutical research.
He says that promised jobs are in the pipeline — those
knowledge-based jobs that made the Triangle famous. They
seem to have at least provided resistance to the region 
during the recession. 
Some people have created their own jobs — a coffee 
service, a brewery, a ladies’ boutique, coaching, painting,
house- and window-cleaning businesses. “I’m not sure where
the funding is coming from,” Steen says. Some may have 
borrowed from their retirement accounts, she speculates,
while others may have been able to convince banks to loan.
And after a six-month stint commuting to a Washington,
D.C.-based think tank, she reports that her husband found
work at Pfizer.  RF
Region Focus | Fourth Quarter | 2010  25
Employment by Sector
SOURCE: N.C. Employment Security Commission
IN THOUSANDS
0 10 20 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100
Total Government
Education & Health Services
Manufacturing
Professional & Business Services
Trade, Transportation & Utilities
Leisure & Hospitality
Other Services
Financial Activities
Mining, Logging & Construction
Information
Durham-Chapel Hill MSA
2009 1999
Total Government
Trade, Transportation & Utilities
Professional & Business Services
Education & Health Services
Professional & Business Services
Leisure & Hospitality
Mining, Logging & Construction
Manufacturing
Financial Activities
Other Services
Information
Raleigh-Cary MSA

Triangulating the recession : Knowledge jobs lend resistance, but not immunity to downturn

http://www.richmondfed.org/publications/research/region_focus/2010/q4/pdf/feature3.pdf

Triangulating the recession : Knowledge jobs lend resistance, but not immunity to downturn

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