CHARLOTTE, N.C. – June 1, 2011 — The North Carolina economy will continue its sluggish recovery from the recession through 2011 and 2012, UNC Charlotte economist John Connaughton reported today in his quarterly Babson Capital/UNC Charlotte Economic Forecast for the state.
Connaughton reported that the North Carolina economy expanded by only 1.0 percent in 2010, following a contraction of 0.8 percent in 2009. By quarter, the North Carolina economy experienced a modest increase in Gross State Product (GSP) of 2.0 percent during the first quarter of 2010. In the second quarter, North Carolina GSP dipped and recorded an annualized real growth rate of 1.5 percent. GSP actually declined by 0.8 percent in the third quarter, but rebounded slightly in the fourth quarter to record an annualized increase of 1.0 percent.
“Overall, the North Carolina economy suffered through a modest recovery at best during 2010,” Connaughton said. “While the U.S. economy maintained a modest yet stable record of economic growth, the North Carolina economy started strong but had very weak growth during the spring and summer quarters.”
The Forecast, funded by Babson Capital Management and published quarterly by the University of North Carolina at Charlotte, provides both a review of North Carolina’s recent economic performance and an estimation of the state’s future growth. Connaughton, who directs the Forecast, is the Babson Capital Management professor of financial economics at UNC Charlotte’s Belk College of Business.
2010 Sector Analysis
Seven of the state’s eleven economic sectors experienced increases during 2010. The sectors with the strongest increases were:
- Mining, with a real increase of 9.1 percent
- Agriculture, with a real increase of 5.2 percent
- Wholesale Trade, with a real increase of 3.7 percent
- Services with a real increase of 3.6 percent
- Retail Trade, with a real increase of 1.5 percent
- Government, with an increase of 1.2 percent
One other sector, Nondurable Goods Manufacturing, experienced a real increase of 0.7 percent.
2010 Employment Report
In 2010, North Carolina establishments gained only 5,600 net jobs, an increase of 0.1 percent over the 2009 level. The 2010 job gains follow the loss of over 320,000 jobs during the 2008-2009 recession.
2011 Forecast and Sector Analysis
According to Connaughton, the North Carolina economy is expected to increase by 2.7 percent during 2011.
In the first quarter, GSP is expected to increase by an annualized real rate of 2.5 percent. During the second quarter GSP should again increase, but at a slower pace and an annualized real rate of 2.0 percent. In the third quarter, GSP growth is expected to remain stable and record an annualized real growth rate of 1.9 percent. In the fourth quarter of 2011, GSP is expected to pick up and grow at an annualized real rate of 2.7 percent.
Seven of the state’s eleven economic sectors are forecast to experience output increases during 2011. The sectors with the strongest expected growth are:
- Wholesale Trade, with a projected increase of 5.1 percent
- Retail Trade, with a projected real increase of 3.0 percent
- Services, with a projected real increase of 3.0 percent
- Mining with a projected real increase of 2.3 percent
Three other sectors are also expected to experience output growth but at rates less than the overall state level: Finance, Insurance and Real Estate (FIRE), with a projected real increase of 1.5 percent; Government, with a projected real increase of 1.1 percent; and Nondurable Goods Manufacturing, with a projected real increase of 0.3 percent.
2011 Jobs Outlook
In 2011, Connaughton forecasts that North Carolina establishments will gain 64,700 net jobs, an increase of 1.7 percent over the employment level in December 2010.
Five of the state's ten nonagricultural sectors of the economy are expected to experience employment increases during 2011. The sectors with the strongest employment increases in 2011 are Wholesale Trade at 5.0 percent, Retail Trade at 4.6 percent, Services at 2.9 percent, and FIRE at 2.8 percent.
“While the recovery in GSP is underway, job growth is likely to lag,” Connaughton added. “North Carolina lost over 320,000 jobs during 2008 and 2009, and it is likely to take four or five years to regain the lost jobs. Job growth will be the biggest problem for both the U.S. and North Carolina economies over the next several years.”
The North Carolina seasonally adjusted unemployment rate began 2010 at 11.1 percent, over 1.5 percentage points higher than the United States rate. By April 2011, the North Carolina rate had dropped to 9.7, while the United States rate had fallen to 8.8 percent. Both the U.S. and North Carolina unemployment rates are expected to continue to decline slightly during the year, and by December 2011 the North Carolina unemployment rate is expected to decrease to 9.4 percent.
2012 Forecast
Looking ahead to 2012, Connaughton expects the North Carolina economy to increase by only 2.3 percent. North Carolina establishments are expected to gain 72,000 net jobs, an increase of 1.9 percent over the employment level in December 2011.
The full Forecast report is available at www.belkcollege.charlotte.edu/forecast. Dr. Connaughton will present his next report on September 7, 2011.