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The North Carolina economy is expected to grow by 3.1 percent during 2007, UNC Charlotte economist John Connaughton reported today in his TIAA-CREF/UNC Charlotte Economic Forecast.
Connaughton’s forecast for 2007 is stronger than the growth rate of 2.5 percent experienced during 2006.
The forecast, funded by TIAA-CREF and published quarterly by the University of North Carolina at Charlotte, provides both a review of North Carolina’s recent economic performance and a barometer of the state’s future growth. Connaughton, who directs the forecast, is the TIAA-CREF professor of economics at UNC Charlotte’s Belk College of Business.
2007 Economic Performance
Overall, Connaughton expects the North Carolina economy to grow during all four quarters of 2007. During the first quarter, Gross State Product (GSP) increased by an annualized real growth rate of 2.5 percent. During the second quarter, GSP growth picked up and increased by an annualized real growth rate of 3.4 percent. In the third quarter, GSP growth is expected to increase by an annualized rate of 3.3 percent. In the fourth quarter, North Carolina GSP growth is expected to slow, recording an annualized real growth rate of only 2.0 percent.
“Despite the weakness expected during the fourth quarter, the annual growth for 2007 represents the sixth consecutive year of economic expansion. This trend is likely to continue into 2008 despite the recent rise in mortgage defaults and tightening credit markets,” Connaughton said. “The North Carolina economy will weather these problems and continue the growth and expansion.”
2007 Sector Analysis
The sectors of the state economy with the strongest expected growth for 2007 are:
- Mining, with a projected real growth rate of 10.6 percent;
- Finance, Insurance and Real Estate (FIRE), 5.8 percent;
- Services, 5.1 percent;
- Wholesale Trade, 4.8 percent; and
- Government, 4.0 percent.
Five other sectors are expected to experience growth during 2007 but at rates less that the overall state growth rate of 3.1 percent. These sectors are:
- Agriculture, with a projected real growth rate of 2.5 percent;
- Construction, 1.3 percent;
- Transportation, Warehousing, Utilities and Information (TWUI), 1.1 percent;
- Nondurable Goods Manufacturing, 0.9 percent, and
- Retail Trade, 0.5 percent.
2007 Employment Growth
For 2007, the North Carolina economy is expected to add 75,600 net jobs by December 2007, an increase of 1.9 percent over the employment level in December 2006.
Seven of the state's ten nonagricultural sectors of the economy are expected to experience positive employment growth during 2007. The sectors that will display the strongest employment growth rates in 2007 are:
- Mining at 4.4 percent;
- Services, 3.3 percent; and
- FIRE at 3.2 percent
The unemployment rate for October of 2007 was 4.8 percent, higher than the United States rate of 4.7 percent. The North Carolina rate is expected to be stable during 2007 and is forecast to close the year at 4.8 percent.
2008 Economic Forecast
For 2008, the North Carolina economy is expected to continue its seventh year of economic expansion. Real (inflation adjusted) GSP is expected to increase by 2.5 percent over the 2007 level.
For 2008, first quarter GSP is expected to increase by an annualized real growth rate of 1.9 percent. During the second quarter, GSP is expected to increase by an annualized real rate of 3.3 percent. In the third quarter, GSP growth is expected to drop off and record an annualized real growth rate of 2.1 percent. In the fourth quarter of 2008, GSP growth is expected to pick up and reach an annualized real rate of 2.7 percent.
2008 Sector Projections
Nine of the state’s eleven economic sectors are forecast to experience growth during 2008. The sectors with the strongest expected growth forecasts are:
- Services, with a projected real growth rate of 4.6 percent;
- Wholesale Trade, 4.5 percent;
- Finance, Insurance, and Real Estate (FIRE), 3.8 percent; and
- Transportation, Warehousing, Utilities and Information (TWUI), 3.7 percent.
Five other sectors are expected to experience growth, but at rates less than the overall growth rate of 2.5 percent. These sectors are:
- Government, with a projected real growth rate of 1.8 percent,
- Retail Trade, 0.9 percent;
- Construction, 0.7 percent;
- Mining, 0.3 percent; and
- Nondurable Goods Manufacturing, 0.3 percent.
“This expansion, which began in November 2001, is now 72 months long,” Connaughton said. “The average duration of the ten expansions since World War II has been 57 months, and only three have been longer than the current expansion. The forecast for 2007 would extend the length of this expansion to 74 months, making it the fourth longest expansion since 1945.”
2008 Employment Outlook
For 2008, Connaughton forecasts that North Carolina establishments will add 83,900 net jobs, an increase of 2.0 percent over the 2007 level.
Eight of the state's ten nonagricultural sectors of the economy are expected to experience positive employment growth during 2008. The sectors that are expected to display the strongest employment growth rates are:
- Mining at 19.7 percent;
- Government, 5.1 percent; and
- Services, 3.0 percent.
The full forecast is available at www.belkcollege.charlotte.edu. Connaughton will release his next report in March 2008.