Gains in second half of the year begin to chip away at declines over the past six quarters
The North Carolina economy is expected to decline by 3.6 percent during 2009, UNC Charlotte economist John E. Connaughton reportedDecember10in his quarterly economic forecast for the state. This follows the decline of 0.6 percent experienced during 2008.
Overall, the North Carolina economy is expected to decline during the first two quarters of 2009, but to grow in the second half of the year. In the first quarter, Gross State Product (GSP) decreased by an annualized real growth rate of 7.3 percent. During the second quarter, GSP again declined, this time by an annualized real rate of 7.6 percent.
In the third quarter of 2009, however, GSP is expected to grow for the first time in six quarters at an annualized real rate of 3.0 percent. For the fourth quarter, North Carolina GSP is expected to continue the recovery and expand by an annualized real rate of 3.8 percent.
“There continue to be very mixed signals concerning the strength of the recovery,” Connaughton said. “The most troubling problem remains the financial sector. Excess reserves, which 16 months ago were less than $2 billion, now stand at nearly $1 trillion. As a result the banking sector, which is critical to recovery, remains troubled. Those enormous reserves represent money that is not being lent out to facilitate the recovery.”
Connaughton is a professor of economics in the Belk College of Business at UNC Charlotte. He has served as director of the Economic Forecast since 1981.
2009 Sector Analysis and Employment Outlook
Nine of the state’s 11 economic sectors are expected to experience declines during 2009. The sectors with the strongest expected declines are:
• Construction, with a projected real decline of 17.1 percent;
• Mining, with a projected real decline of 11.9 percent;
• Finance, Insurance and Real Estate (FIRE), with a projected real decline of 6.9 percent;
• Wholesale Trade, with a projected real decline of 6.8 percent;
• Durable Goods Manufacturing, with a projected real decline of 5.8 percent;
• Retail Trade, with a projected real decline of 4.4 percent;
• Services, with a projected real decline of 4.1 percent;
• Nondurable Goods Manufacturing, with a projected real decline of 3.7 percent; and
• Agriculture, with a projected real decline of 1.1 percent.
Only two of the state’s economic sectors are expected to experience growth during 2009. These sectors are:
• Government, with a projected real growth rate of 7.2 percent; and
• Transportation, Warehousing, Utilities and Information (TWUI), with a projected real growth rate of 0.2 percent.
For 2009, North Carolina establishments are expected to lose 124,100 net jobs, a decrease of 3.1 percent over the 2008 level.
The North Carolina seasonally adjusted unemployment rate began 2009 at 9.7 percent, more than two percentage points higher than the United States rate. By October 2009, the North Carolina rate had risen to 11.0 percent, while the United States rate was at 10.2 percent. Both the national and state unemployment rates are expected to continue to rise throughout the year, and by December the North Carolina unemployment rate is expected to remain at 11.0 percent.
2010 Economic Forecast
For 2010, Connaughton forecasts that North Carolina’s real GSP will increase by 2.8 percent over the 2009 level. First quarter GSP is expected to increase by an annualized real rate of 3.6 percent. During the second quarter, GSP should again increase by an annualized real rate of 3.8 percent. In the third quarter, GSP is expected to slip slightly, but still record an annualized real growth rate of 3.1 percent. In the fourth quarter of 2010, GSP is also expected to grow at an annualized real rate of 3.8 percent.
2010 Sector Outlook and Employment Outlook
Six of the state’s 11 economic sectors are forecast to experience output increases during 2010. The sectors with the strongest expected growth are:
• Construction, with a projected real increase of 5.2 percent;
• Services, with a projected real increase of 5.1 percent;
• Government, with a projected real increase of 4.6 percent;
• Retail Trade, with a projected real increase of 3.1 percent;
• Finance, Insurance and Real Estate (FIRE), with a projected real increase of 2.9 percent; and
• Transportation, Warehousing, Utilities and Information (TWUI), with a projected real increase of 2.1 percent.
For 2010, North Carolina establishments are expected to gain 32,800 net jobs. Job growth should begin once again in December 2009, ending 22 months of decline.
Seven of the state's ten nonagricultural sectors of the economy are expected to experience employment increases during 2010. The sectors with the strongest employment increases in 2010 are:
• Wholesale Trade at 5.4 percent,
• Construction at 3.4 percent and
• Services at 2.7 percent.
“The expectation is that the North Carolina economy should begin a modest recovery during the second half of 2009,” Connaughton said. “The recession, which began in December 2007, is expected to last at least six quarters. This would make the 2008-2009 recession the longest since the 1982 recession, which lasted 16 months. The two most recent recessions were quite short; both the 1991 and 2001 recessions lasted only eight months each. This recession is likely to be 17 or 18 months in length.”
The UNC Charlotte Economic Forecast is published quarterly by the Belk College of Business at the University of North Carolina at Charlotte. The full report is available at forecast. Connaughton will release his next Forecast report in March 2010.
About UNC Charlotte
UNC Charlotte is North Carolina’s urban research institution. With an enrollment ranking it fourth among the 17 schools in the UNC system, it is the largest public university in the greater Charlotte metropolitan region. A doctoral institution, UNC Charlotte serves the region through applied research, knowledge transfer and engaged community service. For fall 2009, approximately 24,700 students, including 5,300 graduate students, were enrolled in one of the University’s comprehensive doctoral, master’s or bachelor’s programs.
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