The North Carolina economy will continue its lackluster recovery through 2013, UNC Charlotte economist John Connaughton reported today in his quarterly economic forecast for the state. Connaughton expects the state economy to grow by an inflation-adjusted rate of 1.5 percent in both 2012 and 2013, matching the growth rate for 2011 but lower than the 3.2 percent growth recorded in 2010.
“While the state has been in recovery since July of 2009, it has been a weak recovery,” Connaughton said. “In 2012, both the U.S. and state economies have been very close to entering a double-dip recession. GSP growth in 2012 has been a little weaker than the growth rates during 2011 and 2010. The modest growth during the first two years of the recovery, followed by the weak growth expected during 2012, will continue the pattern of weak job growth experienced during this recovery.”
Connaughton, the Babson Capital professor of financial economics in the Belk College of Business, presented his quarterly forecast to more than 150 members of the Charlotte business community and the media at a luncheon held at UNC Charlotte’s Center City campus. The Forecast is funded by Babson Capital Management LLC.
2012 Forecast, Sector Analysis and Employment
Connaughton expects the North Carolina economy to increase by an inflation-adjusted rate of 1.5 percent during 2012. In the first quarter, the Gross State Product (GSP) increased at an annualized real rate of 2.3 percent. During the second quarter, GSP is expected to slow and increase at an annualized real rate of 1.9 percent. In the third quarter, GSP is expected to record an annualized real growth rate of 1.6 percent. In the fourth quarter of 2012, GSP is expected to continue the slow pace of growth, increasing at an annualized real rate of only 0.8 percent.
Ten of the state’s 15 economic sectors are forecast to experience output increases during 2012. The sectors with the strongest expected growth are:
- Mining, with a projected real increase of 6.4 percent;
- Hospitality and Leisure Services, with a projected real increase of 4.6 percent;
- Retail Trade, with a projected real increase of 4.4 percent;
- Finance, Insurance and Real Estate (FIRE), with a projected real increase of 4.3 percent;
- Educational and Health Services, with a projected real increase of 4.1 percent;
- Wholesale Trade, with a projected real increase of 3.4 percent;
- Construction with a projected real increase of 3.2 percent; andBusiness and Professional Services, with a projected real increase of 2.7 percent.
Seasonally-adjusted, nonagricultural employment in North Carolina is expected to reach 3,981,700 persons in December 2012, an increase of 1.3 percent over the employment level in December 2011. The state is expected to gain 49,500 net jobs during the year.
Nine of the state's 14 nonagricultural sectors of the economy are expected to experience employment increases during 2012. The sectors with the strongest employment increases in 2012 are Wholesale Trade at 4.3 percent, FIRE at 3.0 percent, and Business and Professional Services at 2.6 percent.
“By the end of 2012, the state is expected to have replaced only 131,300 of the 333,400 jobs lost during the recession,” Connaughton said, “which means that 39.4 percent of the total jobs lost will have been replaced in the last three years. At this pace it will take another four or five years to gain back the jobs lost during 2008 and 2009.”
The North Carolina seasonally adjusted unemployment rate began 2012 at 10.2 percent, almost two percentage points higher than the United States rate. By July the North Carolina rate had fallen to 9.6 percent, while the national rate was unchanged at 8.3 percent. Both the U.S. and North Carolina unemployment rates are expected to remain constant throughout the rest of the year, and by December the North Carolina unemployment rate is expected to be 9.7 percent.
2013 Forecast, Sector Analysis and Employment
The North Carolina economy is expected to increase by an inflation-adjusted rate of 1.5 percent during 2013. For 2013, first quarter GSP is expected to increase at an annualized real rate of 1.9 percent. During the second quarter, GSP is expected to increase at an annualized real rate of 1.5 percent. In the third quarter, GSP is expected to record an annualized real growth rate of 1.6 percent. In the fourth quarter of 2013, GSP is expected to grow at an annualized real rate of 1.6 percent.
Fourteen of the state’s 15 economic sectors are forecast to experience output increases during 2013. The sectors with the strongest expected growth are:
- Agriculture, with a projected real increase of 8.3 percent;
- Other Services, with a projected real increase of 4.5 percent;
- Hospitality and Leisure Services, with a projected real increase of 3.8 percent;
- Educational and Health Services, with a projected real increase of 3.6 percent;
- Transportation, Warehousing and Utilities (TWU), with a projected real increase of 3.2 percent;
- Finance, Insurance and Real Estate, with a projected real increase of 1.6 percent;
- Business and Professional Services, with a projected real increase of 1.6 percent;
- Retail Trade, with a projected real increase of 1.6 percent; and
- Information, with a projected real increase of 1.5 percent.
Seasonally-adjusted, nonagricultural employment in North Carolina is expected to reach 4,051,400 persons in December 2013, an increase of 1.8 percent over the employment level in December 2012. The state is expected to gain 69,700 net jobs during the year.
Ten of the state's 14 nonagricultural sectors of the economy are expected to experience employment increases during 2013. The sectors with the strongest employment increases in 2013 are Nondurable Goods Manufacturing at 3.2 percent, Hospitality and Leisure Services at 3.0 percent, and Retail Trade at 2.8 percent.
“For 2013, the economy is expected to continue the 2012 pattern of modest GSP growth,” Connaughton said. “Continued uncertainty in Europe and uncertainty about tax increases in 2013 are the main concerns and the principal reasons that growth will be sluggish in both 2012 and 2013.
“There are no quick fixes in Europe,” he continued. “The Eurozone problems will be with us for several years and, because Europe represents the largest U.S. export market, their double dip in 2012 will be influential in determining U.S. growth rates for several years. In addition, tax uncertainty continues to weaken consumer and business confidence, adding to the Eurozone drag.”
The full Forecast report is available at http://www.belkcollege.charlotte.edu/forecast. Connaughton will present his next Forecast report in December 2012.