How is the North Carolina economy doing in the third quarter of 2016? Michael Walden, William Neal Reynolds Distinguished Professor in the Department of Agricultural and Resource Economics at North Carolina State University, gives his analysis.
- After improving slowly in the years immediately following the Great Recession, North Carolina’s economic growth rate has recently accelerated, posting the tenth fastest output gain among states in 2015. This is the same pattern the state followed after the 2001 recession.
- However, just as at the national level, the state’s economic growth rate has been low by historical standards, as well as compared to the economic expansion of the early 2000s. Part of the reason is a reduction in population growth in the state.
- The state’s labor market has also recently improved, with increases in employment, an increase in the labor force participation rate, and reductions in each of the alternative measures of the unemployment rate.
- Yet a worrisome trend is a drop in the productivity of the state’s workers relative to national worker productivity. Also, jobs in the state have expanded the most at the two ends of the wage scale – higher-paying jobs and lower-paying jobs – with the slowest growth being in middle-paying jobs.
- Regional differences in economic improvement have continued – and actually accelerated – during the current economic expansion. Charlotte and Raleigh have expanded their job bases by an astonishing 20 percent since the end of the Great Recession, while several regions have seen little or negative job growth.
- In line with national projections, economic growth in the state should continue for the remainder of 2016 and for 2017. A total of 86,000 payroll jobs will be added in 2016, with 90,000 forecasted for 2017.
- Still, economic growth in the state will be uneven, with several regions registering unemployment rates under 4 percent in 2017, while others will have rates of 6 percent or higher.
More like the Nation?
In the presidential election, North Carolina is now considered a “battleground state.” This means the state is so evenly divided between the major political parties that either of the two main presidential candidates could win. With its substantial in-migration of households from other states during recent decades, North Carolina is becoming more demographically and politically similar to the nation as a whole.
As this edition of The North Carolina Economic Outlook shows, the same could be said of the state economy – it is becoming more like the national economy. Although in the last three years the state’s economy has grown faster than the national economy, the margin for the state has narrowed, particularly compared to the recovery following the 2001 recession. The same is the case for the growth in payroll jobs. One reason is the slowing of population growth in North Carolina. Prior to the Great Recession, the state’s annual population growth rate averaged over one percentage point higher than the national rate. In recent years it has averaged under one-half percentage point higher.
The structure of the state’s economic sectors has also been moving closer to the national structure. Non-durable manufacturing – long a mainstay of the North Carolina economy – has continued to downsize, while durable manufacturing has been expanding. This change mirrors national trends. Also, the state’s information (technology) and professional and business services sectors are growing in relative size just as in the national economy.
Yet the on-going transformation of the state economy is creating issues. Job growth has been strongest in both high-paying and low-paying economic sectors and weakest in middle-paying sectors like manufacturing, construction, and government. The number of “discouraged workers” – individuals without work who have stopped looking for a job – appears to be stubbornly stuck at near 50,000 – the same as before the Great Recession. And worker productivity – a key measure for developing new and expanding businesses – has fallen significantly relative to the same measure for the nation since the recession.
In the modern economy, North Carolina – like most states – has experienced major regional differences in economic growth. These differences have continued – indeed accelerated – since the Great Recession. Charlotte and Raleigh continue to be in a class by themselves, with each posting an amazing 20 percent payroll job growth rate since 2010. Asheville, Durham, and Wilmington form a second category of strongly growing regions. Unfortunately, several regions of the state have experienced low or negative growth since the end of the Great Recession.