SECOND QUARTER REPORT MAY 19, 2022
Annual Growth Rates In Real GDP
2. 0
2. 8 2020
• For 2021, NORTH CAROLINA real GDP increased by 6.9 percent over the 2020 level. 1. 9
6. 9
2019
2. 7
4 3 2 1 0 -1 -2 -3 -4 -5
• Twelve of the state’s 15 economic sectors experienced output increases during 2021. The sectors with the strongest growth rates were hospitality and leisure services with a real increase of 23.6 percent, information with a real increase of 15.4 percent, business and professional services with a real increase of 12.9 percent, durable goods manufacturing with a real increase of 12.7 percent, and educational and health services with a real increase of 7.6 percent.
2021 2022f 2023f
GDP/Gross Domestic Product is a yardstick that measures the total output of a state’s economy for a given year
Year-End Seasonally Adjusted North Carolina Unemployment Rates 8
• For 2021, NORTH CAROLINA establishments added 163,200 net jobs during the year, an increase of 3.6 percent. • For 2022, NORTH CAROLINA real GDP is forecast to increase by 2.7 percent over the 2021 level. • Eleven of the state’s 15 economic sectors are expected to experience output increases during 2022. The sectors with the strongest expected growth rates are hospitality and leisure services with a real increase of 10.5 percent, information with a real increase of 7.4 percent, agriculture with a real increase of 7.0 percent, business and professional services with a real increase of 5.4 percent, and other services with a real increase of 3.7 percent. • For 2022, NORTH CAROLINA establishments are forecast to add 110,100 net jobs, an increase of 2.4 percent.
6 4 2
FORECAST HIGHLIGHTS
3. 8 2019
5. 6 2020
4. 1 2021
3. 4
3. 4
2022f
2023f
• The NORTH CAROLINA unemployment rate peaked at 13.5 percent in April and May 2020 and by December 2021, the state’s unemployment rate had fallen to 3.7 percent. By December 2022, the state’s unemployment rate is expected to drop slightly to 3.4 percent.
Quarterly Growth Rates in Real GDP
2021 GDP
8
Gross Domestic Product (GDP) reached a level of $631,618.4 million in 2021. Real (inflation-adjusted) GDP is increased by 6.9 percent over the 2020 level. This growth in 2021 represents the first full year of growth since COVID-19.
6 4
9.8
7.9 6.0
2
For 2021, first quarter GDP increased by an annualized real rate of 9.8 percent. During the second quarter, GDP increased by an annualized real rate of 6.0 percent. In the third quarter, GDP increased only by an annualized real rate of 2.7 percent. In the fourth quarter of 2021, GDP increased by an annualized real rate of 7.9 percent.
2.7
0 2021 I 2021 II 2021 III 2021 IV
2021 Highlights 2021*
Percent Change
Current Dollars Total Gross Product
631,618.4
10.9
Constant (2012 Dollars) Total Gross Product Agricultural Mining Construction Manufacturing Durable Goods Nondurable Goods TWU Wholesale Trade Retail Trade Information FIRE B&P E&H H&L Other Services Government
536,011.7 4,655.4 833.2 19,321.9 92,854.1 44,377.8 48,476.3 18,776.8 31,555.5 30,561.1 27,304.1 99,970.4 77,215.7 42,628.3 16,754.7 9,377.7 64,202.7
6.9 -4.2 1.0 3.8 8.9 12.7 5.4 -0.6 4.4 3.9 15.4 5.6 12.9 7.6 23.6 4.0 -0.4
* Millions of dollars
2021 started off strong after an unexpected weak fourth quarter of 2020. Despite a series of break through COVID-19 variants, overall for 2021 both the U.S. and North Carolina economies performed quite well. In fact, real U.S. GDP was 3.1 percent higher in the fourth quarter of 2021 than the fourth quarter of 2019 before COVID-19. This is an average growth for the two-year period of 2020 and 2021 of 1.5 percent, which is just slightly lower than the GDP growth rate during the last decade. For North Carolina the two-year picture was even better. NORTH CAROLINA real GDP was 4.9 percent higher in the fourth quarter of 2021 than in the fourth quarter of 2019. Over the two-year COVID-19 period the state averaged almost 2.5 percent annual real GDP growth. In addition, North Carolina had the ninth best recovery of all 50 states. In all, 42 states have real GDP in the fourth quarter above the fourth quarter of 2019. The real GDP effects of COVID-19 are essentially over, with just a couple of labor market problems and supply chain issue still troubling. The labor market problems were going to emerge without COVID, the pandemic simply accelerated the demographic issues as the “baby boomer” generation reaches retirement age. The extended supply chain issues have always been there however, COVID exacerbated the weaknesses and brought the problem to the forefront.
Percent of Total Real GDP
2021 Total Real GDP Growth 6.9% 0.9 0.2 3.5 3.6
Agriculture -4.2 Mining 1.0 TWU -0.6 Construction 3.8
8.3
Durables 12.7
9.0
Nondurables 5.4
5.9
Wholesale Trade 4.4
5.7
Retail Trade 3.9
5.1
Information 15.4
18.7
FIRE 5.6
14.4
B&P Services 12.9
8.0
E&H Services 7.6
3.1 1.7
H&L Services 23.6 Other Services 4.0
12.0
Government -0.4
Percent of Real Sector Growth
2021 GDP SECTOR ANALYSIS The chart to the left presents the projected contributions of each major economic sector to North Carolina’s Gross Domestic Product (GDP). The real (inflation-adjusted) growth rate for 2021 increased by 6.9 percent. Real growth rates for each sector (displayed in black type) are plotted on the horizontal axis. Percentages of GDP contributed by each sector (displayed in green type) are plotted on the vertical axis. The resulting rectangles show the weighted importance of each sector’s growth during 2021. All of the sector information presented in the table to the left is based on the new North American Industry Classification System (NAICS) definitions. Twelve of the state’s 15 economic sectors experienced output increases during 2021. The sectors with the strongest growth rates were hospitality and leisure services with a real increase of 23.6 percent, information with a real increase of 15.4 percent, business and professional services with a real increase of 12.9 percent, durable goods manufacturing with a real increase of 12.7 percent, and educational and health services with a real increase of 7.6 percent. Seven other sectors are experienced growth rates, at levels below the overall 6.9 percent GDP real growth rate. These sectors are finance, insurance, and real estate (FIRE) with a real increase of 5.6 percent; nondurable goods manufacturing with a real increase of 5.4 percent; wholesale trade with 4.4 percent; other services at 4.0 percent; retail trade with a real increase of 3.9 percent; construction with a real increase of 3.8 percent; and mining at 1.0 percent. Three sectors experienced output declines during 2021. These are agriculture with a real decrease rate of 4.2 percent transportation, warehousing, and utilities (TWU) with a real decrease of 0.6 percent; and government with a real decrease of 0.4 percent.
Quarterly Growth Rates in Forecasted Real GDP
2022 GDP
5
Gross Domestic Product (GDP) is forecast to reach a level of $688,278.5 million in 2022. Real (inflation-adjusted) GDP is expected to increase by 2.7 percent over the 2021 level. This growth in 2022 will represent the second full year of growth since COVID-19.
4 3 2 2.0
0
1.8
For 2022, first quarter GDP is expected to decrease by an annualized real rate of 0.4 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 2.0 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 1.8 percent. In the fourth quarter of 2022, GDP is expected to increase by an annualized real rate of 1.4 percent.
1.4
-0. 4 2022 If 2022 IIf 2022 IIIf 2022 IVf
2022 Highlights 2022* Current Dollars Total Gross Product
688,278.5
Percent Change 8.9
Constant (2012 Dollars) Total Gross Product Agricultural Mining Construction Manufacturing Durable Goods Nondurable Goods TWU Wholesale Trade Retail Trade Information FIRE B&P E&H H&L Other Services Government
550,804.8 4,890.1 831.2 18,934.1 94,746.8 45,119.9 49,626.9 18,920.0 31,522.3 29,822.7 29,314.8 102,547.9 81,412.7 43,710.0 18,514.0 9,724.8 65,823.5
2.7 7.0 -0.2 -2.0 2.0 1.6 2.4 0.8 -0.1 -2.4 7.4 2.6 5.4 2.5 10.5 3.7 2.5
* Millions of dollars
For 2022, there are two big stories that are playing out over the year. First is the first quarter decline in both U.S. and North Carolina GDP. The U.S. GDP declined by 1.4 percent, while North Carolina real GDP dropped by 0.4 percent. This decline is partly due to Omicron issues domestically and inventory declines, especially in the new car industry. The second big issue is the impact that inflation is having on the economy. For most families the direct impact of inflation is rising gasoline prices and food prices. However, there is a bigger issue associated with inflation and that is its impact on real GDP growth. For example, in the first quarter of 2022 current dollar GDP increased by 6.5 percent. So while consumers and businesses spent 6.5 percent more on goods and services during the first quarter, because of inflation that increase in current dollar spending resulted in a decline of actual goods and services delivered. Going forward in 2022, we have several factors that could upset the U.S. and North Carolina economies. First, we have the uncertainty of new variants of COVID-19 cropping up and creating a temporary slowing of economic activity and further compromising the supply chain. Second, is the continued problem of inflation. It is clearly not going away any time soon, and the Fed may have to become more hawkish and that could spin the economy into recession later this year or early next year.
Percent of Total Real GDP
2022 Total Real GDP Growth 2.7% 0.9 0.2 3.4 3.4
Agriculture 7.0 Mining -0.2 TWU 2.1 Construction -2.0
8.2
Durables 1.6
9.0
Nondurables 2.4
5.4
Wholesale Trade -0.1
5.3
Retail Trade -2.4
5.3
Information 7.4
18.6
FIRE 2.6
14.8
B&P Services 5.4
7.9
E&H Services 2.5
3.4 1.7
H&L Services 10.5 Other Services 3.7
11.9
Government 2.5
Percent of Real Sector Growth
2022 GDP SECTOR ANALYSIS The chart to the left presents the projected contributions of each major economic sector to North Carolina’s Gross Domestic Product (GDP). The real (inflation-adjusted) growth rate for 2022 is forecast to increase by 2.7 percent. Projected real growth rates for each sector (displayed in black type) are plotted on the horizontal axis. Projected percentages of GDP contributed by each sector (displayed in green type) are plotted on the vertical axis. The resulting rectangles show the expected weighted importance of each sector’s growth during 2022. All of the sector information presented in the table to the left is based on the new North American Industry Classification System (NAICS) definitions. Eleven of the state’s 15 economic sectors are expected to experience output increases during 2022. The sectors with the strongest expected growth rates are hospitality and leisure services with a real increase of 10.5 percent, information with a real increase of 7.4 percent, agriculture with a real increase of 7.0 percent, business and professional services with a real increase of 5.4 percent, and other services with a real increase of 3.7 percent. Six sectors are expected to experience growth rates below the overall state growth rate of 2.7 percent. These sectors are finance, insurance, and real estate (FIRE) with a real increase of 2.6 percent; educational and health services with a real increase of 2.5 percent; government with a real increase of 2.5 percent; nondurable goods manufacturing with a real increase of 2.4 percent; transportation, warehousing, and utilities (TWU) with a real increase of 2.1 percent; and durable goods manufacturing with a real increase of 1.6 percent. Four sectors are expected to decline in 2022 these sectors are wholesale trade with a decrease of 0.1 percent, mining with a decrease of 0.2 percent, construction with decrease by 2.0 percent, and retail trade with decrease by 2.4 percent.
2021 Year-End Employment Trends 0.1 5.1
Mining -1.8 Construction 2.5
5.5
Durables 4.2
Percent of Total Employment
4.5
Nondurables
-0.5
4.1
Wholesale Trade 4.2
11.0
Retail Trade 0.6
4.2 1.7
TWU 0.6 Information 10.1
5.9
14.8
13.6
10.4
FIRE 4.4
2021 EMPLOYMENT SECTOR ANALYSIS The sector employment analysis is based on the new North American Industrial Classification System (NAICS). North Carolina employment reached 4,656,100 persons by December 2021, a 3.6 percent increase over the December 2020 employment level. The state added 163,200 net jobs in 2021. Twelve of the state’s nonagricultural sectors of the economy experienced employment increases during 2021. The sectors with the strongest employment increases in 2021 were hospitality and leisure services at 11.7 percent, and information at 10.1 percent.
2021 Employment Highlights
B&P Services 5.8
E&H Services 2.8
H&L Services 11.7
3.6
Other Services 5.5
15.4
Government 0.3
Total Establishment Employment Mining Construction Manufacturing Durable Goods Nondurable Goods Wholesale Trade Retail Trade TWU Information FIRE B&P Services E&H Services H&L Services Other Services Government *
Percent of Sector Employment Growth
Year-End*
Percent Change
4,656.1 5.5 239.0 465.9 255.2 210.7 192.3 513.5 194.7 79.8 274.9 691.0 634.5 483.1 165.9 716.0
3.6 -1.8 2.5 2.0 4.2 -0.5 4.2 0.6 0.6 10.1 4.4 5.8 2.8 11.7 5.5 0.3
thousands of persons
2022 Year-End Employment Trends 0.1 5.2
Mining 3.6 Construction 3.8
5.4
Durables 1.4
Percent of Total Employment
4.6
Nondurables
3.9
4.2
Wholesale Trade 3.5
10.9
Retail Trade 0.9
4.1 1.8
TWU 0.5 Information 6.3
5.9
FIRE 3.0
2022 EMPLOYMENT SECTOR ANALYSIS The sector employment analysis presented on this page is based on the new North American Industrial Classification System (NAICS). North Carolina employment is expected to reach 4,766,200 persons by December 2022, a 2.4 percent increase over the December 2021 employment level. The state is expected to add 110,100 net jobs in 2022. All 14 of the state’s nonagricultural sectors of the economy are expected to experience employment increases during 2022. The sectors with the strongest expected employment increases in 2022 are information at 6.3 percent and nondurable goods at 3.9 percent.
2022 Employment Highlights 15.0
13.6
10.5
B&P Services 3.6
E&H Services 2.1
H&L Services 3.7
3.6
Other Services 2.4
15.1
Government 0.4
Total Establishment Employment Mining Construction Manufacturing Durable Goods Nondurable Goods Wholesale Trade Retail Trade TWU Information FIRE B&P Services E&H Services H&L Services Other Services Government *
Percent of Sector Employment Growth
Year-End*
Percent Change
4,766.2 5.7 248.2 477.7 258.7 219.0 199.0 518.4 195.6 84.8 283.2 715.6 648.1 501.0 169.9 719.2
2.4 3.6 3.8 2.5 1.4 3.9 3.5 0.9 0.5 6.3 3.0 3.6 2.1 3.7 2.4 0.4
thousands of persons
2021-2022 NORTH CAROLINA UNEMPLOYMENT RATE
FORECAST reports historical seasonally adjusted monthly unemployment rates for North Carolina and the United States and forecasts the seasonally adjusted monthly unemployment rate for North Carolina. The seasonal adjustment accounts for variations in labor market conditions that cause regular fluctuations in the unemployment level each month. The graph at the top of this page provides a summary of the monthly unemployment rates for 2021 and 2022. The solid blue line represents the United States seasonally adjusted historical unemployment rate. The seasonally adjusted unemployment rate for North Carolina is represented by the solid green line. The North Carolina seasonally adjusted unemployment rate forecast is represented by the solid red line. The seasonally adjusted rates for the United States and North Carolina can be compared directly and provide more reliable estimates than the unadjusted rates. The United States and North Carolina started 2021 with unemployment rates of 6.4 percent and 5.5 percent respectively. Both the U.S. and North Carolina unemployment rates have fallen consistently to 3.9 percent and 4.1 percent by December. The North Carolina rate should decline through the rest of 2022 and close the year at 3.4 percent by December of 2022.
2023 OUTLOOK
2023 Quarterly Growth Rates in Forecasted Real GSP
4 The data used in this report comes from the toU.S. Grossthe Statewebsites Product (GSP) for is expected reachDepartment a level of $743,413.0of 3 million in 2023. Real (inflation adjusted) GSP is expected to increase Commerce’s Bureau of Economic Analysis (www.bea.gov) and North Carolina by 1.9 percent over the 2022 level. Thisthe growth in 2023 would follow 2 percent growth in 2022 and result in third year of economic Employment Security Commission2.7 (www.ncesc.com) as of April 30, 2022. 2.3 2.1 growth for the North Carolina economy since the pandemic recession 1 2.1
1.8
in 2020. The North Carolina economy is expected to add 74,000 jobs in 2023, maintaining the unemployment rate of around 3.4 percent through December 2023.
0 2023 If 2023 IIf 2023 IIIf 2023 IVf
2023 GSP Highlights 2023 *
2023 Employment Highlights
Current Dollars Total Gross Product
743,413.0
Percent Change 8.0
Constant (2012 Dollars) Total Gross Product Agricultural Mining Construction Manufacturing Durable Goods Nondurable Goods TWU Wholesale Trade Retail Trade Information FIRE B&P E&H H&L Other Services Government
561,471.6 5,088.9 847.8 19,448.7 95,929.4 45,797.7 50,131.7 19,434.2 31,866.6 30,118.6 30,148.6 104,077.4 83,370.4 44,906.6 19,299.3 9,989.0 66,946.0
1.9 2.1 2.0 2.7 1.2 1.5 1.0 2.7 1.1 1.0 2.8 1.5 2.4 2.7 4.2 2.7 1.7
* millions of dollars
Total Establishment Employment Mining Construction Manufacturing Durable Goods Nondurable Goods Wholesale Trade Retail Trade TWU Information FIRE B&P Services E&H Services H&L Services Other Services Government *
Year-End*
Percent Change
4,840.2 5.7 254.2 484.3 261.7 222.6 205.0 521.4 198.0 89.6 286.2 727.6 654.0 513.0 176.1 725.2
1.6 0.0 2.4 1.4 1.2 1.6 3.0 0.6 1.2 5.7 1.1 1.7 0.9 2.4 3.6 0.8
thousands of persons