North Carolina Economic Forecast | First Quarter Report | March 14, 2024

• For 2023, NORTH CAROLINA real GDP is projected to increase by 2.8 percent over the 2022 level.

• Eleven of the state’s economic sectors are expected to experience output increases during 2023. The sectors with the strongest growth rates are information with a real increase of 12.7 percent; retail trade with a real increase of 9.5 percent; educational and health services with a real increase of 6.4 percent; transportation, warehousing, and utilities (TWU) with a real increase of 5.2 percent; business and professional services with a real increase of 4.3 percent; hospitality and leisure services with a real increase of 3.9 percent; and construction with a real increase of 3.7 percent.

• For 2023, NORTH CAROLINA establishments added 99,400 net jobs during the year, an increase of 2.0 percent.

• For 2024, NORTH CAROLINA real GDP is forecast to increase by 2.5 percent over the 2023 level.

• Thirteen of the state’s economic sectors are expected to experience output increases during 2024. The sectors with the strongest growth rates are information with a real increase of 7.5 percent, mining with a real increase of 6.1 percent, retail trade with a real increase of 5.3 percent, construction with a real increase of 3.6 percent, nondurable goods manufacturing with a real increase of 3.4 percent, and business and professional services with a real increase of 3.2 percent.

• For 2024, NORTH CAROLINA establishments are forecast to add 53,500 net jobs, an increase of 1.1 percent.

• By December of 2024, the state’s unemployment rate is expected to be 4.0 percent.

2023 GDP

Gross Domestic Product (GDP) is forecast to reach a level of $767,620.7 million in 2023. Real (inflation-adjusted) GDP is expected to increase by 2.8 percent over the 2022 level. This growth in 2023 will represent the third full year of growth since COVID-19.

For 2023, first quarter GDP increased by an annualized real rate of 3.4 percent. During the second quarter, GDP increased by an annualized real rate of 1.3 percent. In the third quarter, GDP increased by an annualized real rate of 4.8 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 3.1 percent.

2023 Highlights

Current Dollars

Total Gross Product

Constant (2012 Dollars)

Total Gross Product

Agricultural

Mining

Construction

Manufacturing

Durable Goods

Nondurable Goods

TWU

Wholesale Trade

Retail Trade Information

FIRE

Other Services Government

Both the North Carolina and U.S. economies seem to be defying the impact of a 525 basis point increase in interest rates as a result of Federal Reserve policy over the past 24 months. The strong first quarter GDP growth was not sustained as the second quarter growth dropped to a modest 1.3 percent. However, in the third quarter, both U.S. and North Carolina GDP picked up considerably as a result of consumers’ one last fling during the second half of the summer. Overall, 2023 with an annual GDP growth of 2.8 percent looks good, with a strong second half of the year.

For the past two years the U.S. government has engaged in stimulative fiscal policy and contractionary monetary policy at the same time. For fiscal year 2022 (October 1, 2021 to September 30, 2022) the U.S. deficit was $1,376 billion or 5.5 percent of GDP. For fiscal year 2023 the Congressional Budget Office (CBO) projects the U.S. budget deficit to be $1,539 billion or 5.9 percent of GDP. These budget deficits are almost double the 3.0 percent non-stimulative level. During the same period, beginning in March of 2022, the Federal Reserve has been aggressively increasing interest rates (525 basis points in 21 months) to slow the economy down. The question is who will win this battle? It is quite possible we might see a mild slowdown in 2024, but if federal fiscal spending continues unabated the economy may continue to grow but we may see a return of inflation later in 2024.

2023 GDP S ECTOR A NALYSIS

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 2023 is projected to increase 2.8 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 2023. All of the sector information presented in the table to the left is based on the North American Industry Classification System (NAICS) definitions.

Eleven of the state’s economic sectors are expected to experience output increases during 2023. The sectors with the strongest growth rates are information with a real increase of 12.7 percent; retail trade with a real increase of 9.5 percent; educational and health services with a real increase of 6.4 percent; transportation, warehousing, and utilities (TWU) with a real increase of 5.2 percent; business and professional services with a real increase of 4.3 percent; hospitality and leisure services with a real increase of 3.9 percent; and construction with a real increase of 3.7 percent.

Four other sectors are expected to experience growth rates, at levels below the overall 2.8 percent GDP real growth rate. These sectors are nondurable goods manufacturing with a real increase of 1.4 percent; finance, insurance, and real estate (FIRE) with a real increase of 0.6 percent; wholesale trade with a real increase of 0.4 percent; and government with a real increase of 0.1 percent. Durable goods manufacturing is expected to be flat during 2023.

Three sectors are expected to experience declines during 2023. These sectors are agriculture with a decrease of 24.2 percent, mining with a decrease of 9.4 percent, and other services with a decrease of 1.9 percent

Quarterly Growth Rates in Real GDP

Current Dollars

2024 Highlights

Total Gross Product

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

2024 GDP

Gross Domestic Product (GDP) should reach a level of $813,284.2 million in 2024. Real (inflation-adjusted) GDP is expected to increase by 2.5 percent over the 2023 level. This growth in 2024 will represent the fourth full year of growth since COVID-19.

For 2024, first quarter GDP is expected to increase by an annualized real rate of 2.2 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 1.9 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 1.9 percent. In the fourth quarter of 2024, GDP is expected to increase by an annualized real rate of 2.1 percent.

For 2024, there are two big questions. First, will there be a recession and second, will the FED continue to control inflation? The recession question is complicated as fiscal policy by Congress and the President continues to fight the FED, and its attempt to slow the economy by raising interest rates. After 24 months of increasing interest rates by 525 basis points, the conventional wisdom would suggest that the economy should be slowing or we should be seeing signs of recession. After an incredibly strong four quarters in 2023 the economy seems to be showing signs of slowing slightly. If fact, as recently as March 6, 2024 the Atlanta FED GDPNow tracker indicates that first quarter U.S. GDP is slowing a little compared to the 2023 quarterly GDP growth rates. The estimate now stands at 2.5 percent growth for the first quarter of 2024.

However, while the FED is holding steady on the brakes by keeping interest rates high, Congress and the President are continuing to stimulate the economy with fiscal policy deficit spending. Deficits for fiscal years 2023 and 2024 are projected to be over $1.6 trillion or almost 6 percent of GDP. Deficits of this size in the third and fourth years of economic recovery with the unemployment rate below 4 percent are simply irresponsible. If Congress does not control fiscal spending we are unlikely to see a recession in 2024, however, we are likely to see a slowing economy and a return of inflation. Without a change in policy, we are likely to see a return of demand pull inflation led, this time, not by consumers and business but by government spending.

2024 GDP S ECTOR A NALYSIS

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 2024 is projected to increase 2.5 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 2024. All of the sector information presented in the table to the left is based on the North American Industry Classification System (NAICS) definitions.

Thirteen of the state’s economic sectors are expected to experience output increases during 2024. The sectors with the strongest growth rates are information with a real increase of 7.5 percent, mining with a real increase of 6.1 percent, retail trade with a real increase of 5.3 percent, construction with a real increase of 3.6 percent, nondurable goods manufacturing with a real increase of 3.4 percent, and business and professional services with a real increase of 3.2 percent.

Seven other sectors are expected to experience growth rates, at levels equal to or below the overall 2.5 percent GDP real growth rate. These sectors are educational and health services with a real increase of 2.4 percent; finance, insurance, and real estate (FIRE) with a real increase of 2.2 percent; transportation, warehousing, and utilities (TWU) with a real increase of 2.1 percent; durable goods manufacturing with a real increase of 2.1 percent; hospitality and leisure services with a real increase of 1.2 percent; wholesale trade with a real increase of 0.7 percent; and government with a real increase of 0.8 percent.

Only the agriculture sector and other services are expected to experience a decline in 2024.

The sector employment analysis presented on this page is based on the North American Industrial Classification System (NAICS). North Carolina employment reached 4,951,900 persons by December 2023, a 2.0 percent increase over the December 2022 employment level. The state added 99,400 net jobs in 2023.

Nine of the state’s fourteen nonagricultural sectors of the economy are expected to experience employment increases during 2023. The sectors with the strongest employment increases in 2023 are educational and health services at 5.3 percent and hospitality and leisure at 4.0 percent.

2023 Employment Highlights

The sector employment analysis presented on this page is based on the North American Industrial Classification System (NAICS). North Carolina employment is expected to reach 5,005,400 persons by December 2024, a 1.1 percent increase over the December 2023 employment level. The state is expected to add 53,500 net jobs in 2024.

All fourteen of the state’s nonagricultural sectors of the economy are expected to experience employment increases during 2024. The sectors with the strongest projected employment increases in 2024 are information at 5.8 percent and wholesale trade at 2.8 percent.

2023 -2024 NORTH CAROLINA UNEMPLOYMENT RATE

U.S. Seasonally Adjusted

NC Seasonally Adjusted Forecast

NC Seasonally Adjusted

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 2023 and 2024. The solid blue line represents the United States seasonally adjusted historic 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 2023 with unemployment rates of 3.4 percent and 3.8 percent respectively. The U.S. unemployment rate has been around 3.5 percent through the first half of 2023 but increased slightly since the middle of the year and is currently at 3.9 percent. The North Carolina rate fell during the middle of 2023 but has risen back up to 3.6 percent in December. The North Carolina rate will continue to increase slightly over the next year to 4.0 percent by December 2024.