North Carolina Economic Forecast - Second Quarter Report (May 25, 2023)

Page 1

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

FORECAST HIGHLIGHTS

• For 2022, NORTH CAROLINA real GDP increased by 3.8 percent over the 2021 level.

• Ten of the state’s 15 economic sectors experienced output increases during 2022. The sectors with the strongest growth rates were mining with a real increase of 33.0 percent, agriculture with a real increase of 29.9 percent, information with a real increase of 13.4 percent, business and professional services with a real increase of 12.2 percent, hospitality and leisure services with a real increase of 8.6 percent, government with a real increase of 8.0 percent, education and health services with a real increase of 6.3 percent, and other services with a real increase of 4.9 percent.

• For 2022, NORTH CAROLINA establishments added 163,600 net jobs during the year, an increase of 3.5 percent.

• For 2023, NORTH CAROLINA real GDP is forecast to increase by 1.4 percent over the 2022 level.

• Twelve of the state’s economic sectors are expected to experience output increases during 2023. The sectors with the strongest growth rates are agriculture with a real increase rate of 15.4 percent, information with a real increase of 7.2 percent, mining with a real increase of 7.0 percent, business and professional services with a real increase of 4.0 percent, educational and health services with a real increase of 3.4 percent, hospitality and leisure services with a real increase of 2.7 percent, other services with a real increase of 2.4 percent, and retail trade with a real increase of 2.4 percent.

• For 2023, NORTH CAROLINA establishments are forecast to add 78,300 net jobs, an increase of 1.6 percent.

• By December of 2023, the state’s unemployment rate is expected to be 4.0 percent.

3.8
2020 2021 2022 2 4 6 8
2024f 2023f 4.1 5.6 3.9 3.6 Annual Growth Rates In Real GDP 0 2020 2022 2023f 2024f 2021 1 2 4 3.8 -1.3 7.2 1.4 -1 -2 -3 -5 -4 1.6 3

Quarterly Growth Rates in Real GDP

2022 GDP

Gross Domestic Product (GDP) reached a level of $730,072.6 million in 2022. Real (inflation-adjusted) GDP increased by 3.8 percent over the 2021 level. This growth in 2022 will represent the second full year of growth since COVID19.

For 2022, first quarter GDP increased by an annualized real rate of 2.9 percent. During the second quarter, GDP decreased by an annualized real rate of 0.4 percent. In the third quarter, GDP increased by an annualized real rate of 2.7 percent. In the fourth quarter of 2022, GDP increased by an annualized real rate of 3.7 percent.

2022 Highlights

For 2022, there were two big stories that played out over the year. First was the first and second quarter declines U.S. GDP. In the first and second quarters of 2022, U.S. GDP declined by 1.6 and 0.6 percent, while North Carolina real GDP bucked the national trend by increasing in the first quarter by 2.9 percent and decreasing in the second quarter by only 0.4 percent. The decline in U.S. GDP occurred because of the emergence of the Omicron variant in the first quarter but continued on through the second quarter as supply chain problems persisted in many sectors of the economy. In addition, the first and second quarters experienced an unprecedented decline in productivity, with first quarter 2022, labor productivity declining by 6.0 percent and second quarter, labor productivity declining by 3.7 percent. So in the first half of 2022 we saw current dollar GDP increased by 6.6 and 8.4 percent, because consumers and businesses spent 6.6 and 8.4 percent more on goods and services, but because of inflation, productivity declines, and supply chain issues the increase in current dollar spending resulted in a decline of actual goods and services delivered.

The other big issue going forward was the impact that inflation has had and is continuing to have on both the U.S. and North Carolina economies. This problem is compounded by Federal Reserve policy of rapidly raising interest rates, and the uncertainty about future Fed policy and rates.

Agricultural Mining Construction Manufacturing Durable Goods Nondurable Goods TWU Wholesale Trade Retail Trade Information FIRE B & P E & H H & L Other Services Government 730,072.6 564,965.2 7,013.2 1,360.7 17,730.5 85,961.1 40,736.2 45,480.9 20,920.5 33,298.4 30,533.6 31,620.5 102,019.3 87,427.8 47,137.2 19,761.1 10,572.8 69,352.8 2022* Percent Change 10.3 3.8 29.9 33.0 -9.0 -3.1 -4.2 -2.1 3.3 0.9 -1.0 13.4 -0.6 12.2 6.3 8.6 4.9 8.0
5 4 2 0 3
Current Dollars Total Gross Product Constant (2012 Dollars) Total Gross Product
* Millions of dollars
2.7 2022
2022
2.9 -0.4 3.7
I 2022 II
III 2022 IV

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 increased by 3.8 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 2022. All of the sector information presented in the table to the left is based on the North American Industry Classification System (NAICS) definitions.

Ten of the state’s 15 economic sectors experienced output increases during 2022. The sectors with the strongest growth rates were mining with a real increase of 33.0 percent, agriculture with a real increase of 29.9 percent, information with a real increase of 13.4 percent, business and professional services with a real increase of 12.2 percent, hospitality and leisure services with a real increase of 8.6 percent, government with a real increase of 8.0 percent, education and health services with a real increase of 6.3 percent, and other services with a real increase of 4.9 percent.

Two sectors experienced real output increase but at levels below the overall GDP increase of 3.8 percent. These sectors wee transportation, warehousing, and utilities (TWU) with a real increase of 3.3percent; and wholesale trade with a real increase of 0.9 percent.

Five sectors are experienced GDP declines in 2022, these sectors were finance, insurance, and real estate (FIRE) with a decrease of 0.6 percent; retail trade with a decrease of 1.0 percent; nondurable goods manufacturing with a decrease of 2.1 percent; durable goods manufacturing with a decrease of 4.2 percent; and construction with decrease of 9.0 percent.

Percent of Total Real GDP Percent of Real Sector Growth 1.2 2022 Total Real GDP Growth 3.8% 0.2 3.7 7.2 8.1 3.1 5.9 5.4 3.5 12.3 18.1 15.5 8.3 1.9 5.6 B&P Services 12.2 E&H Services 6.3 H&L Services 8.6 Other Services 4.9 Government 8.0 FIRE -0.6 Information 13.4 Durables -4.2 TWU 3.3 Wholesale Trade 0.9 Retail Trade -1.0 Nondurables -2.1 Construction -9.0 Mining 33.0 Agriculture 29.9

Quarterly Growth Rates

2023 GDP

Gross Domestic Product (GDP) is forecast to reach a level of $771,512.4 million in 2023. Real (inflation-adjusted) GDP is expected to increase by 1.4 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 is expected to increase by an annualized real rate of 0.8 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 0.9 percent. In the third quarter, GDP is expected to decrease by an annualized real rate of 0.3 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 1.8 percent.

2023 Highlights

The big question in 2023 is, “will the U.S. economy slip into a recession?” The answer is clearly uncertain, but leaning toward yes at this time. During the first and second quarters of 2022 U.S. GDP declined and many suggest that the U.S. economy entered into a recession. However, the two quarter decline in real GDP is only a rule of thumb. It is neither necessary nor sufficient in indicating that we were in recession. While GDP declined in the first half of 2022, we also saw tremendous strength in the labor market. For 2022, the U.S. economy added 4,793,000 net jobs and North Carolina added 163,600 jobs.

So are we in for a recession in 2023? That depends almost entirely on what the Federal Reserve does during the summer. The Fed Funds Rate target is currently between 5.00 and 5.25 percent. The April CPI suggests that inflation is running at 4.9 percent year over year. This means real interest rates are right around zero. The FOMC meets again in June and they will receive the May CPI during their meeting. They may pause or they may raise once by 25 basis points. Either way, the recent trouble in the financial sector is slowing lending across all banks and helping the Fed in its inflation fight. However, the net impact of increasing interest rates and reduced bank lending is creating uncertainty about the direction the U.S. economy is heading over the next couple of quarters. It is quite possible we will see a mild slowdown during the second half of 2023.

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 B & P E & H H & L Other Services Government 771,512.4 573,016.2 8,091.1 1,456.0 16,645.1 84,055.4 40,865.7 43,189.7 21,047.0 33,849.6 31,296.4 33,906.8 101,930.8 90,941.2 48,739.7 20,286.8 10,825.1 69,972.1 2023* Percent Change 5.7 1.4 15.4 7.0 -6.1 -2.2 0.3 -5.0 0.6 1.7 2.4 7.2 -0.1 4.0 3.4 2.7 2.4 0.9 * Millions of dollars 8 6 2 0 4
in Forecasted Real GDP -0.3 2023 I 2023 II 2023 III 2023 IV 0.8 0.9 1.8

2023 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 2023 is projected to increase 1.4 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.

Twelve of the state’s economic sectors are expected to experience output increases during 2023. The sectors with the strongest growth rates are agriculture with a real increase rate of 15.4 percent, information with a real increase of 7.2 percent, mining with a real increase of 7.0 percent, business and professional services with a real increase of 4.0 percent, educational and health services with a real increase of 3.4 percent, hospitality and leisure services with a real increase of 2.7 percent, other services with a real increase of 2.4 percent, retail trade with a real increase of 2.4 percent, and wholesale trade with a real increase of 1.7 percent.

Three other sectors are expected to experience growth rates, at levels below the overall 1.4 percent GDP real growth rate. These sectors are government with a real increase of 0.9 percent; and transportation, warehousing, and utilities (TWU) with a real increase of 0.6 percent; and durable goods manufacturing with a real increase of 0.3 percent.

Three sectors are expected to experience declines during 2023. These sectors are construction with a decrease of 6.1 percent; nondurable goods manufacturing with a decrease of 5.0 percent; and finance, insurance, and real estate (FIRE) with a decrease of 0.1 percent.

Percent of Total Real GDP Percent of Real Sector Growth 1.4 2023 Total Real GDP Growth 1.4% 0.3 3.7 7.1 7.5 2.9 5.9 5.5 3.6 12.2 17.8 15.9 8.5 1.9 5.9 B&P Services 4.0 E&H Services 3.4 H&L Services 2.7 Other Services 2.4 Government 0.9 FIRE -0.1 Information 7.2 Durables 0.3 TWU 0.6 Wholesale Trade 1.7 Retail Trade 2.4 Nondurables -5.0 Construction -6.1 Mining 7.0 Agriculture 15.4

2022 Year-End Employment Trends

2022 EMPLOYMENT SECTOR ANALYSIS

The sector employment analysis presented on this page is based on the North American Industrial Classification System (NAICS). North Carolina employment reached 4,852,500 persons by December 2022, a 3.5 percent increase over the December 2021 employment level. The state added 163,600 net jobs in 2022.

Twelve of the state’s fourteen nonagricultural sectors of the economy experienced employment increases during 2022. The sectors with the strongest employment increases in 2022 were information at 9.2 percent, hospitality and leisure services at 8.2 percent and wholesale trade at 6.0 percent.

2022 Employment Highlights

Construction 4.2 Percent of Sector Employment Growth Nondurables 3.3 FIRE 4.2 Retail Trade 1.5 Durables 1.2 Wholesale Trade 6.0 0.1 5.2 4.6 4.3 5.3 10.7 4.0 10.7 14.8 Government 1.3 6.1 Other Services 5.6 Information 9.2 B&P Services 4.4 E&H Services 2.9 H&L Services 8.2 15.3 13.6 3.6 1.7 Mining -3.6
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 4,852.5 5.4 252.0 477.0 255.8 221.2 208.1 519.2 196.0 84.4 296.0 742.1 661.3 520.1 173.7 717.2 Year-End* Percent Change 3.5 -3.6 4.2 2.2 1.2 3.3 6.0 1.5 -1.4 9.2 4.2 4.4 2.9 8.2 5.6 1.3 *thousands of persons
Percent of Total Employment TWU -1.4

2023 Year-End Employment Trends

2023 EMPLOYMENT SECTOR ANALYSIS

The sector employment analysis presented on this page is based on the North American Industrial Classification System (NAICS). North Carolina employment is expected reached 4,930,800 persons by December 2023, a 1.6 percent increase over the December 2022 employment level. The state is expected to add 78,300 net jobs in 2023.

All fourteen of the state’s nonagricultural sectors of the economy are expected to experience employment increases during 2023. The sectors with the strongest employment increases in 2023 are mining at 5.6 percent and information at 4.0 percent.

2023 Employment Highlights

Construction 1.3 Percent of Sector Employment Growth Nondurables 0.5 FIRE 0.6 Retail Trade 0.5 Durables 1.0 Wholesale Trade 1.4 0.1 5.2 4.5 4.3 5.2 10.6 4.0 10.8 14.7 Government 1.2 6.0 Other Services 2.1 Information 4.0 B&P Services 2.2 E&H Services 2.4 H&L Services 2.7 15.4 13.7 3.6 1.8 Mining 5.6
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 4,930.8 5.7 255.3 480.6 258.3 222.3 211.0 521.7 198.7 87.8 297.8 758.4 677.0 534.1 177.3 725.5 Year-End* Percent Change 1.6 5.6 1.3 0.7 1.0 0.5 1.4 0.5 1.4 4.0 0.6 2.2 2.4 2.7 2.1 1.2 *thousands of persons
Percent of Total Employment TWU 1.4

2022 -2023 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 2022 and 2023. 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 2022 with unemployment rates of 4.0 percent and 3.9 percent respectively. The U.S. unemployment rate has fallen consistently to 3.5 percent by the end of 2022. The North Carolina rate fell during the middle of 2022 but has risen back up to 3.9 percent by the end of the year. The North Carolina unemployment rate has declined during the first quarter of 2023 to 3.5 percent in March. The North Carolina rate will increase slightly over the year to 3.9 percent by December 2023.

2024 Quarterly Growth Rates

2024 OUTLOOK

Gross State Product (GSP) is expected to reach a level of $810,715.9 million in 2024. Real (inflation adjusted) GSP is expected to increase by 1.6 percent over the 2023 level. This growth in 2024 would follow 1.4 percent growth in 2023 and result in fourth year of economic growth for the North Carolina economy since the pandemic recession in 2020. The North Carolina economy is expected to add 53,400 jobs in 2024, maintaining the unemployment rate of around 4.0 percent through December 2024.

2024 GSP Highlights

2024 Employment Highlights

2024 IIf 2024 If 2024 IVf 4 3 2024 IIIf 1 0 2
in Forecasted Real GSP 1.8 2.7 1.7 2.0
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 B & P E & H H & L Other Services Government 810,715.9 581,930.1 8,458.1 1,497.5 16,758.2 84,878.9 41,282.5 43,596.4 21,467.4 34,291.6 31,617.5 34,944.9 103,075.4 92,927.2 49,591.7 20,805.3 11,034.8 70,581.7 2024 * Percent Change 5.1 1.6 4.5 2.8 0.7 1.0 1.0 0.9 2.0 1.3 1.1 3.1 1.1 2.2 1.7 2.6 1.9 0.9
* 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 4,984.2 5.7 257.7 484.8 261.3 223.5 217.0 523.5 201.1 92.6 300.2 770.4 683.0 540.1 179.7 728.5 Year-End* Percent Change 1.1 0.0 0.9 0.9 1.2 0.5 2.8 0.3 1.2 5.5 0.8 1.6 0.9 1.1 1.4 0.4
*thousands of persons

The data used in this report comes from the websites for the U.S. Department of Commerce’s Bureau of Economic Analysis (www.bea.gov) and the North Carolina Department of Commerce (www.commerce.nc.gov) as of May 18, 2023.

Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.