September 7, 2023
THIRD QUARTER REPORT
GDP/Gross Domestic Product is a yardstick that measures the total output of a state’s economy for a given year
FORECAST HIGHLIGHTS
• For 2023, NORTH CAROLINA real GDP is projected to increase by 2.4 percent over the 2022 level.
• Thirteen 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 11.2 percent, retail trade with a real increase of 5.6 percent, educational and health services with a real increase of 4.9 percent, hospitality and leisure services with a real increase of 4.6 percent, business and professional services with a real increase of 4.4 percent, mining with a real increase of 4.3 percent, and agriculture with a real increase rate of 3.5 percent.
• For 2023, NORTH CAROLINA establishments added 97,900 net jobs during the year, an increase of 2.0 percent.
• For 2024, NORTH CAROLINA real GDP is forecast to increase by 2.4 percent over the 2023 level.
• All fifteen 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 6.0 percent; agriculture with a real increase of 4.5 percent; mining with a real increase of 3.0 percent; business and professional services with a real increase of 2.9 percent; hospitality and leisure services with a real increase of 2.8 percent; transportation, warehousing, and utilities (TWU) with a real increase of 2.5 percent; and education and health services with a real increase of 2.4 percent.
• For 2024, NORTH CAROLINA establishments are forecast to add 53,400 net jobs, an increase of 1.1 percent.
• By December of 2024, the state’s unemployment rate is expected to be 4.0 percent.
3.8
2020 2021 2022 2 4 6 8 Annual Growth Rates In Real GDP 0 2020 2022 2023f 2024f 2021 1 2 4 3.8 -1.3 7.2
2024f 2023f 2.4 4.1 5.6 -1 -2 -3 -5 -4 2.4 3.9 3 3.6
Quarterly Growth Rates in Real GDP
Gross Domestic Product (GDP) is forecast to reach a level of $781,073.4 million in 2023. Real (inflation-adjusted) GDP is expected to increase by 2.4 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 increased by an annualized real rate of 1.3 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 2.6 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 3.6 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 2.5 percent.
2023 Highlights
The big question in 2023 is: “Will the U.S. economy slip into a recession?” The answer is clearly uncertain, but recent data suggest that the U.S. is stronger than most economists believed just 3 months ago. 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 161,500 jobs.
So what is the outlook for 2023? 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 or 5.5 percent of GDP. For fiscal year 2023 the Congressional Budget Office 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 2021, the Federal Reserve has been aggressively increasing interest rates (525 basis points in 16 months) to slow the economy down. The question is who will win this battle? It is quite possible we will see a mild slowdown during the fourth quarter of 2023 or the first quarter of 2024, but if federal fiscal spending continues unabated the economy may continue to grow with inflation coming back in 2024.
2023 GDP
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 781,073.4 578,582.7 7,262.0 1,419.4 17,069.3 85,423.2 40,938.6 44,564.8 21,052.2 33,817.5 32,255.5 35,151.3 102,135.5 91,243.6 49,461.8 20,662.8 10,781.0 70,767.3 2023* Percent Change 7.0 2.4 3.5 4.3 -3.7 -0.6 0.5 -2.0 0.6 1.6 5.6 11.2 0.1 4.4 4.9 4.6 2.0 2.0
8 6 2 0 4
Current Dollars
* Millions of dollars
3.6 2023 I 2023 IIf 2023 IIIf 2023 IVf 1.3 2.6 2.5
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 2.4 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.
Thirteen 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 11.2 percent, retail trade with a real increase of 5.6 percent, educational and health services with a real increase of 4.9 percent, hospitality and leisure services with a real increase of 4.6 percent, business and professional services with a real increase of 4.4 percent, mining with a real increase of 4.3 percent, and agriculture with a real increase rate of 3.5 percent.
Six other sectors are expected to experience growth rates, at levels below the overall 2.4 percent GDP real growth rate. These sectors are government with a real increase of 2.0 percent; other services with a real increase of 2.0 percent; wholesale trade with a real increase of 1.6 percent; and transportation, warehousing, and utilities (TWU) with a real increase of 0.6 percent; and durable goods manufacturing with a real increase of 0.5 percent; and finance, insurance, and real estate (FIRE) with a real increase of 0.1 percent.
Two sectors are expected to experience declines during 2023. These sectors are construction with a decrease of 3.7 percent, and nondurable goods manufacturing with a decrease of 2.0 percent.
Percent of Total Real GDP Percent of Real Sector Growth 1.3 2023 Total Real GDP Growth 2.4% 0.2 3.6 7.1 7.7 3.0 5.8 5.6 3.6 12.2 17.7 15.8 8.5 1.9 6.1 B&P Services 4.4 E&H Services 4.9 H&L Services 4.6 Other Services 2.0 Government 2.0 FIRE 0.1 Information 11.2 Durables 0.5 TWU 0.6 Wholesale Trade 1.6 Retail Trade 5.6 Nondurables -2.0 Construction -3.7 Mining 4.3 Agriculture 3.5
Quarterly Growth Rates in Real GDP
2024 GDP
Gross Domestic Product (GDP) should reach a level of $827,679.5 million in 2024. Real (inflation-adjusted) GDP is expected to increase by 2.4 percent over the 2023 level. This growth in 2024 will represent the third full year of growth since COVID-19.
For 2024, first quarter GDP is expected to increase by an annualized real rate of 2.1 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 2.3 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 2.7 percent.
2024 Highlights
Current Dollars
Total Gross Product
Constant (2012 Dollars) Total Gross Product
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 16 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. But so far this has not occurred.
If fact, as recently as September 1, 2023 the Atlanta FED GDPNow tracker indicates that third quarter U.S. GDP is likely to increase by 5.9 percent. That is hardly indicative of a recession.
So why is the economy continuing to expand and why are labor markets so tight? While the FED is putting on the brakes by raising interest rates, 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 $1.5 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 return of inflation. Without a change in policy, we will see a return of demand pull inflation led, this time, not by consumers and business but by government spending.
Agricultural Mining Construction Manufacturing Durable Goods Nondurable Goods TWU Wholesale Trade Retail Trade Information FIRE B & P E & H H & L Other Services Government 827,679.5 592,565.5 7,591.3 1,461.6 17,319.6 87,366.4 41,883.8 45,482.6 21,578.2 34,534,6 32,899.8 37,266.1 104,145.1 93,920.3 50,629.6 21,242.0 11,003.2 71,607.7 2024* Percent Change 6.0 2.4 4.5 3.0 1.5 2.3 2.3 2.1 2.5 2.1 2.0 6.0 2.0 2.9 2.4 2.8 2.1 1.2
5 4 2 0 3
* Millions of dollars
2.3 2024I 2024 II 2024 III 2024 IV 2.1 1.9 2.7
2024 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 2024 is projected to increase by 2.4 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 2024. All of the sector information presented in the table to the left is based on the North American Industry Classification System (NAICS) definitions.
All fifteen 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 6.0 percent; agriculture with a real increase of 4.5 percent; mining with a real increase of 3.0 percent; business and professional services with a real increase of 2.9 percent; hospitality and leisure services with a real increase of 2.8 percent; transportation, warehousing, and utilities (TWU) with a real increase of 2.5 percent; and education and health services with a real increase of 2.4 percent.
Seven sectors are expected to experience real output increase but at levels below the overall GDP increase of 2.4 percent. These sectors are durable goods manufacturing with a real increase of 2.3 percent; nondurable goods manufacturing with a real increase of 2.1 percent; wholesale trade with a real increase of 2.1 percent; other services with a real increase of 2.1 percent; retail trade with a real increase of 2.0 percent; finance, insurance, and real estate (FIRE) with a real increase of 2.0 percent; construction with a real increase of 1.5 percent; and government with a real increase of 1.2 percent.
Percent of Total Real GDP Percent of Real Sector Growth 1.3 2024 Total Real GDP Growth 2.4% 0.2 3.6 7.1 7.7 2.9 5.8 5.6 3.6 12.1 17.6 15.8 8.5 1.9 6.3 B&P Services 2.9 E&H Services 2.4 H&L Services 2.8 Other Services 2.1 Government 1.2 FIRE 2.0 Information 6.0 Durables 2.3 TWU 2.5 Wholesale Trade 2.1 Retail Trade 2.0 Nondurables 2.1 Construction 1.5 Mining 3.0 Agriculture 4.5
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 4,950,400 persons by December 2023, a 2.0 percent increase over the December 2022 employment level. The state is expected to add 96,900 net jobs in 2023.
Twelve 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 mining at 5.6 percent and educational and health services at 3.6 percent.
2023 Employment Highlights
Construction -0.7 Percent of Sector Employment Growth Nondurables 0.3 FIRE 1.5 Retail Trade 1.4 Durables 1.2 Wholesale Trade 0.0 0.1 5.1 4.5 4.2 5.2 10.6 4.0 10.9 14.8 Government 2.1 6.1 Other Services 1.1 Information 0.7 B&P Services 2.9 E&H Services 3.6 H&L Services 3.3 15.4 13.8 3.5 1.7 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 4950.4 5.7 250.3 480.8 259.0 221.8 208.1 526.4 200.2 85.0 300.4 763.5 685.0 537.3 175.6 732.3 Year-End* Percent Change 2.0 5.6 -0.7 0.8 1.2 0.3 0.0 1.4 2.1 0.7 1.5 2.9 3.6 3.3 1.1 2.1 *thousands of persons
Percent of Total Employment TWU 2.1
2023 EMPLOYMENT SECTOR ANALYSIS 2023 Year-End Employment Trends
2024 EMPLOYMENT
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 5,003,800 persons by December 2024, a 1.1 percent increase over the December 2023 employment level. The state is expected to add 53,400 net jobs in 2024.
Thirteen of the state’s fourteen nonagricultural sectors of the economy are expected to experience employment increases during 2024. The sectors with the strongest employment increases in 2024 are information at 5.6 percent and wholesale trade at 2.9 percent.
2024 Employment Highlights
Construction 1.0 Percent of Sector Employment Growth Nondurables 0.5 FIRE 0.8 Retail Trade 0.3 Durables 1.2 Wholesale Trade 2.9 0.1 5.1 4.5 4.3 5.2 10.6 4.0 10.9 14.7 Government 0.4 6.1 Other Services 1.4 Information 5.6 B&P Services 1.6 E&H Services 0.9 H&L Services 1.1 15.5 13.8 3.6 1.8 Mining 0.0
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 5003.8 5.7 252.7 485.0 262.0 223.0 214.1 528.1 202.6 89.8 302.8 775.5 691.0 543.3 178.0 735.3 Year-End* Percent Change 1.1 0.0 1.0 0.9 1.2 0.5 2.9 0.3 1.2 5.6 0.8 1.6 0.9 1.1 1.4 0.4 *thousands of persons
Percent of Total Employment TWU 1.2
SECTOR ANALYSIS 2024 Year-End Employment Trends
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. 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 half of 2023 to 3.3 percent in July. The North Carolina rate will increase slightly over the next two years to 4.0 percent by December 2024.
2023-2024 NORTH CAROLINA UNEMPLOYMENT RATE
3 3.2 3.4 3.6 3.8 4 4.2 4.4 4.6 4.8 5 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
The data used in this report comes from the websites for the U.S. Department of Commerce’s Bureau of Economic Analysis (bea.gov) and the North Carolina Department of Commerce (commerce.nc.gov) as of August 22, 2023.
