FOURTH QUARTER REPORT
December 14, 2023
FORECAST HIGHLIGHTS Annual Growth Rates In Real GDP 4 3 2 1 0 -1 -2 -3 -4 -5
5.8 2.0
2.5
1.9
-0.6
2020
2021
2022 2023f 2024f
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 6
3.8 2020
5.6 2021
• Twelve 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 11.1 percent; educational and health services with a real increase of 6.7 percent; transportation, warehousing, and utilities (TWU) with a real increase of 6.7 percent; retail trade with a real increase of 6.4 percent, hospitality and leisure services with a real increase of 4.2 percent, and business and professional services with a real increase of 4.0 percent. • For 2023, NORTH CAROLINA establishments are expected to add 94,800 net jobs during the year, an increase of 2.0 percent. • For 2024, NORTH CAROLINA real GDP is forecast to increase by 1.9 percent over the 2023 level. • Fourteen 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 4.8 percent; transportation, warehousing, and utilities (TWU) with a real increase of 3.6 percent; mining with a real increase of 3.5 percent; business and professional services with a real increase of 2.6 percent; educational and health services with a real increase of 2.3 percent; and durable goods manufacturing with a real increase of 2.0 percent. • For 2024, NORTH CAROLINA establishments are forecast to add 53,400 net jobs, an increase of 0.9 percent.
4 2
• For 2023, NORTH CAROLINA real GDP is projected to increase by 2.5 percent over the 2022 level.
4.1 2022
3.5 2023f
4.0 2024f
• By December of 2024, the state’s unemployment rate is expected to be 4.0 percent.
2023 GDP
Quarterly Growth Rates in Real GDP
Gross Domestic Product (GDP) is forecast to reach a level of $765,945.6 million in 2023. Real (inflation-adjusted) GDP is expected to increase by 2.5 percent over the 2022 level. This growth in 2023 will represent the third full year of growth since COVID-19.
8 6 4 2
3.4 1.1
0
3.4
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 1.1 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 3.4 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 1.8 percent.
1.8
2023 II 2023 IIIf 2023 IVf
2023 I
2023 Highlights 2023*
Percent Change
Current Dollars Total Gross Product
765,945.6
7.0
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
624,045.1 3,505.1 716.2 25,489.5 87,378.6 38,149.9 49,228.7 26,862.6 33,237.5 35,852.5 31,179.8 124,998.2 95,291.2 53,555.1 22,399.7 12,362.1 74,863.4
2.5 -15.9 -10.6 2.3 -0.1 0.1 0.0 6.7 1.4 6.4 11.1 0.2 4.0 6.7 4.2 -0.7 0.5
* Millions of dollars
Both the North Carolina and U.S. economies are clearly feeling the impact of a 525 basis point increase in interest rates as a result of Federal Reserve policy over the past 21 months. The strong first quarter GDP growth was not sustained as the second quarter growth dropped to a modest 1.1 percent. In the third quarter, both U.S. and North Carolina GDP picked up considerably as a result of consumer’s one last fling during the second half of the summer. However, it looks as if the long GDP growth run is slowing down. Overall, 2023 with an annual GDP growth of 2.5 percent looks good, but the economy is clearly slowing during the last quarter. 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 (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 will see a mild slowdown during the fourth quarter of 2023 and at least the first quarter of 2024, but if federal fiscal spending continues unabated the economy may continue to grow with inflation coming back in 2024.
Percent of Total Real GDP
2023 Total Real GDP Growth 2.5% 0.6 0.1 4.3
Agriculture -15.9 Mining -10.6 TWU 6.7
4.1
Construction 2.3
6.1
Durables 0.1
7.8
Nondurables 0.0
5.3
Wholesale Trade 1.4
5.7
Retail Trade 6.4
5.0
Information 11.1
19.9
FIRE 0.2
15.2
B&P Services 4.0
8.5
E&H Services 6.7
3.6 2.0
H&L Services 4.2 Other Services -0.7
11.9
Government 0.5
Percent of Real Sector Growth
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 2.5 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 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 information with a real increase of 11.1 percent; educational and health services with a real increase of 6.7 percent; transportation, warehousing, and utilities (TWU) with a real increase of 6.7 percent; retail trade with a real increase of 6.4 percent; hospitality and leisure services with a real increase of 4.2 percent; and business and professional services with a real increase of 4.0 percent. Five other sectors are expected to experience growth rates, at levels below the overall 2.5 percent GDP real growth rate. These sectors are construction with a real increase of 2.3 percent; wholesale trade with a real increase of 1.4 percent; government with a real increase of 0.5 percent; and finance, insurance, and real estate (FIRE) with a real increase of 0.2 percent. Nondurable 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 15.9 percent, mining with a decrease of 10.6 percent, and other services with a decrease of 0.7 percent
Quarterly Growth Rates in Real GDP
2024 GDP Gross Domestic Product (GDP) should reach a level of $806,934.5 million in 2024. Real (inflation-adjusted) GDP is expected to increase by 1.9 percent over the 2023 level. This growth in 2024 will represent the fourth full year of growth since COVID-19.
5 4 3 2 0
1.6
1.7
1.9
2.1
2024I
2024 II
2024 III
2024 IV
For 2024, first quarter GDP is expected to increase by an annualized real rate of 1.6 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 1.7 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 1.9 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 2.1 percent.
2024 Highlights 2024* Current Dollars Total Gross Product
806.934.5
Percent Change 5.4
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
636.018.0 3.359.1 741.3 25.815.9 89.070.0 38.919.3 50.150.7 27.837.4 33.774.4 36.389.3 32.671.7 126.602.9 97.759.5 54.779.7 22.749.7 12.501.9 75.771.8
1.9 -4.4 3.5 1.3 1.9 2.0 1.9 3.6 1.6 1.5 4.8 1.3 2.6 2.3 1.6 1.1 1.2
* Millions of dollars
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 21 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 first three quarters in 2023 the economy is finally showing signs of slowing. If fact, as recently as December 7, 2023 the Atlanta FED GDPNow tracker indicates that fourth quarter U.S. GDP is slowing to a growth rate of 1.1 percent. This is the first sign that FED interest rate policy is working. However, 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 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.
Percent of Total Real GDP
2024 Total Real GDP Growth 1.9% 0.5 0.1 4.4
Agriculture -4.4 Mining 3.5 TWU 3.6
4.0
Construction 1.3
6.1
Durables 2.0
7.8
Nondurables 1.9
5.3
Wholesale Trade 1.6
5.7
Retail Trade 1.5
5.1
Information 4.8
19.8
FIRE 1.3
15.3
B&P Services 2.6
8.6
E&H Services 2.3
3.6 2.0
H&L Services 1.6 Other Services 1.1
11.8
Government 1.2
Percent of Real Sector Growth
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 1.9 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 2024. All of the sector information presented in the table to the left is based on the North American Industry Classification System (NAICS) definitions. Fourteen 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 4.8 percent; transportation, warehousing, and utilities (TWU) with a real increase of 3.6 percent; mining with a real increase of 3.5 percent; business and professional services with a real increase of 2.6 percent; educational and health services with a real increase of 2.3 percent; and durable goods manufacturing with a real increase of 2.0 percent. Eight other sectors are expected to experience growth rates, at levels equal to or below the overall 1.9 percent GDP real growth rate. These sectors are nondurable goods manufacturing with a real increase of 1.9 percent; hospitality and leisure services with a real increase of 1.6 percent; wholesale trade with a real increase of 1.6 percent; retail trade with a real increase of 1.5 percent; finance, insurance, and real estate (FIRE) with a real increase of 1.3 percent; construction with a real increase of 1.3 percent; government with a real increase of 1.2 percent; and other services with a real increase of 1.1 percent. Only the agriculture sector is expected to experience a decline in 2024.
Percent of Total Employment
2023 Year-End Employment Trends 0.1 5.0
Mining 5.7 Construction -2.4
5.2
Durables -1.1
4.4
Nondurables -2.2
4.3
Wholesale Trade 1.7
10.7
Retail Trade 1.7
4.1 1.7
TWU 3.4 Information 1.9
6.0
FIRE 0.7
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 to reach 4,947,300 persons by December 2023, a 2.0 percent increase over the December 2022 employment level. The state is expected to add 94,800 net jobs in 2023. Eleven 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 5.7 percent and educational and health services at 4.9 percent.
2023 Employment Highlights 15.4
14.0
10.9
B&P Services 2.6
E&H Services 4.9
H&L Services 3.3
3.5
Other Services 0.3
14.8
Government 2.0
Percent of Sector Employment Growth
Year-End* Total Establishment Employment 4,947.3 Mining 5.7 Construction 246.0 Manufacturing 471.8 Durable Goods 255.4 Nondurable Goods 216.4 211.7 Wholesale Trade 527.9 Retail Trade TWU 202.7 Information 86.0 FIRE 297.3 B&P Services 761.5 E&H Services 693.6 H&L Services 537.4 174.3 Other Services 731.4 Government *Thousands of persons
Percent Change 2.0 5.6 -2.4 -1.1 -0.2 -2.2 1.7 1.7 3.4 1.9 0.4 2.6 4.9 3.3 0.3 2.0
Percent of Total Employment
2024 Year-End Employment Trends 0.1 5.0
Mining 0.0 Construction 1.0
5.2
Durables 1.2
4.4
Nondurables 0.6
4.4
Wholesale Trade 2.8
10.6
Retail Trade 0.3
4.1 1.8
TWU 1.2 Information 5.6
6.0
FIRE 0.8
2024 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 to reach 5,003,700 persons by December 2024, a 0.9 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 projected employment increases in 2024 are information at 5.6 percent and wholesale trade at 2.8 percent.
2024 Employment Highlights 15.5
B&P Services 1.6
14.0
E&H Services 0.9
10.9
H&L Services 1.1
3.5
14.7
Other Services 1.4 Government 0.4
Percent of Sector Employment Growth
Year-End* Total Establishment Employment 5003.7 Mining 5.7 Construction 248.4 Manufacturing 476.0 Durable Goods 258.4 Nondurable Goods 217.6 217.7 Wholesale Trade 529.7 Retail Trade TWU 205.1 Information 90.8 FIRE 299.7 B&P Services 773.5 E&H Services 699.6 H&L Services 543.4 176.7 Other Services 734.4 Government *Thousands of persons
Percent Change 0.9 0.0 1.0 0.9 1.2 0.6 2.8 0.3 1.2 5.6 0.8 1.6 0.9 1.1 1.4 0.4
2023-2024 NORTH CAROLINA UNEMPLOYMENT RATE 5 4.8
4.6 4.4
4.2 4 3.8
3.6 3.4
3.2 3
JAN FEB MAR APR MAY JUN
JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN
U.S. Seasonally Adjusted
NC Seasonally Adjusted Forecast
JUL AUG SEP OCT NOV DEC
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 has begun to increase in the last few months. The North Carolina rate fell during the middle of 2023 but has risen back up to 3.4 percent in October. By the end of 2023, the North Carolina unemployment rate should increase slightly to 3.5 percent. The North Carolina rate will continue to increase slightly over the next year to 4.0 percent by December 2024.
FOURTH QUARTER REPORT
December 14, 2023