North Carolina Economic Forecast | Fourth Quarter | Dec. 11, 2025

Fourth Quarter Report

December 11, 2025

FORECAST HIGHLIGHTS Annual Growth Rates In Real GDP 8 6 4 2 0 -1 -2 -3 -4 -5

3.6

3.6

3.3

2022

2023

2024 2025f 2026f

2.6

3.0

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 4 2

3.9

3.7

3.6

3.7

2022

2023

2024

2025f

• For 2025, NORTH CAROLINA real GDP is forecast to increase by 2.6 percent over the 2024 level.

• Nine of the state’s fifteen economic sectors are expected to experience output increases during 2025. The sectors with the strongest growth rates are agriculture with a real increase of 8.6 percent; information with a real increase of 7.2 percent; business and professional services with a real increase of 4.5 percent; construction with a real increase of 3.9 percent; wholesale trade with a real increase of 3.8 percent; educational and health services with a real increase of 3.7 percent; finance, insurance, and real estate (FIRE) with a real increase of 3.6 percent; and durable goods with a real increase of 2.8 percent.

• For 2025, NORTH CAROLINA establishments are forecast to add 72,300 net jobs, an increase of 1.4 percent.

• For 2026, NORTH CAROLINA real GDP is forecast to increase by 3.0 percent over the 2025 level.

• Fourteen out of fifteen of the state’s economic sectors are expected to experience output increases during 2026. The sectors with the strongest anticipated growth rates are mining with a real increase of 5.5 percent; information with a real increase of 5.0 percent; business and professional services with a real increase of 4.3 percent; construction with a real increase of 4.1 percent; finance, insurance, and real estate (FIRE) with a real increase of 3.5 percent; and nondurable goods manufacturing with a real increase of 3.0 percent.

4.1

• For 2026, NORTH CAROLINA establishments are forecast to add 80,800 net jobs, an increase of 1.6 percent.

2026f

• By December of 2026, the state’s unemployment rate is expected to increase to 4.1 percent.

Quarterly Forecasted Growth Rates in Real GDP 8 6 4 2 0

3.7 0.0 2025 I

2025 II

3.2

2025 IIIf 2025 IVf

2025 Highlights Percent Change

Current Dollars Total Gross Product

891,409.9

5.6

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

681,228.6 5,583.4 978.2 28,597.7 83,801.4 33,132.5 50,668.9 27,352.6 34,423.9 42,940.3 38,269.5 147,774.3 105,504.5 58,440.2 22,596.3 11,914.8 77,734.

2.6 8.6 -2.9 3.9 0.3 2.8 -1.2 -0.1 3.8 -0.2 7.2 3.6 4.5 3.7 -1.5 -0.6 1.4

* Millions of dollars

Gross Domestic Product (GDP) is expected to reach a level of $891,409.9 million in 2025. Real (inflation-adjusted) GDP is expected to increase by 2.6 percent over the 2024 level. This growth in 2025 will represent the fifth full year of growth since COVID-19.

For 2025, first quarter GDP was flat with an annualized real rate of 0.0 percent. During the second quarter, GDP increased by an annualized real rate of 3.7 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 3.2 percent. In the fourth quarter of 2025, GDP is expected to increase by an annualized real rate of 2.9 percent.

2.9

2025*

2025 GDP

U.S. first quarter GDP declined by 0.6 percent which was a major influence on the flat North Carolina first quarter GDP performance. In addition, the continued drag caused by the slow recovery from Hurricane Helene is still having a negative impact on the North Carolina economy.

Recovery in western North Carolina is going to take a long time because of the nature of the damage. Unlike coastal areas most businesses and households in the western part of the state do not have flood insurance.

Normally, rebuilding after a natural disaster stimulates the economy, but in this case the lack of insurance has put a burden on small business and households and delayed the rebuilding stimulus on the economy. The hurricane’s impact on the state’s economy, which began in late 2024, will continue to impact the state’s overall GDP through all of 2025 and into early 2026.

Finally, 2025 has seen a period of uncertain Fed policy. After three reductions in the Federal funds rate in the fall of 2024, the Fed has been unclear on rate policy going forward. This uncertainty has had a significant impact in early 2025, and because of policy lags, will likely continue through the end of the year. Right now the Fed is facing conflicting goals as inflation has remained sticky and the employment picture is beginning to weaken.

2025 Total Real GDP Growth 2.6% Agriculture 8.6

0.9 0.1 4.0

Percent of Total Real GDP

4.2

Mining -2.9 TWU -0.1 Construction 3.9

4.8

Durables 2.8

7.4

Nondurables -1.2

5.0

Wholesale Trade 3.8

6.3

Retail Trade -0.2

5.6

Information 7.2

21.5

FIRE 3.6

15.4

B&P Services 4.5

8.5

E&H Services 3.7

3.3 1.7

H&L Services -1.5 Other Services -0.6

11.3

Government 1.4

Percent of Real Sector Growth

2025 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 2025 increased by 2.6 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 2025. All of the sector information presented in the table to the left is based on the North American Industry Classification System (NAICS) definitions.

Nine of the state’s fifteen economic sectors are expected to experience output increases during 2025. The sectors with the strongest growth rates are agriculture with a real increase of 8.6 percent; information with a real increase of 7.2 percent; business and professional services with a real increase of 4.5 percent; construction with a real increase of 3.9 percent; wholesale trade with a real increase of 3.8 percent; educational and health services with a real increase of 3.7 percent; finance, insurance, and real estate (FIRE) with a real increase of 3.6 percent; and durable goods with a real increase of 2.8 percent.

One other sector, government, is expected to experience a growth rate of 1.4, which is below the overall 2.6 percent GDP real growth rate.

Six sectors are expected to experience a decline in output during 2025.

These sectors are mining with a real decrease of 2.9 percent; hospitality and leisure with a real decrease of 1.5 percent; non-durable goods manufacturing with a real decrease of 1.2 percent; other services with a real decrease of 0.6 percent; retail trade with a real decrease of 0.2 percent; and transportation, warehousing, and utilities (TWU) with a real decrease of 0.1 percent.

Quarterly Forecasted Growth Rates in Real GDP 8 6 4 2

3.0

3.2

2026 If

2026 IIf

2.9

0 2026 IIIf 2026 IVf

2026 Highlights Current Dollars Total Gross Product

950,680.8

Percent Change 6.6

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

701,972.0 8,915.0 1,781.9 47,248.3 110,889.1 45,685.8 65,170.1 39,651.5 56,878.3 58,244.5 39,128.2 219,322.4 127,636.6 76,606.2 36,317.3 20,332.4 20,332.4

3.0 -1.9 5.5 4.1 2.8 2.5 3.0 1.7 2.6 1.5 5.0 3.5 4.3 2.9 2.7 2.3 1.5

* Millions of dollars

Gross Domestic Product (GDP) should reach a level of $950,680.8 million in 2026. Real (inflation-adjusted) GDP is expected to increase by 3.0 percent over the 2025 level. This growth in 2026 will represent the sixth full year of growth since COVID-19.

For 2026, first quarter GDP is expected to increase by an annualized real rate of 3.0 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 3.2 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 2.9 percent. In the fourth quarter of 2025, GDP is expected to increase by an annualized real rate of 2.6 percent.

2.6

2026*

2026 GDP

For 2026, there are some big questions. What will be the effect of the administration policy? Will there be a recession, a slowdown, or a boom?

The recession will be complicated by two issues. First, what will the Fed do? Will it continue to fight inflation and keep the fed funds rate above the neutral rate, or will it sense labor market weakness and continue to cut interest rates? Second, will we see an AI bubble? Finally, will runaway capital investment in AI technology lead to a stock market sell-off of tech stocks and slow consumer spending?

A second option is for the economy to continue to grow but at a slower pace. The U.S. economy has demonstrated resilience during 2025 despite a number of threats to economic growth. Tariff fears of an economic drag have not materialized, the government shutdown hasn’t caused significant disruptions, and international issues seem to have flown under the radar.

A third option is an economic boom, brought about by efficiency benefits of AI and the resulting productivity gains. This could happen in 2026 but is more likely to happen in 2027.

However, if Congress does not begin to control fiscal spending, we are likely to see a return of inflation in 2026, which could disrupt the Fed’s plans. The wild card in all of this is Fed interest rate policy and the balance between a return of inflation, a slow down, a recession, or a boom.

Percent of Total Real GDP

2026 Total Real GDP Growth 3.0% 0.8 0.1 3.9

Agriculture -1.9 Mining 5.5 TWU 2.1

4.2

Construction 4.1

4.8

Durables 2.5

7.4

Nondurables 3.0

5.0

Wholesale Trade 2.6

6.2

Retail Trade 1.5

5.7

Information 5.0

21.6

15.6

FIRE 3.5

B&P Services 4.3

8.5

E&H Services 2.9

3.3

H&L Services 2.7 Other Services 2.3

1.7 11.2

Government 1.5

Percent of Real Sector Growth

2026 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 2026 is projected to increase 3.0 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 expected growth during 2026. All of the sector information presented in the table to the left is based on the North American Industry Classification System (NAICS) definitions.

Fourteen out of fifteen of the state’s economic sectors are expected to experience output increases during 2026. The sectors with the anticipated strongest growth rates are mining with a real increase of 5.5 percent; information with a real increase of 5.0 percent; business and professional services with a real increase of 4.3 percent; construction with a real increase of 4.1 percent; finance, insurance, and real estate (FIRE) with a real increase of 3.5 percent; and nondurable goods manufacturing with a real increase of 3.0 percent.

Eight other sectors are expected to experience growth rates, at levels below the overall 3.0 percent GDP real growth rate. These sectors are educational and health services with a real increase of 2.9 percent; hospitality and leisure services with a real increase of 2.7 percent; wholesale trade with a real increase of 2.6 percent; durable goods manufacturing with a real increase of 2.5 percent; other services with a real increase of 2.3 percent; transportation, warehousing, and utilities (TWU) with a real increase of 2.1 percent; government with a real increase of 1.5 percent; and retail trade with a real increase of 1.5 percent.

Only agriculture will experience a decline in 2026.

Percent of Total Employment

2025 Year-End Employment Trends 0.1 5.5

Mining -5.0 Construction 3.0

4.7

Durables -1.5

4.3

Nondurables 0.3

4.1

Wholesale Trade 1.4

10.4

Retail Trade 1.9

4.0 1.7

TWU 1.2 Information 1.5

6.1

FIRE 1.3

2025 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 5,116,200 persons in December 2025, a 1.4 percent increase over the December 2024 employment level. The state is expected to add 72,300 net jobs in 2025.

Twelve of the state’s fourteen nonagricultural sectors of the economy are expected to experience employment increases during 2025. The sectors with the strongest employment increases in 2025 are construction at 3.0 percent, education and health services at 2.6 percent, and other services at 2.6 percent.

2025 Employment Highlights 14.9

B&P Services 2.0

14.2

E&H Services 2.6

10.7

H&L Services 0.7

4.0

Other Services 2.6

15.3

Government 0.6

Percent of Sector Employment Growth

Year-End* Total Establishment Employment 5116.2 Mining 5.7 Construction 282.0 Manufacturing 457.6 Durable Goods 238.7 Nondurable Goods 218.9 210.3 Wholesale Trade 532.9 Retail Trade TWU 205.0 Information 86.4 FIRE 312.6 B&P Services 763.1 E&H Services 726.6 H&L Services 549.5 202.7 Other Services 782.2 Government *Thousands of persons

Percent Change 1.4 -5.0 3.0 -0.6 -1.5 0.3 1.4 1.9 1.2 1.5 1.3 2.0 2.6 0.7 2.6 0.6

Percent of Total Employment

2026 Year-End Employment Trends 0.1 5.5

Mining 0.0 Construction 1.3

4.6

Durables 0.5

4.2

Nondurables 0.5

4.1

Wholesale Trade 0.9

10.3

Retail Trade 0.6

4.0 1.8

TWU 1.2 Information 5.6

6.0

FIRE 0.4

2026 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 5,210,600 persons by December 2026, a 1.6 percent increase over the December 2025 employment level. The state is expected to add 80,800 net jobs in 2026.

All of the state’s fourteen nonagricultural sectors of the economy are expected to experience employment increases during 2026. The sectors with the strongest projected employment increases in 2026 are information at 5.6 percent, education and health services at 5.0 percent; and business and professional services at 1.6 percent.

2026 Employment Highlights 14.9

B&P Services 1.6

14.7

E&H Services 5.0

10.7

H&L Services 1.1

3.9

Other Services 0.6

15.2

Government 0.8

Percent of Sector Employment Growth

Year-End* Total Establishment Employment 5,210.6 Mining 5.7 Construction 287.3 Manufacturing 460.3 Durable Goods 241.4 Nondurable Goods 218.9 212.2 Wholesale Trade 534.2 Retail Trade TWU 208.2 Information 92.1 FIRE 313.5 B&P Services 776.3 E&H Services 764.3 H&L Services 555.7 202.1 Other Services 789.7 Government *Thousands of persons

Percent Change 1.6 0.0 1.3 0.5 0.5 0.5 0.9 0.6 1.2 5.6 0.4 1.6 5.0 1.1 0.6 0.8

2025-2026 NORTH CAROLINA UNEMPLOYMENT RATE ' $"& $"% $"$ $"# $ !"& !"% !"$

!"# ! ()* +,- .)/ )0/ .)1 (2* (23 )24 5,0 678 *69 :,7 ()* +,- .)/ )0/ .)1 (2* (23 )24 5,0 678 *69 :,7 2"5";5<=>?@=AAB;)CDE>F<C

*7;5<=>?@=AAB;)CDE>F<C;+?G<H=>F

*7;5<=>?@=AAB;)CDE>F<C

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 2025 and 2026. 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 2025 with unemployment rates of 4.0 percent and 3.7 percent respectively. The U.S. unemployment rate has been increasing through the first half of 2025 reaching 4.4 percent by September. The North Carolina rate has remained below the U.S. rate during all of 2025 and stood at 3.7 percent in August. However, the North Carolina rate is likely to increase during 2025 and 2026 to 4.1 percent by December of 2026.

Fourth Quarter Report

December 11, 2025