The North Carolina economy is expected to continue its sixth year of economic expansion in 2007, UNC Charlotte economist John Connaughton reported today in his TIAA-CREF/UNC Charlotte Economic Forecast for the state. Connaughton estimates that real, inflation-adjusted Gross State Product (GSP) is expected to increase by 2.0 percent over the 2006 level.
“Since World War II, there have been ten periods of economic expansion, with an average length of 57 months,” Connaughton said. “By June 2007 we will have been in this current expansion for 68 months. The forecast for 2007 would extend the length of this expansion to 74 months and make it the fourth longest expansion since 1945.”
The forecast, funded by TIAA-CREF and published quarterly by the University of North Carolina at Charlotte, provides both a review of North Carolina’s recent economic performance and a barometer of the state’s future growth. Connaughton, who directs the forecast, is the TIAA-CREF professor of economics at UNC Charlotte’s Belk College of Business.
Connaughton presented his Forecast today to a group of regional business leaders and the media at a luncheon held in center city Charlotte.
“As an integral part of Charlotte’s thriving financial business community, we are pleased to sponsor this economic forecast by John Connaughton,” said Kevin Brown, TIAA-CREF vice president, client services. “We at TIAA-CREF benefit from this important report and want to make this barometer for state growth available to the people of North Carolina.”
Connaughton expects overall growth during the four quarters of 2007 to be stable. For 2007, first quarter GSP is expected to have increased by an annualized real growth rate of 1.7 percent. During the second quarter, GSP is expected to increase by an annualized real rate of 1.9 percent. In the third and fourth quarters, GSP growth should continue and record an annualized real growth rate of 1.8 percent.
Eight of the state’s eleven economic sectors are forecast to experience growth during 2007. The sectors with the strongest expected growth forecasts are
- Agriculture with a projected real growth rate of 15.3 percent;
- Finance, Insurance, and Real Estate (FIRE), 3.9 percent;
- Wholesale Trade, 3.4 percent;
- Mining, 2.8 percent;
- Transportation, Warehousing, Utilities, and Information (TWUI), 2.8 percent;
- Services, 2.8 percent; and
- Government, 2.4 percent.
In his employment outlook, Connaughton estimated that North Carolina establishments will add 99,900 net jobs, an increase of 2.5 percent over the 2006 level. Seven of the state's ten nonagricultural sectors of the economy are expected to experience positive employment growth during 2007, with the strongest employment growth in Government at 3.7 percent, Construction at 3.5 percent, and Services at 3.4 percent.
The state’s unemployment rate in December 2006 was 4.9 percent, higher than the United States rate of 4.5 percent. The N.C. rate is expected to remain stable during 2007 and is forecast to close the year at 4.9 percent.
Updating statistics for the previous year, Connaughton reported that the North Carolina economy grew by 2.9 percent during 2006. The growth forecast for 2006 is lower than the growth rate of 4.1 percent experienced during 2005.
Overall, the North Carolina economy grew during three of the four quarters of 2006. During the first quarter, GSP increased by an annualized real growth rate of 6.9 percent. During the second quarter, GSP growth was virtually flat, recording an annualized real growth rate of -0.2 percent.
In the third quarter, growth picked up, as real annualized GSP increased by 2.6 percent. In the fourth quarter, North Carolina GSP picked up again, recording an annualized real growth rate of 3.0 percent.
“Despite the weakness during the second quarter, the annual growth for 2006 represents the fifth consecutive year of economic expansion. This economic expansion is likely to continue into 2007 despite the recent rise in energy prices that began in April,” Connaughton said. “The North Carolina economy will weather the rise in gasoline prices and experience economic growth of 2.0 percent during 2007.”
The sectors with the strongest growth in 2006 were:
- Construction with a real growth rate of 9.3 percent;
- Mining, 8.8 percent;
- Services, 5.7 percent;
- Wholesale Trade, 5.1 percent; and
- Finance, Insurance, and Real Estate (FIRE), 4.9 percent.
The comprehensive TIAA-CREF/UNC Charlotte Economic Forecast for Second Quarter 2007 is available at www.belkcollege.charlotte.edu/forecast. The next forecast report will be released in September.