The North Carolina economy is expected to grow by 2.6 percent during 2007, UNC Charlotte economist John Connaughton reported today in his TIAA-CREF/UNC Charlotte Economic Forecast for North Carolina. The growth forecast for 2007 is lower than the growth rate of 2.9 percent experienced during 2006.
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.
2007 Economic Outlook
Overall, Connaughton expects the North Carolina to grow during all four quarters of the current year. During the first quarter GSP increased by an annualized real growth rate of 2.1 percent. During the second quarter, GSP growth is expected to have increased by only 1.7 percent. In the third quarter, growth is expected to pick up; Connaughton estimates that real annualized GSP should increase by 3.7 percent. However, in the fourth quarter North Carolina GSP is expected to grow by an annualized real growth rate of only 1.0 percent.
“Despite the weakness expected during the second quarter, the annual growth for 2007 represents the sixth consecutive year of economic expansion. This economic expansion is likely to continue into 2008 despite the recent rise in mortgage defaults and tightening credit markets,” Connaughton said. “The North Carolina economy will weather these problems and experience economic growth of 2.2 percent during 2008.”
The sectors with the strongest expected growth forecasts for 2007 are:
- Agriculture with a projected real growth rate of 9.2 percent;
- Mining, 6.0 percent;
- Wholesale Trade, 4.8 percent;
- Finance, Insurance, and Real Estate (FIRE), 4.5 percent;
- Services, 4.3 percent;
- Wholesale Trade, 4.2 percent; and
- Government, 3.9 percent.
Three other sectors are expected to experience growth during 2007, but at rates lower than the overall state growth rate of 2.6 percent. These sectors are Construction, with a projected real growth rate of 1.7 percent, Transportation, Warehousing, Utilities, and Information (TWUI), 1.1 percent; and Retail Trade, 0.5 percent.
Two sectors, Durable Goods Manufacturing and Nondurable Goods Manufacturing are not expected to grow during 2007.
2007 Employment Outlook
For 2007, Connaughton expects the North Carolina economy to add 89,600 net jobs by December 2006, an increase of 2.2 percent over the employment level in December 2006.
Seven of the state’s ten nonagricultural sectors of the economy are expected to experience positive employment growth during 2007. The sectors that will display the strongest employment growth rates in 2007 are: Mining at 8.8 percent; Services, 3.4 percent, and Retail Trade, 3.0 percent.
2007 Unemployment Statistics
The state unemployment rate for July 2007 was 5.0 percent, above the United State rate of 4.6 percent. The North Carolina rate is expected to be stable during 2007 and is forecast to close the year at 4.9 percent.
2008 Economic Forecast
For 2008, the North Carolina economy is expected to continue its seventh year of economic expansion. Real (inflation adjusted) GSP is expected to increase by 2.2 percent over the 2007 level.
Connaughton expects GSP for the first quarter of 2008 to increase by an annualized real growth rate of 2.5 percent. During the second quarter, GSP is expected to increase by an annualized real rate of 2.8 percent. In the third quarter, GSP growth is expected to drop off and record an annualized real growth rate of 1.0 percent. In the fourth quarter of 2008, GSP growth is expected to pick-up and reach an annualized real rate of 3.3 percent.
Nine of the state’s eleven economic sectors are forecast to experience growth during 2008. The sectors with the strongest expected growth forecasts are:
- Services, with a projected real growth rate of 5.3 percent;
- Wholesale Trade, 4.5 percent;
- Agriculture, 3.8 percent;
- Retail Trade, 2.8 percent; and
- Government, of 2.2 percent.
Four other sectors are expected to experience growth, but at rates less than the overall growth rate of 2.2 percent. These sectors are Transportation, Warehousing, Utilities and Information (TWUI) with a projected real growth rate of 1.8 percent; Finance, Insurance and Real Estate (FIRE), 0.8 percent; and Nondurable Goods Manufacturing, 0.1 percent.
2008 Employment Outlook
For 2008, Connaughton expects N.C. employers to add 82,400 net jobs, an increase of 2.0 percent over the 2007 level. Eight of the state’s ten nonagricultural sectors of the economy are expected to experience positive employment growth during 2008. The sectors Connaughton expects to display the strongest employment growth rates in 2007 are Mining at 9.5 percent; Government, 4.1 percent; and Services, 3.1 percent.
“The current economic expansion, which began in November of 2001, is now 68 months long,” Connaughton said. “The average duration of the ten expansions since World War II has been 57 months. Only three periods of expansion have been longer than the one we are currently experiencing. Our forecast for 2007 would extend the length of the current expansion to 74 months, thus making it the fourth-longest since 1945.”
The full Forecast report is available online at www.belkcollege.charlotte.edu/forecast.Connaughton will release his next report in early December.