CHARLOTTE, N.C. – Sept. 7, 2011 — The North Carolina economy will register slight increases in output and job growth in 2011 and 2012, UNC Charlotte economist John Connaughton reported today in his quarterly Babson Capital/UNC Charlotte Economic Forecast for the state.
For 2011, the state’s real Gross State Product (GSP) is expected to increase by 1.7 percent over the 2010 level. This follows an increase of 2.6 percent experienced during 2010.
The North Carolina economy experienced a modest decline in GSP during the first quarter of 2011; during this quarter GSP decreased by an annualized real rate of 0.3 percent. During the second quarter, North Carolina GSP is expected to increase at an annualized real growth rate of 2.1 percent. During the third quarter, GSP is expected to increase at an annualized rate of 1.0 percent. For the fourth quarter, GSP growth should pick up and record an annualized increase of 1.8 percent.
“Overall, the North Carolina economy suffered through a modest recovery during 2010 and the first half of 2011,” Connaughton said. “U.S. real GDP growth for 2010 was 3.0 percent, following a 3.5 percent decline during 2009. By contrast, North Carolina real GSP growth for 2010 was 2.6 percent, following a decline of 1.6 percent during 2009 and 1.2 percent in 2008.”
The Forecast, funded by Babson Capital Management and published quarterly by the University of North Carolina at Charlotte, provides both a review of North Carolina’s recent economic performance and an estimation of the state’s future growth. Connaughton, who directs the Forecast, is the Babson Capital Management professor of financial economics at UNC Charlotte’s Belk College of Business.
2011 Sector Analysis
Eight of the state’s eleven economic sectors are forecast to experience output increases during 2011. The sectors with the strongest expected growth are:
- Finance, Insurance and Real Estate (FIRE), with a projected increase of 2.9 percent;
- Wholesale Trade, with a projected real increase of 2.8 percent;
- Nondurable Goods Manufacturing, with a projected real increase of 2.7 percent; and
- Services, with a projected real increase of 2.6 percent.
Four other sectors are also expected to experience output growth, but at rates less than the overall state level:
- Durable Goods Manufacturing, with a projected real increase of 1.4 percent;
- Retail Trade, with a projected real increase of 1.2 percent;
- Transportation, Warehousing, Utilities and Information (TWUI), with a projected real increase of 0.5 percent; and
- Government, with a projected real increase of 0.4 percent.
2011 Employment Outlook
For 2011, North Carolina establishments are expected to gain only 23,600 net jobs over the 2010 level. The 2011 job gains follow the loss of over 320,000 jobs during the 2008-09 recession.
The North Carolina seasonally adjusted unemployment rate began 2011 at 9.8 percent, almost 1.0 percentage point higher than the United States rate. By July 2011, the North Carolina rate had risen to 10.1 percent, while the national rate had risen to only 9.1 percent. Both the U.S. and North Carolina unemployment rates are expected to continue to rise slightly during the year, and by December the North Carolina unemployment rate is expected to be 10.3 percent.
2012 Forecast
The North Carolina economy is expected to increase by only 1.8 percent during 2012. First quarter GSP is expected to increase by an annualized real rate of 1.3 percent. During the second quarter, GSP is expected to increase by an annualized real rate of 2.2 percent. In the third quarter, GSP growth is expected to record an annualized real growth rate of 2.7 percent. In the fourth quarter of 2012, GSP is expected to grow at an annualized real rate of 2.9 percent.
2012 Sector Analysis
Nine of the state’s eleven economic sectors are forecast to experience output increases during 2012. The sectors with the strongest expected growth are:
- Retail Trade, with a projected increase of 3.6 percent,
- Wholesale Trade, with a projected real increase of 3.0 percent,
- Services, with a projected real increase of 2.6 percent,
- Government, with a projected real increase of 2.5 percent, and
- Construction, with a projected real increase of 2.1 percent.
2012 Jobs Outlook
For 2012, North Carolina establishments are expected to gain 28,600 net jobs, an increase of 0.7 percent over the employment level in December 2011.
Five of the state's ten nonagricultural sectors of the economy are expected to experience employment increases during 2012. The sectors with the strongest employment increases in 2012 are:
- Wholesale Trade, at 5.0 percent,
- Retail Trade at 4.5 percent,
- Services at 2.9 percent, and
- FIRE at 2.8 percent.
“While the recovery in GSP is underway, job growth is likely to lag,” Connaughton said. “North Carolina lost over 320,000 jobs during 2008 and 2009, and it is likely to take at least four to five years to regain the lost jobs. Job growth will be the biggest problem for both the U.S. and North Carolina economies over the next several years.”
The UNC Charlotte Economic Forecast is published quarterly by the Belk College of Business and sponsored by Babson Capital Management. The full Forecast report is available at forecast. Connaughton will release his next Forecast report in December 2011.