Slowdown Continues Through Early 2009, 58,000 Jobs Lost
CHARLOTTE - Dec. 9, 2008 - The North Carolina economy is expected to decline by 0.2 percent during 2008, UNC Charlotte economist John Connaughton reported today in his UNC Charlotte Economic Forecast for the fourth quarter of the year.
The decline expected for 2008 follows an extended period of economic expansion for the state economy that began in the fourth quarter of 2001. Expansion continued through 2007, which saw a growth rate of 2.4 percent.
Overall, the North Carolina economy is expected to decline during three of the four quarters in 2008. In the first quarter, the Gross State Product (GSP) decreased by an annualized real growth rate of 1.8 percent. During the second quarter, GSP growth rebounded and recorded an annualized real growth rate of 0.7 percent. In the third quarter GSP should continue to decline, with an expected annualized decrease of 1.1 percent. For the fourth quarter, North Carolina GSP is again expected to contract by an annualized real rate of 1.3 percent.
“Both the residential construction industry and the financial sector have been reeling for the past six months,” Connaughton said. “In addition, a number of other sectors are beginning to suffer as the economy sinks deeper into recession. Both manufacturing and retail trade are beginning to feel the effects of the overall slowdown. The only bright spot is the decline in oil prices and the impact that might have by putting cash back into consumers’ pockets to fuel a rebound in 2009.
“This recession officially began at the end of December 2007,” Connaughton continued, “and is a direct result of the mortgage meltdown and the dent put into consumer pocketbooks by high gasoline prices during the first three quarters of the year.”
Connaughton, a professor of economics in the Belk College of Business, has served as director of the UNC Charlotte Economic Forecast since 1982. His reports are published quarterly.
2008 Outlook by Economic Sector: Declines in 8 of 11 Sectors
Eight of the state’s eleven economic sectors are forecast to experience declines during 2008. The sectors with the strongest expected declines are:
• Agriculture, -11.0 percent
• Construction, -8.0 percent
• Mining, -6.1 percent
• Durable Goods Manufacturing, -3.2 percent
• Retail Trade, -2.1 percent
• Finance, Insurance and Real Estate (FIRE), -1.8 percent
• Wholesale Trade, -1.5 percent
• Nondurable Goods Manufacturing, -1.0 percent
Three other sectors – Services, Government and Transportation, Warehousing,
Utilities and Information (TWUI) – are expected to experience growth in 2008.
2008 Jobs Outlook
For 2008, the North Carolina economy is expected to lose 58,100 net jobs, a decrease of 1.4 percent over the employment level in December 2007.
Nine of the state's ten nonagricultural sectors of the economy are expected to experience employment declines during 2008. The sectors expected to display the strongest employment declines in 2008 are:
• Durable Goods Manufacturing,-5.4 percent
• Nondurable Goods Manufacturing,-5.2 percent
• Mining,-3.8 percent
The state’s unemployment rate for September 2008 was 7.0 percent, higher than the United State’s rate of 6.1 percent. The North Carolina rate is expected to increase slightly during the rest of 2008 to 7.1 percent by December.
2009 Forecast
For 2009, the North Carolina economy is expected to continue to decline with real GSP dropping by 0.2 percent over the 2008 level.
For 2009, first quarter GSP is expected to continue the decline which began in 2008, with real annualized GSP expected to fall by 1.2 percent. During the second quarter, GSP growth is expected to begin again, with GSP increasing by an annualized real rate of 1.4 percent. In the third quarter, GSP growth is also expected to increase and record an annualized real growth rate of 1.1 percent. In the fourth quarter of 2009, GSP growth is expected to reach an annualized real rate of 1.6 percent.
Seven of the state’s eleven economic sectors are forecast to experience output declines during 2009. The sectors with the strongest expected declines are:
• Construction, -4.3 percent
• Mining, -2.3 percent
• Durable Goods Manufacturing, -2.1 percent
• Finance, Insurance and Real Estate (FIRE), -1.5 percent
• Nondurable Goods Manufacturing, -0.9 percent
• Retail Trade, -0.6 percent
• Wholesale Trade, -0.4 percent
Four sectors are expected to experience growth during 2009: Government
Transportation, Warehousing, Utilities and Information (TWUI); Services; and Agriculture.
“The expectation is that the North Carolina economy should begin a modest recovery during the second quarter of 2009,” Connaughton said. “The recession, which began in January of 2008, is expected to last at least five quarters. This would make the 2008 recession the longest recession since the 1982 recession, which lasted 16 months. The two most recent recessions were quite short; both the 1991 and 2001 recessions lasted only eight months each. We are already in the twelfth month of this recession.”
2009 Jobs Outlook
For 2009 North Carolina establishments are forecast to lose 37,800 net jobs, a decrease of 0.9 percent over the 2008 level.
Seven of the state's ten nonagricultural sectors of the economy are expected to experience employment declines during 2009. The sectors that are expected to display the strongest employment declines are:
• Mining at –17.9 percent,
• FIRE at –6.9 percent, and
• Nondurable Goods Manufacturing at –5.4 percent.
“The outlook for a recovery during the second quarter of 2009 is based on two critical factors taking place,” Connaughton said. “First, the credit markets, which froze on September 17, 2008 must begin to operate, and money lending must take place. The Fed has been successful in securing the financial industry from failure but has not been able to free-up lending.
“Second, the incoming administration must provide a fiscal stimulus package in excess of $500 billion to create jobs and stem the downward spiral in job losses that has plagued the economy since January 2008,” he added.
The full Forecast report is available at www.belkcollege.charlotte.edu/forecast. Connaughton will make his next report in March 2009.