Recovery Underway but Job Growth will be Slow, Connaughton Reports
Job Growth Began in January after Two Years of Decline
CHARLOTTE – March 16, 2010 — The North Carolina economy is forecast to increase by 3.5 percent in 2010, UNC Charlotte economist John Connaughton reported today in his quarterly forecast for the state. This marks the first year of expected growth following two years of decline and job loss.
Connaughton is a professor of economics in the Belk College of Business at UNC Charlotte. He has served as director of the Economic Forecast since 1981.
In 2010, Connaughton expects first quarter Gross State Product (GSP) to increase by an annualized real rate of 4.0 percent. During the second quarter, GSP should again increase by an annualized real rate of 4.0 percent. In the third quarter, GSP is expected to slip slightly and record an annualized real growth rate of 3.6 percent. In the fourth quarter of 2010, GSP is also expected to grow at an annualized real rate of 3.8 percent.
2010 Sector Outlook
Seven of the state’s eleven economic sectors are forecast to experience output increases during 2010. The sectors with the strongest expected growth are:
• Construction with a projected real increase of 7.2 percent;
• Services with a projected real increase of 7.1 percent;
• Finance, Insurance and Real Estate (FIRE) with a projected real increase of 5.2 percent;
• Government with a projected real increase of 4.8 percent;
• Retail Trade with a projected real increase of 4.0 percent;
• Transportation, Warehousing, Utilities and Information (TWUI) with a projected real increase of 2.2 percent; and
• Wholesale Trade with a project real increase of 0.3 percent.
2010 Employment Outlook
For 2010, North Carolina establishments are expected to gain 36,200 net jobs. Connaughton predicts that job growth began in January, ending 24 months of decline.
Seven of the state's ten nonagricultural sectors of the economy are expected to experience employment increases during 2010. The sectors with the strongest employment increases in 2010 are:
• Wholesale Trade at 4.9 percent;
• Construction at 3.4 percent; and
• Services at 2.7 percent.
“While a modest recovery is underway, job growth is still lacking,” Connaughton said. “After two years of consistent job losses, we still haven’t seen a month of job growth either nationally or in North Carolina.
“Once job growth begins, it will be very slow. It’s likely take several years for the state’s economy to replace the almost 250,000 jobs lost over the last two years of recession.”
North Carolina’s seasonally adjusted unemployment rate began 2009 at 9.7 percent, over 2 percentage points higher than the United States rate. By December 2009, the North Carolina rate had risen to 11.2, while the United States rate was at 10.0 percent. Both the U.S. and North Carolina unemployment rates are expected to decline during 2010, and by December 2010 the North Carolina unemployment rate is expected to drop to 10.8 percent.
Recovery began in late 2009
While definitive government data is still several months away, Connaughton expects the North Carolina economy to have declined by 2.8 percent during 2009. This follows the decline of 0.6 percent experienced during 2008.
The North Carolina economy declined during the first three quarters of 2009. In the first quarter, GSP decreased by an annualized real growth rate of 7.6 percent. During the second quarter, GSP again declined, but only by an annualized real rate of 1.5 percent. This represents a considerably smaller decline than was reported in the Dec. 2009 forecast. In the third quarter, GSP again declined for the fifth consecutive quarter. For the fourth quarter 2009, North Carolina GSP is expected to increase for the first time as the recovery begins. GSP is expected to expand by an annualized real rate of 6.8 percent.
“The question now is, how strong and sustained will this recovery be?” Connaughton added. “I continue to see mixed signals concerning the strength of the recovery, particularly in the financial sector.
“We are still seeing banks holding excess reserves of more than $1 trillion. This is a tremendous amount of money that could be lent out to facilitate the recovery.”
2009 Sector Analysis
Eight of the state’s eleven economic sectors are expected to experience declines during 2009. The sectors with the strongest expected declines are:
• Construction with a projected real decline of 18.6 percent;
• Mining with a projected real decline of 9.0 percent;
• Wholesale Trade with a projected real decline of 8.3 percent;
• Durable Goods Manufacturing with a projected real decline of 5.8 percent;
• Nondurable Goods Manufacturing with a projected real decline of 5.1 percent;
• Retail Trade with a projected real decline of 4.6 percent;
• Finance, Insurance and Real Estate (FIRE) with a projected real decline of 3.8 percent; and
• Services with a projected real decline of 1.9 percent.
In 2009, North Carolina establishments lost 145,700 net jobs, a decrease of 3.6 percent over the 2008 level. The 2009 job loss follows the loss of 120,100 jobs during 2008.
The UNC Charlotte Economic Forecast is published quarterly by the Belk College of Business at the University of North Carolina at Charlotte. The full report is available at /forecast. Connaughton will release his next Forecast report in June.