Economic Forecast: Next two years to bring slow growth; inflation still a risk

The economy is cooling, but 2024 will still bring growth for the U.S. and North Carolina.

“After an incredibly strong 2023, the economy seems to be showing signs of slowing slightly,” said John Connaughton, UNC Charlotte professor of financial economics. “For the first quarter of 2024, GDP in the U.S. came in at a lackluster 1.6%, well below the expected 2.5%.”

GDP, or Gross Domestic Product, is the main measure of economic output.

Connaughton released the North Carolina Economic Forecast 2024 Second Quarter Report on May 16, noting that the state and national economies continue to resist the impact of the U.S. Federal Reserve’s monetary policy over the past two years.

Two critical questions persist, Connaughton said. Will there be a recession and will the Federal Reserve continue to control inflation? Fiscal policy by Congress and the president is still competing with the Fed’s efforts to slow the economy. The tension threatens a return of demand-pull inflation, but probably not a recession, he said.

“Congress and the president are continuing to stimulate the economy with fiscal policy deficit spending,” he said. “The deficit for fiscal year 2023 was over $1.6 trillion, and the estimate for 2024 is just shy of $1.6 trillion, or almost 6% of GDP. Deficits of this size in the third and fourth years of economic recovery, with the unemployment rate below 4%, are simply irresponsible.”

In North Carolina, 2024 and 2025 will represent the fourth and fifth years of economic growth since the pandemic recession of 2020. Looking to 2025, Connaughton projects the Gross State Product to increase by 2.3% over the 2024 level. The North Carolina economy is expected to add 53,400 jobs in 2025, maintaining a slightly increased unemployment rate of around 4% through December 2025.

2024 Numbers
Looking to 2024, the report forecasts modest growth. North Carolina’s real (inflation-adjusted) GDP growth rate for 2024 is projected to increase by 3%. Of the state’s economic sectors, 14 are expected to see output increases. The sectors with the strongest anticipated growth rates are: 

  • Mining: 7.8%
  • Retail Trade: 6.1%
  • Information: 5.9%
  • Nondurable Goods Manufacturing: 5.6%
  • Construction: 5.1%

North Carolina employment is expected to add 60,400 net jobs, reaching 5,026,000 persons by December 2024, a 1.2% increase over the December 2023 employment level. By December 2024, the state’s unemployment rate is expected to reach 4%.

2023 Gross Domestic Product
For 2023, North Carolina’s real (inflation-adjusted) GDP increased by 2.7% over the 2022 level. Twelve of the state’s economic sectors experienced output increases during 2023. The sectors with the strongest growth rates were:

  • Information: 12.3%
  • Retail Trade: 9.6%
  • Educational and Health Services: 6.5%
  • Transportation, Warehousing and Utility: 5.6%
  • Business and Professional Services: 4.3%

Three sectors experienced declines during 2023:

  • Agriculture: -23%
  • Mining: -9.4%
  • Other Services: -1.7%

2023 Employment
North Carolina employment reached 4,965,600 persons by December 2023, a 1.8% increase over the December 2022 employment level. The state added 85,800 net jobs in 2023. The state unemployment rate fell during the middle of 2023 but rose to 3.5% by March 2024, according to the report. Of the state’s 14 nonagricultural sectors, 10 saw employment increases during 2023. The sectors with the strongest employment gains were:

Hospitality and Leisure: 4.6%

Educational and Health Services: 3.8%

Construction: 3.6%