N.C. forecast: Economy is at a critical point

John Connaughton
Wednesday, May 26, 2021

Belk College of Business economist John Connaughton says economic growth should continue through 2022 

 North Carolina’s economy continues to rebound, but recent data show it may be some time before the economy is back to where it was prior to last year’s COVID-19 shutdowns, according to John Connaughton, director of the UNC Charlotte Economic Forecast. 

“We’re at a critical point right now,” said Connaughton, professor of financial economics in the Belk College of Business. “The economy has been coming back for four straight quarters, but we have some more to go before we erase the damage done by the shutdown last year. While the shutdown is behind us, we’re not back yet. We still have a couple of quarters to go before we get back to the employment level we had before this all began.” 

Connaughton, who released his second-quarter UNC Charlotte Economic Forecast Report on Wednesday, May 26, said among the factors he is watching are:  

  • Work disincentives and employment
  • Creeping inflation caused by stimulus spending, and what it’s doing to the sum of the national debt
  • How the Federal Reserve will respond to hefty price increases

Gross State Product analysis
Real (inflation-adjusted) Gross State Product (GSP) is expected to increase by 5.3% over the 2020 level, according to the report. This growth in 2021 will represent the first full year of growth since COVID-19.

For 2021, Connaughton forecasts an output increase for 14 of the state’s 15 economic sectors. 

These sectors will see the strongest inflation-adjusted output increases in 2021: 

  • Agriculture: 19.6%
  • Hospitality and Leisure Services: 15.5%  
  • Educational and Health Services: 7.8% 
  • Durable Goods (Manufacturing): 6.6%
  • Wholesale Trades: 6.1% 
  • Information: 5.9% 
  • Business and Professional Services: 5.8%
  • Retail Trade: 5.7%
  • Construction: 5.5% 

Mining is the only sector forecast to decline with an expected decrease of 0.1%. 

All 14 of the state’s nonagricultural economic sectors are expected to experience employment increases during 2021. 

North Carolina employment is expected to reach 4,635,500 by December, an increase of 4.5% over December 2020. The state is expected to add 199,700 net jobs in 2021. 

These sectors are expected to have the strongest increases for the year: 

  • Hospitality and Leisure Services: 12.1% 
  • Information: 11.6%
  • Construction: 7.2%

The North Carolina unemployment rate, which peaked at 12.9% at the height of the pandemic shutdown in April 2020, should decline through the rest of the year and reach 5% by December. 

2022 outlook
According to the report, a second year of economic growth for North Carolina’s economy is expected in 2022. The North Carolina economy is expected to add 126,800 jobs in 2022, reducing the unemployment rate to around 4.5% by December 2022.

The full report and a recording of the presentation will be available at belkcollege.uncc.edu/forecast. Connaughton will release the third-quarter UNC Charlotte Economic Forecast report on Sept. 15.