COVID-related restrictions are likely to slow economic growth in North Carolina for the remainder of the year, according to John Connaughton, director of the North Carolina Economic Forecast.
“This experience provides a cautionary note for economists looking forward,” said Connaughton, professor of financial economics in UNC Charlotte’s Belk College of Business. “While we like to think that driving components of the economy will dictate future growth, we have to realize that the COVID virus will do what it will do, which will have an overriding impact on future economic activity,”
Connaughton said restrictions due to the Delta variant and a spike in COVID-19 cases are likely to be less drastic than earlier restrictions, and the effect on the economy will not be as serious. He released the “Third Quarter North Carolina Economic Forecast Report” on Wednesday, Sept. 15.
Gross State Product Analysis
For 2021, real (inflation-adjusted) Gross State Product (GSP) is expected to increase by 9.1% over the 2020 level, according to the report.
For the fourth quarter, GSP is expected to increase by an annualized real rate of 3.6%.
This year, Connaughton forecasts an output increase for all of the state’s 15 economic sectors.
These sectors will see the strongest inflation-adjusted output increases this year:
- Agriculture: 17.5%
- Hospitality and Leisure Services: 15.7%
- Durable Goods Manufacturing: 11.75
- Information: 9.3%
- Professional Services: 8.5%
- Retail Trade: 6.8%
- Construction: 6.7%
Several sectors are expected to experience growth rates well below the GSP real growth rate, including: Warehousing and Utilities, 2.8%, and Government, 0.9%.
Employment
The jobs recovery is not evenly distributed among the state’s economic sectors, Connaughton said.
“The real impact of the COVID recession has been on employment,” he added. “As of July 2021, the state’s level of establishment employment is still almost 50,000 lower than the February 2019.”
All 14 of the state’s nonagricultural economic sectors are expected to experience employment increases in 2021.
North Carolina employment is expected to reach 4,647,600 by December, an increase of 4.8% over December 2020. The state is expected to add 211,800 net jobs in 2021.
These sectors are expected to have the strongest employment increases for the year:
- Government: 10.4%
- Information: 9.2%
- Construction: 7.9%
Connaughton said the hospitality and leisure sector continues to lag behind, accounting for all of the overall lower North Carolina jobs levels as of July, 155,000 fewer jobs than in February 2019.
The North Carolina unemployment rate, which peaked at 12.9% at the height of the pandemic shutdown in April 2020, is expected to decline through the rest of the year and reach 5.2% by December.
2022 Outlook
According to the report, a second year of economic growth is forecast for North Carolina in 2022. The North Carolina economy is expected to add 126,800 jobs in 2022, reducing the unemployment rate to 4.0% by December 2022.
All 15 of the state’s economic sectors also are expected to experience output increases during 2022. The strongest expected growth rates are:
- Hospitality and Leisure Services: 8.0%
- Educational and Health Services: 4.3%
- Transportation, Warehousing and Utilities (TWU): 4.3%
North Carolina’s GSP for 2022 is expected to increase by an annualized real rate of 2.6%.
The North Carolina Economic Forecast, which debuted in 1982, is published quarterly by UNC Charlotte’s Belk College of Business. The full report and a recording of the presentation will be available at belkcollege.charlotte.edu/forecast.
The fourth-quarter North Carolina Economic Forecast report will be released on Dec. 9.