Inflation continues to create uncertainty in North Carolina and across the country, with economic conditions shaping up for a potential recession in 2023, according to John Connaughton, director of the North Carolina Economic Forecast.
“Inflation is clearly not going away any time soon,” said Connaughton, professor of financial economics at UNC Charlotte’s Belk College of Business. “The Fed may have to become more hawkish, and that could spin the economy into recession later this year or early next year.”
Additionally, the uncertainty of new COVID-19 variants arising could temporarily slow economic activity and further compromise the supply chain, Connaughton said.
Connaughton said there are two big stories to watch:
- The first quarter decline in U.S. and North Carolina Gross Domestic Product (GDP). Real North Carolina GDP dropped .04%, partly due to Omicron issues domestically and inventory declines, especially in the new car industry.
- The impact inflation is having on the economy. While consumers spent 6.5% more on goods and services during the first quarter, because of inflation, that increase resulted in decline in goods and services delivered.
The Belk College released the “Second Quarter North Carolina Economic Forecast Report” Thursday, May 19, with Connaughton’s virtual presentation.
Gross Domestic Product Analysis
North Carolina’s real (inflation-adjusted) GDP is expected to increase by 2.7% over the 2021 level in 2022, according to the report. This growth will represent the second full year of growth since COVID-19.
Eleven of the state’s 15 economic sectors are expected to experience output increases during 2022. The sector with the strongest expected year-to-year growth rates:
- Hospitality and Leisure Services: 10.5%
- Information: 7.4%
- Agriculture: 7%
- Business and professional services: 5.4%
- Other: 3.7%.
Six sectors are expected to experience growth rates below the overall state growth rate of 2.7%. Four sectors are expected to a decline in 2022, with these sectors seeing the largest decline:
- Retail trade: Decrease of 2.4%
- Construction: Decrease of 2%
Employment
According to the report, all 14 of the state’s nonagricultural sectors of the economy are expected to experience employment increases during 2022. The sectors with the strongest expected employment increases are:
- Information: 6.3%
- Nondurable Goods: 3.9%.
- Hospitality and Leisure Services: 3.7%
North Carolina employment is expected to reach 4,766,200 persons by December 2022, a 2.4% increase over the December 2021 employment level. The state is expected to add 110,100 net jobs in 2022.
North Carolina’s unemployment rate is expected to decline through the rest of 2022 and close the year at 3.4%.
The North Carolina Economic Forecast, celebrating its 40th anniversary this year, 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 Third Quarter North Carolina Economic Forecast Report will be released in September.