Over the past 21 months, the U.S. Federal Reserve has steadily raised interest rates in an effort to cool the economy and stave off inflation. The North Carolina and U.S. economies are showing signs of slowing, although a return of inflation is still not out of the question.
“The strong Gross Domestic Product growth we saw in the first quarter was not sustained,” said John Connaughton, professor of financial economics for UNC Charlotte’s Belk College of Business. “We saw the second-quarter growth drop to a modest 1.1%, and late 2023 and early 2024 likely will show a continuing slowdown.”
Connaughton, who released the North Carolina Economic Forecast Fourth Quarter Report Thursday, Dec, 14, sees two big questions for 2024. “First, will there be a recession and second, will the Federal Reserve continue to control inflation?” he asked. “The recession question is complicated as fiscal policy by Congress and the president continues to fight the Fed and its attempt to slow the economy by raising interest rates.”
On Wednesday, Dec. 13, the Federal Reserve kept its key interest rate steady and signaled there could be three rate cuts in 2024.
2023 Gross Domestic Product Analysis
For 2023, North Carolina’s real (inflation-adjusted) GDP is forecast to increase by 2.5% over the 2022 level, representing the third full year of growth since COVID-19.
Connaughton expects output increases for 12 of the state’s 15 economic sectors during 2023. The sectors with the strongest expected growth rates include:
- Information: 11.1%
- Educational and Health Services: 6.7%
- Transportation, Warehousing and Utility: 6.7%
- Retail Trade: 6.4%
- Hospitality and Leisure Services: 4.2%
Expectations are that three sectors will have experienced declines during 2023:
- Agriculture: -15.9%
- Mining -10.6%
- Other Services: -0.7%
2023 Employment
Of the state’s 14 nonagricultural sectors, 11 are forecast to see employment increases during 2023. The sectors with the strongest expected employment gains are:
- Mining: 5.7%
- Educational and Health Services: 4.9%
North Carolina employment is projected to reach 4,947,300 persons by December 2023, a 2.0% increase over the December 2022 employment level. The state is expected to add 94,800 net jobs in 2023. The state unemployment rate fell during the middle of 2023 but rose to 3.4% in October, according to the report.
2024 Preview
Looking ahead to 2024, the report forecasts modest growth. North Carolina employment is expected to add 53,400 net jobs, reaching 5,003,700 persons by December 2024, a 0.9% increase over the anticipated December 2023 employment level. By December of 2024, the state’s unemployment rate is expected to reach 4.0%.
North Carolina’s real (inflation-adjusted) GDP growth rate for 2024 is projected to increase by 1.9%. Fourteen of the state’s economic sectors are expected to see output increases.