Thursday, September 16, 2010

Report on N.C. economy: 'Guardedly optimistic'

Posted By on Thu, Sep 16, 2010 at 3:01 PM

Connaughton
  • Connaughton

John Connaughton, an economics professor at UNC Charlotte, has offered the university's quarterly economic forecast to citizens and leaders since 1981. This quarter, he predicts the state's economy will improve this year, after declining last year. He also predicts job gains, but doesn't want anyone to get too excited just yet since things will be slow going.

Note: It's important to remember when reading economic news that, while economists can use their data and knowledge to suggest what may happen in the future, it often takes many months, and looking backward in time, to determine, definitively, what the economy is doing. That's why you'll often hear economists confirm the occurrence of a recession, or some other economic shift, months after we've already experienced it.

Further reading: U.S. poverty rate jumps highest since 1994 — MSNBC.com

Here's the report from UNC Charlotte, which you can download in its entirety, complete with charts and graphs, here:

The North Carolina economy is expected to increase by 0.8 percent over the 2009 level, UNC Charlotte economist John Connaughton announced today in his quarterly report on the health of the state economy. This modest increase follows a decline of 2.7 percent in 2009.

Connaughton reports that the North Carolina economy experienced a modest increase in Gross State Product (GSP), an annualized real growth rate of 0.2 percent, during the first quarter of 2010. During the second quarter, Connaughton expects GSP to increase by an annualized real rate of 4.2 percent. Growth is expected to slow in the second half of the year, with an increase of 2.6 percent forecast in the third quarter. Fourth quarter GSP is forecast to increase by an annualized rate of 3.2 percent.

“The first quarter GSP performance was considerably weaker than the U.S. GDP increase of 3.7 percent,” Connaughton noted. “The national economy has been able to put together four consecutive quarters of expansion, while the North Carolina economy has struggled to put two quarters of growth together.

“The state’s economic growth during this time has only been sufficient to stem job losses, but not enough to generate job growth,” Connaughton continued. “Although there is little likelihood of a ‘double dip’ during the second half of the year, the economy will continue to be sluggish enough that to many people it will feel like a return to recession.”

Connaughton is a professor of economics in the Belk College of Business. He has served as director of the UNC Charlotte Economic Forecast since 1981.

2010 Sector Analysis

Seven of the state’s eleven economic sectors are expected to experience increases during 2010. The sectors with the expected strongest increases are:

• Agriculture, with a real increase of 7.7 percent;

• Services, with a real increase of 4.1 percent;

• Mining, with a real increase of 3.4 percent;

• Government, with a real increase of 3.1 percent;

• Retail Trade, with a real increase of 1.9 percent; and

• Transportation, Warehousing, Utilities and Information (TWUI) with a real increase of 1.5 percent.

One other sector, Wholesale Trade, is also expected to grow, but with an increase of 0.6 percent will fall below the overall GSP growth of 0.8 percent. Two sectors, Durable and Nondurable Goods Manufacturing, will experience declines while Finance, Insurance & Real Estate (FIRE) will be essentially flat.

2010 Jobs Outlook

For 2010, North Carolina establishments are expected to gain 37,400 net jobs, an increase of 1.0 percent over the 2009 level. The 2010 job gains follow the loss of over 282,000 jobs in the state during the 2008-2009 recession.

The North Carolina seasonally-adjusted unemployment rate began 2010 at 11.1 percent, over 1.5 percentage points higher than the United States rate. By July, the North Carolina rate had dropped to 9.8 percent, while the United States rate had fallen to 9.5 percent. Both the U.S. and North Carolina unemployment rates are expected to continue to decline slightly during the year, and by December the North Carolina unemployment rate is expected to decrease to 9.4 percent.

2011 Forecast

For 2011, Connaughton forecasts that the state GSP will increase by 2.7 percent over the 2010 level.

First quarter GSP is expected to increase by an annualized real rate of 2.6 percent. During the second quarter, GSP should again increase, by an annualized real rate of 2.2 percent. In the third quarter, GSP growth is expected to remain stable and record an annualized real growth rate of 2.2 percent. In the fourth quarter of 2011, GSP is expected to grow at an annualized real rate of 2.4 percent.

Only seven of the state’s eleven economic sectors are forecast to experience output increases during 2011. The sectors with the strongest expected growth are:

• Finance, Insurance and Real Estate (FIRE) with a projected real increase of 5.5 percent;

• Services with a projected real increase of 4.8 percent;

• Government with a projected real increase of 3.9 percent; and

• Retail Trade with a projected real increase of 3.0 percent.

Two other sectors are also expected to experience output growth, but at rates less than the overall state level: Transportation, Warehousing, Utilities and Information (TWUI) with a projected real increase of 2.4 percent; and Mining with a projected real increase of 0.2 percent.

2011 Employment Outlook

For 2011 North Carolina establishments are expected to gain 19,700 net jobs, an increase of 0.5 percent over the employment level in Dec. 2010.

Seven of the state's ten nonagricultural sectors of the economy are expected to experience employment increases during 2011. The sectors with the strongest employment increases in 2011 are projected to be Wholesale Trade at 5.5 percent, Retail Trade at 2.5 percent and Services at 1.8 percent.

“While the recovery in GSP is underway, job growth is likely to lag in North Carolina,” Connaughton said. “We lost over 282,000 jobs during 2008 and 2009, and it is likely to take four or five years to regain the lost jobs. Job growth will be the biggest problem for both the U.S. and North Carolina economies over the next several years.”

The UNC Charlotte Economic Forecast is published quarterly by the Belk College of Business. The full Forecast report is available at http://belkcollege.uncc.edu/forecast. Connaughton will release his next Forecast report in Dec. 2010.

Everyone is welcome to attend the quarterly economic forecasts, which are usually offered over a box lunch at no charge. Learn how to join the invitation list here.

In January of this year, Robert Reich a former U.S. Secretary of Labor, a professor at the University of California Berkley and the author of "Supercapitalism," also predicted slow job growth for the nation's economy:

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