In a new report, NCSU Economist Dr. Michael Walden sees a good year for North Carolina with the state’s gross domestic product growing 3.5 percent than the national GDP. He also sees further declines in unemployment. 2016 looks good for the U.S. economy as well, but he closes the report with a caveat: “Watch for Unknowns.”
Walden issued the report Friday, just days into the meltdown of the Chinese stock market which has helped drive U.S. stocks to what some have said is the worst opening week of a year ever.
Economists don’t have all the answers and aren’t perfect fortune tellers, he notes. even as his own report supports findings of several other recent conclusions by other economic experts as displayed earlier this week at two 2016 economic kickoff events in the Triangle. Walden took part in one.
“A major problem with economic forecasting is the threat of the unknown – unpredictable events that can erupt and disrupt economic conditions,” he writes in the “North Carolina Economic Outlook” for 2016’s first quarter.
“There are two varieties of these unknowns – those we know exist but can’t predict their behavior, and those we don’t even know exist! In the first category are the obvious examples of severe weather, international hotspots (North Korea, the Middle East, terrorism), and domestic disruptions like power outages or medical epidemics. In the second category are – well, that’s just it, we don’t know!
“As 2016 begins there are new concerns about the Middle East and the stability of China’s economy. Of course, these will require watching and monitoring. And at the end of 2016 we will have the uncertainty, anticipation, and expectations associated with a newly elected President. It will be an interesting and memorable year.”
A good year for the state?
Walden published eight “headlines” that are bullish for N.C.:
- Growth will continue: State real gross domestic product will rise 3.5 percent faster than the national rate.
- 90,000 net new payroll jobs will be added
- “Headline” jobless rate will fall to 5.1 percent by year’s end. (Note: Headline rate refers to the generally reported unemployment rate.)
- Fastest job growth will be in higher-paying financial, information, and professional/business sectors but also in lower-paying leisure/hospitality and personal service sectors.
- “Headline” jobless rate will fall to under 5 percent in Asheville, Burlington, Charlotte, Durham, Raleigh, Wilmington and Winston-Salem
- “Headline” jobless rate will be near or above 6 percent in Fayetteville, Rocky Mount, and rural North Carolina
- Biggest economic “plus” will be from improved household formation generating new spending
- Biggest economic “minus” will be from the end to oil and gasoline price drops – still, those prices will remain affordable
North Carolina overview
Walden pointed out that the state’s “economy grew faster than the nation’s economy in 2015. Real GDP growth was 3.4% vs. 2.2% for the nation, labor force growth was 3.2% vs. 0.6%, household employment growth was 3.1% vs. 1.4%, and payroll employment growth was 2.2% vs. 1.9%. The state’s unemployment (headline) rate did not drop consistently like the national rate – despite the state’s faster job growth rates – due to the extraordinary rapid increase in the state’s labor force.”
He sees North Carolina:
- Adding 90,000 jobs
- State unemployment (headline) rate will approach 5% at year’s end.
- Upper-paying sectors of financial services, information, and professional/business services will drive job growth
- Growth also will take place in lower-paying sectors of leisure/hospitality and other services.
But the metro areas will get the lion’s share of growth, ne noted.
“The state’s regional economic divide will also persist in 2016. Charlotte, Greensboro/High Point, and Durham had the fastest relative payroll job growth in 2015, while Fayetteville and Hickory actually lost payroll jobs. Rural North Carolina had a good 2015, with payroll job growth in rural areas slightly exceeding the state growth rate. In 2016 several regions – Asheville, Burlington, Charlotte, Durham, Raleigh, and Wilmington – will have year-end unemployment (headline) rates under 5%. But the rates in Fayetteville and Rocky Mount will end the year near or above 7%.”
“A Turning Point in the Economy”
In his executive summary, he says the national economy is at a “turning point.”
“The national economy performed rather well in 2015. Broad economic growth (GDP) was above the post-recessionary annual average, although growth was well short of the longer run (1990-2010) annual average. Employment growth was actually above the long-run average growth rate. Productivity growth was better than the post-recessionary average but under the long-run average. The housing market made strong – but not stellar – gains,” he wrote.
“The most notable differences for 2015 were for inflation, the household sector, and the dollar’s international value. The all-item’s inflation rate was only 0.5%, due largely to the dramatic drop in oil and gasoline prices. Households solidified their post-recessionary gains, with a 5.3% gain in real (after-inflation) median household income, reductions in relative household debt and debt payments, and a continued strong savings rate. The dollar’s international value jumped 25% compared to its post-recessionary average.”
Adn what’s coming?
“The biggest change in 2016 will be in the financial sector with the path of short-term interest rates on the rise. The rise in rates will have several impacts, including moderation in asset buying, higher interest payments by households, and higher relative interest 3 payments on the federal debt. Still, with the Fed’s cautious and measured pace, these changes will not be dramatic.”
Read the full report at:
http://www.ag-econ.ncsu.edu (Click on the first entry)
