UNC Charlotte economist John Connaughton says North Carolina’s economy will continue to improve, and employers will keep hiring, but the pace this year and next will remain sluggish.
In a Charlotte Observer report, Connaughton says he expects the N.C. economy to grow 2.7 percent this year, with much of the momentum occurring in the fourth quarter. Meanwhile, Connaughton predicts just five of the state’s 10 nonagricultural sectors will add workers this year, for a net gain of 64,700 jobs, he said during his quarterly Babson Capital/UNCC economic forecast.
That’s an increase of 1.7 percent over December’s employment level, but not enough to make up for the massive losses seen during the recession.
“North Carolina lost over 320,000 jobs during 2008 and 2009, and it is likely to take four or five years to regain the lost jobs,” Connaughton said. “Job growth will be the biggest problem for both the U.S. and North Carolina economies over the next several years.”
This year’s projected economic growth follows a weak 2010, when the N.C. economy expanded just 1 percent, less than the 1.3 percent growth the economist predicted a few months ago. Employers statewide added 5,600 net jobs, lifting the state’s employment a scant 0.1 percent over its 2009 level, Connaughton said.
Only six of the state’s nonagricultural sectors added jobs, and some fields, such as construction and finance, real estate and insurance, continued to struggle, he said.
Overall, the N.C. economy performed worse than the U.S., which posted solid – if modest – gains throughout the year.
“The reasons for this weak performance are fairly straightforward,” Connaughton’s report said. “The continuing uncertainty in the financial sector, with banks still struggling to be profitable, coupled with the sharp decline in the construction sector and the ongoing foreclosure problem has generated a drag on the state’s economy.”
Steadily rising gas prices have also stretched consumers, leading to scaled-back buying, he said.
But the outlook should begin to improve this year, with the state’s economy expected to perform on par with the national economy for the first time during the recovery, Connaughton said. Gas prices are already improving, for instance, and the financial sector is under less stress, he said.
Seven of the state’s 11 economic sectors are forecast to experience output increases in 2011, with the biggest gains predicted in wholesale trade, retail trade, services and mining.
Finance, insurance and real estate, one of the hardest-hit sectors in Charlotte and across the state, is expected to grow 1.5 percent.
Sectors such as wholesale trade, retail trade, services and finance are expected to add jobs this year, too, Connaughton said.
He expects the state’s unemployment rate to fall to 9.4 percent by the end of the year, down slightly from its April figure, 9.7 percent. That’s still above the current U.S. jobless rate of 8.8 percent.
Looking ahead, Connaughton forecasts the N.C. economy to increase 2.3 percent in 2012, more slowly than the expected rate this year. But employers are expected to hire more, adding 72,000 net jobs, he said. Read More.