The North Carolina economy continues to grow but is facing more unpredictability in 2015, UNC Charlotte economist John Connaughton reported Sept. 9 in the Babson Capital Management/UNC Charlotte Economic Forecast.
“2015 is proving to be a volatile year for the U.S. economy, with several important economic factors trending in very uncertain ways. North Carolina has continued growth at a slow rate, but we will need to watch the indicators,” Connaughton said. “Fourteen of the state’s 15 economic sectors are still forecast to experience output increases in 2015, with business and professional services leading with a projected real increase of 6.6 percent.”
During his quarterly economic forecast, he highlighted four main areas of the economy to watch in the near term.
- State economic growth continues, but with uncertainty ahead: N.C. Gross State Product (GSP) is forecasted to record an annualized real growth rate of 3 percent over the 2014 level, more than expected and a good benchmark rate. Gross State Product (GSP) is expected to reach a level of $503,355.5 million in 2015. However, looking at 2015 by quarter, the growth is unstable. For 2015, first quarter GSP was flat with an annualized real growth rate of 0 percent. During the second quarter, GSP is expected to increase at an annualized real rate of 5.1 percent. In the third quarter, GSP is expected to increase at an annualized real growth rate of 3.8 percent. In the fourth quarter of 2015, GSP is expected to increase at an annualized real rate of 2.2 percent. “This growth in 2015 would follow three years of modest growth in North Carolina GSP.”
- Federal interest rates are going up - eventually: Connaughton said the Federal Reserve meets later this month to talk about interest rates, and he expects they will be going up in the near future. “The Fed needs breathing room to be able to combat the next U.S. slowdown, but right now the slowing world GDP and the strong U.S. dollar make the prospect of reducing rates risky during the next several months,” he said. “Increases in interest rates will be minimal and as a result and shouldn’t affect consumers being able to buy a car or a house.”
- State unemployment and employment are both rising: North Carolina is expected to gain 89,900 net jobs during 2015, an increase of 2.1 percent over last year. However, the unemployment rate is rising. The North Carolina seasonally adjusted unemployment rate began 2015 at 5.4 percent, while the United States rate was 5.6 percent. By July, the North Carolina rate had risen to 5.9 percent while the U.S. remained stable at 5.3 percent. By December, the North Carolina unemployment rate is expected to be around 6 percent. How is this possible? Connaughton said a combination of discouraged workers (those who gave up on their job search) and legal migrants (coming from other states) have entered the labor force, causing the number of people unemployed to rise, while employment also rose.
- China’s slowdown could spread: “The Chinese economy has slowed, and their stock market has tumbled. While China’s economic slowdown should have little direct impact on U.S. exports to China, it is likely to cause an overall slowing of world GDP growth going forward. The cumulative effect could spread to reduce U.S. exports,” Connaughton said. He added that the recent strength of the U.S. dollar will reduce American exports to two of the nation’s largest trading partners, the European Union and Canada.
Connaughton presented his quarterly forecast to members of the Charlotte business community and the media at a luncheon held at UNC Charlotte Center City. The forecast is funded by Babson Capital Management LLC.
The full Forecast report is available online at belkcollege.uncc.edu/forecast.
Connaughton will release his next Forecast report on December 8, 2015.
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Media Contacts:
Belk College of Business: Kirsten Khire | 704-885-4134 mobile | kkhire@uncc.edu
UNC Charlotte Public Relations: Buffie Stephens | 704-687-5830 | BuffieStephens@uncc.edu