Data Confirms Decline in N.C. Economy, Connaughton Reports
“Modest” Recovery Could Begin in Second Half of 2009, says UNC Charlotte Economist
CHARLOTTE - March 17, 2009 - The North Carolina economy is expected to show a decline of 0.4 percent during 2008, UNC Charlotte economist John Connaughton reported today in his quarterly economic forecast for the state.
The decline expected for 2008 follows a growth rate of 2.2 percent experienced during 2007 and brings an end to six years of steady economic growth in North Carolina.
Overall, the North Carolina economy is expected to decline during three of the four quarters in 2008:
First Quarter 2008 -1.3
Second Quarter 2008 +1.0
Third Quarter 2008 -2.1
Fourth Quarter 2008 -4.9 (estimated)
“This recession, which started in the residential construction industry and spread to the financial sector has now spilled over to a number of other sectors,” said Connaughton, a professor of economics in the Belk College of Business. “Both manufacturing and retail trade are feeling the effects of the overall slowdown and have contributed to the state’s overall decline and the significant drop in GSP during the fourth quarter.
“Officially, the recession began at the end of December 2007 and is a direct result of both the mortgage meltdown and the dent in consumer pocketbooks caused by high gasoline prices during the first three quarters of the year,” Connaughton added.
Connaughton, a highly-regarded expert on regional and state economic issues, has served as director of the UNC Charlotte Economic Forecast since 1981.
2008 Sector Analysis: Seven of Eleven Sectors Show Decline
Seven of the state’s eleven economic sectors are forecast to experience declines during 2008. The sectors with the strongest expected declines are:
• Agriculture, with a projected real decline of 13.5 percent
• Construction, 9.0 percent
• Mining, 3.7 percent
• Durable Goods Manufacturing, 3.4 percent
• Retail Trade, 2.2 percent
• Nondurable Goods Manufacturing, 1.8 percent
• Finance, Insurance, and Real Estate (FIRE), 1.6 percent
2008 Employment Statistics: More Than 120,000 Jobs Lost
During 2008, the North Carolina economy lost 120,100 net jobs, a decrease of 2.9 percent over the employment level in December 2007.
Nine of the state's ten nonagricultural sectors of the economy experienced employment declines during 2008. The sectors with the strongest employment declines in 2008 were:
• Durable Goods Manufacturing at 8.9 percent
• Construction, 7.0 percent
• Nondurable Goods Manufacturing, 5.7 percent
The unemployment rate in North Carolina for December 2008 was 8.1 percent, higher than the United States rate of 7.2 percent. In January 2009, the North Carolina unemployment rate jumped to 9.7 percent, well above the U.S. rate of 7.2 percent. The state unemployment rate is expected to continue to increase during the first half of 2009 and end the year at more than 10 percent.
2009 Forecast: Decline in First and Second Quarters, then an Uptick
For 2009, the North Carolina economy is expected to continue to decline, with real Gross State Product (GSP) dropping by 1.6 percent below the 2008 level.
First Quarter 2009 -2.8
Second Quarter 2009 -0.7
Third Quarter 2009 +1.8
Fourth Quarter 2009 +2.0
The declines in the first and second quarters of 2009 would combine with negative growth in the second half of 2008, for a total of four consecutive quarters of GSP decline.
2009 Sector Outlook: Continued Declines in Construction, Finance
Seven of the state’s eleven economic sectors are forecast to experience output declines during 2009. The sectors with the greatest expected declines are:
• Construction, with a projected real decline of 5.9 percent
• Finance, Insurance, and Real Estate (FIRE), 3.8 percent
• Durable Goods Manufacturing, 3.0 percent
• Retail Trade, 2.4 percent
• Wholesale Trade, 2.1 percent
• Nondurable Goods Manufacturing, 1.6 percent
• Agriculture, 0.1 percent
2009 Jobs Outlook: More Job Losses, But Fewer Than 2008
For 2009, North Carolina establishments are forecast to lose 58,200 net jobs, a decrease of 1.4 percent below the 2008 level.
Eight of the state's ten nonagricultural sectors of the economy are expected to experience employment declines during 2009. The sectors that are expected to display the greatest employment declines are:
• Mining at 10.2 percent
• FIRE, 7.2 percent
• Nondurable Goods Manufacturing, 5.7 percent
“The expectation is that the North Carolina economy should begin a modest recovery during the second half of 2009,” Connaughton said. “The recession, which began in January 2008, is expected to last at least six quarters. This would make the 2008-2009 recession the longest recession since the recession of 1982, which lasted 16 months.
“The two most recent recessions were quite short,” he added. “Both the 1991 and 2001 recessions lasted only eight months each. We are already in the 15th month of this recession.”
The full Forecast report for March 2009 is available on the Belk College website: www.belkcollege.uncc.edu/forecast. Connaughton will present his next report in June 2009.
About UNC Charlotte
A public research university, UNC Charlotte is the fourth largest campus among the 17 institutions of the University of North Carolina system. It is the largest institution of higher education in the Charlotte region. The university offers 18 doctoral programs, 62 master’s degree programs and 89 programs leading to bachelor’s degrees. Fall 2008 enrollment exceeded 23,300 students, including almost 5,200 graduate students.