FIRST QUARTER REPORT March 16, 2023
FORECAST HIGHLIGHTS
Annual Growth Rates In Real GDP
• For 2022, NORTH CAROLINA real GDP is expected to increase by 3.7 percent over the 2021 level.
• Ten of the state’s 15 economic sectors are expected to experience output increases during 2022. The sectors with the strongest expected growth rates are mining with a real increase of 32.5 percent, agriculture with a real increase of 26.7 percent, information with a real increase of 13.0 percent, business and professional services with a real increase of 12.0 percent, hospitality and leisure services with a real increase of 9.3 percent, government with a real increase of 7.9 percent, education and health services with a real increase of 6.2 percent, and other services with a real increase of 4.9 percent.
• For 2022, NORTH CAROLINA establishments are expected to add 190,300 net jobs during the year, an increase of 4.1 percent.
GDP/Gross Domestic Product is a yardstick that measures the total output of a state’s economy for a given year
Year-End Seasonally Adjusted North Carolina Unemployment Rates
• For 2023, NORTH CAROLINA real GDP is forecast to increase by 1.6 percent over the 2022 level.
• Twelve of the state’s economic sectors are expected to experience output increases during 2023. The sectors with the strongest growth rates are agriculture with a real increase rate of 17.6 percent, mining with a real increase of 6.2 percent, information with a real increase of 6.0 percent, hospitality and leisure services with a real increase of 4.6 percent, educational and health services with a real increase of 4.0 percent, business and professional services with a real increase of 3.4 percent, other services with a real increase of 2.4 percent, retail trade with a real increase of 1.9 percent, and wholesale trade with a real increase of 1.8 percent.
• For 2023, NORTH CAROLINA establishments are forecast to add 74,300 net jobs, an increase of 1.5 percent.
• By December of 2023, the state’s unemployment rate is expected to be 3.9 percent.
3. 8
2019 2020 2021 2 4 6 8
0 2019 2021 2022f 2023f 2020 1 2 4 7 . 2 2 . 21 . 3
2023f 2022f 3 . 7 4. 1 5. 6 -1 -2 -3 -5 -4 1 . 6 3. 9 3 3. 6
Quarterly Growth Rates in Forecasted Real GDP
2022 GDP
Gross Domestic Product (GDP) is forecast to reach a level of $728,235.7 million in 2022. Real (inflation-adjusted) GDP is expected to increase by 3.7 percent over the 2021 level. This growth in 2022 will represent the second full year of growth since COVID-19.
For 2022, first quarter GDP increased by an annualized real rate of 2.9 percent. During the second quarter, GDP decreased by an annualized real rate of 0.4 percent. In the third quarter, GDP increased by an annualized real rate of 2.7 percent. In the fourth quarter of 2022, GDP is expected to increase by an annualized real rate of 2.4 percent.
2022 Highlights
For 2022, there are two big stories playing out over the year. First is the first and second quarter declines U.S. GDP. In the first and second quarters of 2022, U.S. GDP declined by 1.6 and 0.6 percent, while North Carolina real GDP bucked the national trend by increasing in the first quarter by 2.9 percent and decreasing in the second quarter by only 0.4 percent. The decline in U.S. GDP occurred because of the emergence of the Omicron variant in the first quarter but continued on through the second quarter as supply chain problems persisted in many sectors of the economy. In addition, the first and second quarters experienced an unprecedented decline in productivity, with first quarter 2022, labor productivity declining by 5.1 percent and second quarter, labor productivity declining by 4.1 percent. So in the first half of 2022 we saw current dollar GDP increased by 6.6 and 8.4 percent because consumers and businesses spent 6.6 and 8.4 percent more on goods and services but because of inflation, productivity declines, and supply chain issues the increase in current dollar spending resulted in a decline of actual goods and services delivered.
The other big issue going forward is the impact that inflation has had and is continuing to have on both the U.S. and North Carolina’s economy. This problem is compounded by Federal Reserve policy of rapidly raising interest rates, and uncertainty about future Fed policy.
Current Dollars Total Gross Product Constant (2012 Dollars) Total Gross Product Agricultural Mining Construction Manufacturing Durable Goods Nondurable Goods TWU Wholesale Trade Retail Trade Information FIRE B & P E & H H & L Other Services Government 728,235.7 564,527.7 6,840.9 1,355.1 17,720.7 85,982.9 40,615.6 45,540.8 20,894.1 33,261.0 30,420.1 30,496.7 102,320.2 87,224.4 47,120.0 19,881.1 10,571.4 69,265.4 2022* Percent Change 10.1 3.7 26.7 32.5 -9.0 -3.1 -4.5 -2.0 3.2 0.8 -1.4 13.0 -0.3 12.0 6.2 9.3 4.9 7.9 * Millions of dollars 5 4 2 0 3
2. 7 2022 If 2022 IIf 2022 IIIf 2022 IVf 2. 90. 4 2. 4
2022 GDP SECTOR ANALYSIS
The chart to the left presents the projected contributions of each major economic sector to North Carolina’s Gross Domestic Product (GDP). The real (inflation-adjusted) growth rate for 2022 is forecast to increase by 3.7 percent. Projected real growth rates for each sector (displayed in black type) are plotted on the horizontal axis. Projected percentages of GDP contributed by each sector (displayed in green type) are plotted on the vertical axis. The resulting rectangles show the expected weighted importance of each sector’s growth during 2022. All of the sector information presented in the table to the left is based on the new North American Industry Classification System (NAICS) definitions.
Ten of the state’s 15 economic sectors are expected to experience output increases during 2022. The sectors with the strongest expected growth rates are mining with a real increase of 32.5 percent, agriculture with a real increase of 26.7 percent, information with a real increase of 13.0 percent, business and professional services with a real increase of 12.0 percent, hospitality and leisure services with a real increase of 9.3 percent, government with a real increase of 7.9 percent, education and health services with a real increase of 6.2 percent, and other services with a real increase of 4.9 percent.
Two sectors are expected to experience real output increase but at levels below the overall GDP increase of 3.7 percent. These sectors are transportation, warehousing, and utilities (TWU) with a real increase of 3.5 percent; and wholesale trade with a real increase of 0.8 percent.
Five sectors are expected to decline in 2022, these sectors are finance, insurance, and real estate (FIRE) with a decrease of 0.3 percent; retail trade with a decrease of 1.4 percent; nondurable goods manufacturing with a decrease of 2.0 percent; durable goods manufacturing with a decrease of 4.5 percent; and construction with decrease of 9.0 percent.
Percent of Total Real GDP Percent of Real Sector Growth 1.2 2022 Total
3.7% 0.2 3.7 7.2 8.1 3.1 5.9 5.4 3.5 12.3 18.1 15.5 8.3 1.9 5.6 B&P Services 12.0 E&H Services 6.2 H&L Services 9.3 Other Services 4.9 Government 7.9 FIRE -0.3 Information 13.0 Durables -4.5 TWU 3.2 Wholesale Trade 0.8 Retail Trade -1.4 Nondurables -2.0 Construction -9.0 Mining 32.5 Agriculture 26.7
Real GDP Growth
2023 GDP
Gross Domestic Product (GDP) is forecast to reach a level of $769,285.7 million in 2023. Real (inflation-adjusted) GDP is expected to increase by 1.6 percent over the 2022 level. This growth in 2023 will represent the third full year of growth since COVID-19.
For 2023, first quarter GDP is expected to increase by an annualized real rate of 0.6 percent. During the second quarter, GDP is expected to increase by an annualized real rate of 1.5 percent. In the third quarter, GDP is expected to increase by an annualized real rate of 1.8 percent. In the fourth quarter of 2023, GDP is expected to increase by an annualized real rate of 2.9 percent.
2023 Highlights
The big question in 2023 is, “will the U.S. economy slip into a recession?”
The answer is clearly uncertain at this time. During the first and second quarters of 2022 U.S. GDP declined and may suggest that is an indication that the U.S. economy is in recession. However, the two quarter decline in real GDP is only a rule of thumb. It is neither necessary or sufficient in indicating that we are in recession. While GDP declined in the first half of 2022, we also saw tremendous strength in the labor market. For 2022, the U.S. economy added 4,814,000 net jobs and North Carolina added 190,300 jobs.
So are we in for a recession in 2023? That depends almost entirely on what the Federal Reserve does during the first half of 2023. The Fed Funds Rate target is currently between 4.50 and 4.75 percent. However, inflation is running at over 6.0 percent year over year. This means real interest rates are still negative. However, recent trouble in the financial sector (the failure of Silicon National Bank) has brought into question future interest rate hikes. In the short term the Fed is going to have to balance the need to increase interest rates to fight inflation with the increased risk to the financial sector associated with higher interest rates. For now, the Fed has stemmed systemic risk by creating a lending facility that effectively insures all banking deposits. However, that action is in essence quantitative easing and is fighting against the Fed’s inflation fight. As a result, the net impact on the overall economy is quite uncertain at this time.
Current Dollars Total Gross Product Constant (2012 Dollars) Total Gross Product Agricultural Mining Construction Manufacturing Durable Goods Nondurable Goods TWU Wholesale Trade Retail Trade Information FIRE B & P E & H H & L Other Services Government 769,285.7 573,668.4 8,043.3 1,438.7 16,721.5 84,116.3 40,410.5 43,705.8 20,992.2 33,846.7 30,990.5 33,400.7 103,395.7 90,227.9 49,027.8 20,801.4 10,826.0 69,839.8 2023* Percent Change 5.6 1.6 17.6 6.2 -5.6 -2.2 -0.5 -4.0 0.5 1.8 1.9 6.0 1.1 3.4 4.0 4.6 2.4 0.8 * Millions of dollars 8 6 2 0 4
1. 8 2023 I 2023 II 2023 III 2023 IV 0. 6 1. 5 2. 9
Quarterly Growth Rates in Real GDP
2023 GDP SECTOR ANALYSIS
The chart to the left presents the projected contributions of each major economic sector to North Carolina’s Gross Domestic Product (GDP). The real (inflation-adjusted) growth rate for 2023 is projected to increase 1.6 percent. Real growth rates for each sector (displayed in black type) are plotted on the horizontal axis. Percentages of GDP contributed by each sector (displayed in green type) are plotted on the vertical axis. The resulting rectangles show the weighted importance of each sector’s growth during 2023. All of the sector information presented in the table to the left is based on the new North American Industry Classification System (NAICS) definitions.
Twelve of the state’s economic sectors are expected to experience output increases during 2023. The sectors with the strongest growth rates are agriculture with a real increase rate of 17.6 percent, mining with a real increase of 6.2 percent, information with a real increase of 6.0 percent, hospitality and leisure services with a real increase of 4.6 percent, educational and health services with a real increase of 4.0 percent, business and professional services with a real increase of 3.4 percent, other services with a real increase of 2.4 percent, retail trade with a real increase of 1.9 percent, and wholesale trade with a real increase of 1.8 percent.
Three other sectors are expected to experience growth rates, at levels below the overall 1.6 percent GDP real growth rate. These sectors are finance, insurance, and real estate (FIRE) with a real increase of 1.1 percent; government with a real increase of 0.8 percent; and transportation, warehousing, and utilities (TWU) with a real increase of 0.5 percent.
Three sectors are expected to experience declines during 2023. These sectors are construction with a decrease of 5.6 percent, nondurable goods manufacturing with a decrease of 4.0 percent, and durable goods manufacturing with a decrease of 0.5 percent.
Percent of Total Real GDP Percent of Real Sector Growth 1.4 2023 Total Real GDP Growth 1.6% 0.3 3.7 7.0 7.6 2.9 5.9 5.4 3.6 12.2 18.0 15.7 8.5 1.9 5.8 B&P Services 3.4 E&H Services 4.0 H&L Services 4.6 Other Services 2.4 Government 0.8 FIRE 1.1 Information 6.0 Durables -0.5 TWU 0.5 Wholesale Trade 1.8 Retail Trade 1.9 Nondurables -4.0 Construction -5.6 Mining 6.2 Agriculture 17.6
2022 Year-End Employment Trends
2022 EMPLOYMENT SECTOR ANALYSIS
The sector employment analysis presented on this page is based on the new North American Industrial Classification System (NAICS). North Carolina employment reached 4,846,400 persons by December 2022, a 4.1 percent increase over the December 2021 employment level. The state added 190,300 net jobs in 2022.
Twelve of the state’s fourteen nonagricultural sectors of the economy experienced employment increases during 2022. The sectors with the strongest employment increases in 2022 were hospitality and leisure services at 9.5 percent and business and professional services at 6.8 percent.
2022 Employment Highlights
Construction 4.6 Percent of Sector Employment Growth Nondurables 2.9 FIRE 4.9 Retail Trade -0.8 Durables 1.1 Wholesale Trade 5.7 0.1 5.2 4.5 4.2 5.3 10.5 4.0 10.9 15.1 Government 2.1 6.0 Other Services 5.5 Information 3.6 B&P Services 6.8 E&H Services 4.7 H&L Services 9.5 15.2 13.7 3.6 1.7 Mining -1.8
Total Establishment Employment Mining Construction Manufacturing Durable Goods Nondurable Goods Wholesale Trade Retail Trade TWU Information FIRE B&P Services E&H Services H&L Services Other Services Government 4,846.4 5.4 250.0 474.9 258.1 216.8 203.2 509.2 194.9 82.7 288.5 738.1 664.3 529.2 175.0 731.90 Year-End* Percent Change 4.1 -1.8 4.6 1.9 1.1 2.9 5.7 -0.8 0.1 3.6 4.9 6.8 4.7 9.5 5.5 2.1
of persons
*thousands
Percent of Total Employment TWU 0.1
2023 Year-End Employment Trends
2023 EMPLOYMENT
SECTOR ANALYSIS
The sector employment analysis presented on this page is based on the new North American Industrial Classification System (NAICS). North Carolina employment is expected reached 4,920,700 persons by December 2023, a 1.5 percent increase over the December 2022 employment level. The state is expected to add 74,300 net jobs in 2023.
All fourteen of the state’s nonagricultural sectors of the economy are expected to experience employment increases during 2023. The sectors with the strongest employment increases in 2023 are information at 5.8 percent, and other mining at 5.6 percent.
2023 Employment Highlights
Construction 2.4 Percent of Sector Employment Growth Nondurables 1.7 FIRE 1.0 Retail Trade 0.6 Durables 1.2 Wholesale Trade 3.0 0.1 5.2 4.5 4.3 5.3 10.4 4.0 11.0 15.0 Government 0.8 5.9 Other Services 3.5 Information 5.8 B&P Services 1.6 E&H Services 0.9 H&L Services 2.3 15.2 13.6 3.7 1.8 Mining 5.6
Total Establishment Employment Mining Construction Manufacturing Durable Goods Nondurable Goods Wholesale Trade Retail Trade TWU Information FIRE B&P Services E&H Services H&L Services Other Services Government 4,920.7 5.7 256.0 481.5 261.1 220.4 209.2 512.2 197.3 87.5 291.5 750.1 670.3 541.2 181.2 737.0 Year-End* Percent Change 1.5 5.6 2.4 1.4 1.2 1.7 3.0 0.6 1.2 5.8 1.0 1.6 0.9 2.3 3.5 0.8
*thousands of persons
Percent of Total Employment TWU 1.2
2022-2023 NORTH CAROLINA UNEMPLOYMENT RATE
FORECAST reports historical seasonally adjusted monthly unemployment rates for North Carolina and the United States and forecasts the seasonally adjusted monthly unemployment rate for North Carolina. The seasonal adjustment accounts for variations in labor market conditions that cause regular fluctuations in the unemployment level each month.
The graph at the top of this page provides a summary of the monthly unemployment rates for 2022 and 2023. The solid blue line represents the United States seasonally adjusted historic unemployment rate. The seasonally adjusted unemployment rate for North Carolina is represented by the solid green line. The North Carolina seasonally adjusted unemployment rate forecast is represented by the solid red line. The seasonally adjusted rates for the United States and North Carolina can be compared directly and provide more reliable estimates than the unadjusted rates.
The United States and North Carolina started 2022 with unemployment rates of 4.0 percent and 3.9 percent respectively. The U.S. unemployment rate has fallen consistently to 3.5 percent by the end of 2022. The North Carolina rate fell during the middle of 2022 but has risen back up to 3.9 percent by the end of the year. The North Carolina unemployment rate should remain fairly stable through 2023, ending the year at 3.9 percent.
The data used in this report comes from the websites for the U.S. Department of Commerce’s Bureau of Economic Analysis (www.bea.gov) and the North Carolina Department of Commerce (www.commerce.nc.gov) as of March 1, 2023.
