NCSU economists warn of possible recession in final quarter of the year

Raleigh — North Carolina’s strong recovery continues after the global pandemic began, but a recession is now increasingly likely, which could change the lives of the state’s residents.

This is based on Dr. Michael Walden, William Neil Reynolds Distinguished Professor Emeritus, North Carolina State University. Walden provides a report on North Carolina’s economic outlook and the state’s current economic conditions through the second quarter of 2022. Walden, a WRAL TechWire Contributorto share reports directly with WRAL TechWire.

The report came on the same day the Associated Press reported that U.S. consumer confidence edged lower in May.

“The Conference Board said Tuesday that its consumer confidence index fell to 106.4 in May from 108.6 in April, still a strong reading,” the Associated Press noted.

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The impact of the recession on North Carolina

According to the report, North Carolina has outperformed the nation on average over the past three recessions. three indicators: Real GDP, a return to the quarterly sum of pre-recession GDP, and a fall in unemployment.

Walden concluded: “North Carolina’s relative economic performance during the recession improved in the 21st century.”

This is due to changes in the state’s economic structure, as the state’s economy has diversified over the first half-century.

Still, even though North Carolina may face a more resilient recessionary environment than the nation or other states or territories, A recession may be coming All the same.

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economic downturn

A recession will bring the possibility of a pullback in the economy and have an impact on the state’s labor market.

Walden’s analysis looks at a variety of forecasts, including “no recession” forecasts and recession-based scenarios.

The report’s “no recession” scenario shows North Carolina’s annual real GDP growth rate at 2.5% and the state’s unemployment rate falling to 3.2% by the end of 2023.

But in Walden’s forecast for a recession in the fourth quarter of 2022 and the first quarter of 2023 (two quarters of decline in real GDP), he forecasts a decline in real GDP of “slightly more than 3%, which indicates a relatively modest decline. decline.”

In this forecast, the state’s unemployment rate will hit 5.2%, but will drop to 4% by the end of 2023.

This is considered mild or moderate. If a recession occurs, it is expected to do the same, Walden said. That’s because “household debt payments as a percentage of their income are at a four-decade low,” the report noted.

Additionally, more households have more cash or cash equivalents available, and many have increased financial savings due to a combination of factors, including the federal stimulus package and more limited purchasing opportunities due to supply chain disruptions and post-pandemic full or partial lockdowns, the report said. pointed out.

According to an economic forecast by Dr. John Connaughton, professor of financial economics at the University of North Carolina at Charlotte, the country into recession 2022, 50-50 earlier this year.

UNCC economists say 50-50 chance of recession in 2022

inconsistent recovery

The report noted that while the state’s economic recovery continued to outpace the national economy following a dip in the second quarter of 2020 in the wake of the global COVID-19 pandemic, the recovery was uneven across industries.

From the bottom of the so-called “Covid-19 recession” to the end of 2021, North Carolina’s total production rose 16%, compared with a 15% increase nationally, the analysis found.

But while the information technology sector and professional services sector reaped the largest economic gains in the state, construction, hospitality and leisure, transportation and warehousing, and personal services received the smallest gains in the state’s economy. For the four sectors, “their GDP levels remain below pre-pandemic levels,” the report noted.

North Carolina also outpaced the nation in employment trends, rural areas of the state Recovery based on top speed anywhere in the state data Economic reports from the North Carolina Department of Commerce and Walden.

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These areas are considered to be any area of ​​the state that is geographically outside of a designated metropolitan statistical area (MSA), leading the sector with employment rates of 106% compared to April 2022 employment levels job growth in the state. February 2020, according to Walden’s forecast.

During the same period, MSA employment in Raleigh recovered 105%, while MSA employment in Durham-Chapel Hill recovered 103% over the same period. Since February 2020, North Carolina statewide has recovered 102% of jobs as of April 2022.But metropolitan areas such as Winston-Salem, New Bern, Greenville, Greensboro-High Point, Goldsboro and the Rocky Mountains have yet to recover from the pandemic, according to Walden’s analysis of U.S. data. previous employment level U.S. Bureau of Labor Statistics.

Image: North Carolina Economic Conditions and Outlook, Q2 2022. Explanation: Q4 2021 GDP as a percent of Q4 2019, by industry, North Carolina. Data source: U.S. Bureau of Labor Statistics.

Long-term outlook: ‘Optimistic’

But in the longer term, North Carolina’s economic forecast is “very optimistic for a number of reasons,” the report said.

This optimistic forecast predicts that the state’s population will continue to increase due to each of the three factors that contribute to the net population change: more births than deaths, Immigrants from other countriesand foreign immigrants.

By 2050, North Carolina’s population is projected to reach 13.8 million, compared with 10.5 million in 2020.

As the population grows, Walden predicts the state’s workforce will expand. In addition, the forecast anticipates expansion of economic development outside the state’s most populous metropolitan areas, and greater investment in high-speed internet access could open up areas for residential living and business growth in the state.

“The biggest challenge facing North Carolina in the coming decades — in fact, the biggest challenge facing most states — will be labor market related,” the report reads. “As the economy of the future develops faster than in the past, one challenge will be monitoring the changing skills needs of the workforce.”

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