We have experienced a decade of economic growth and the big questions many are asking is whether this growth will continue or if there will be a recession in our future.
Matthew Martin, the regional executive of the Charlotte branch of the Federal Reserve Bank of Richmond, recently spoke to the Greater Raleigh Chamber of Commerce. His presentation helped in answering those questions.
Economic growth, Martin said, is a result of two factors: putting more people to work and making them more productive. Economic expansions don’t just die of old age, they are murdered. Martin explained that some action or condition triggers their demise. Examples include the monetary policy actions taken to reduce runaway inflation, external shocks like the Arab oil embargo, or debt imbalances like the housing crisis that sparked The Great Recession.
Let’s review some important numbers. The national unemployment rate is 3.6 percent, the lowest since 1969. North Carolina’s May unemployment rate was 4.1 percent, up from December’s 3.7 percent. First quarter national GDP growth was 3.1 percent, and Martin said it appeared second quarter GDP growth would be around 2 percent. That’s about the same as North Carolina’s growth rate. Consumer spending, about 70 percent of the U.S. economy, grew around 4 percent in the second quarter, according to the Department of Commerce, and retail sales rose more than was expected. Business investment spending has softened a bit, but manufacturing output rose in June. And while new housing starts and home sales are declining slightly, they can be partially explained because labor is harder to find and the permitting process is taking longer.
The tighter labor market is helping force wage growth, which increased 1.7 percent year over year. North Carolina’s growth is a bit below that level, at 1.5 percent. Raleigh and Charlotte account for about 50 percent of state job growth and Raleigh has outpaced every other metropolitan statistical area, with 24 percent job growth since 2007. Our state is ahead of the U.S. average in the leisure and hospitality sector, with strong growth in trade, transportation and utilities, financial activities, and professional and business services sectors. Inflation is running well under the target of 2 percent and is now a relatively stable 1.5 percent.
To be sure there are some economic uncertainties, such as concerns over trade and tariffs, the growing national debt and the rise of non-bank lending, but overall the economy is strong. Record stock market levels reflect the optimism of investors. The Federal Reserve is likely to cut interest rates at their July meeting.
Leading economic publications and developers tout our state as a great place to do business and almost weekly we hear of a business either expanding their current workforce or locating a new facility here. Our population continues to grow, perhaps not at the same levels as in recent years, but by some 100,000 new residents each year.
Even though we have counties (mostly rural) where economic prosperity is not evenly enjoyed, there doesn’t appear to be signals on the immediate horizon to indicate a recession in the next six months to a year. That’s good news for North Carolina.
Tom Campbell is former assistant state treasurer and is creator/host of NC SPIN, a weekly statewide television discussion of state issues that airs on UNC-TV. Contact him at www.ncspin.com.