The recession hit North Carolina hard – very hard. Over 300,000 jobs were lost – equal to 8 percent of all employment – and the jobless rate peaked at 11.3 percent. Both of these measures were well above the comparable national counts.
Our state economy has improved in the past three years. More than 150,000 net payroll jobs have been added, and our unemployment rate has dropped almost 2 percentage points.
Yet North Carolina’s recent economic gains – while welcome – have been modest and still leave the state shy of pre-recessionary levels, especially in the labor market. However, there are good reasons to expect our state’s economy to accelerate in coming years. The emerging economic boom in North Carolina will be based on four factors: a manufacturing revival, a construction surge, an education “bumper crop” and a retiree influx.
1 Manufacturing revival: Almost twice as much of North Carolina’s aggregate economic output comes from manufacturing as in the nation. This fact is a major reason why recessions typically hit North Carolina harder, since purchases of manufactured products can be easily delayed during economic hard times.
In economic recoveries, states specializing in manufacturing typically do better. We saw this in North Carolina from 2003 to 2008. However, the recent recession destroyed over 40 percent of household wealth and consequently moderated consumer spending even after the economy began to improve.
Now that both household and business balance sheets are much improved, consumers and firms will be able to act on their “pent-up demand” for manufactured products. This will spur purchases for North Carolina’s diverse and deep manufacturing industries, from technology to vehicle parts to furniture.
2 Construction surge: The unprecedented pullback in the housing market during the recession devastated the construction industry. Again, North Carolina suffered more. Both construction activity and construction jobs dropped more in our state than in the nation. Yet North Carolina has added population at twice the national rate in the last five years. Therefore, the state has more “catching up” to do with new homes, apartments and retail outlets that should translate into 50,000 construction jobs by 2016.
3 Education “bumper crop”: Economists expect growth to be strongest in “knowledge-based” industries in the coming decade. For example, the U.S. Bureau of Labor Statistics forecasts jobs requiring a college degree to increase 30 percent faster than all other jobs between 2010 and 2020.
This means localities with a growing supply of college graduates will be well-positioned to attract jobs and growth. North Carolina appears to be such a state. Between 2006 and 2011, the number of college graduates in North Carolina rose 19 percent, exceeding the national increase of 11 percent. The gains were even greater in the state’s major metropolitan areas: up 24 percent in Charlotte, 21 percent in the Triangle and 14 percent in the Triad.
The more abundant supply of college graduates in North Carolina, combined with the state’s competitive land and labor costs, world-class universities and pleasing environment should make the state a magnet for knowledge-based firms in upcoming years.
4Retiree influx: Difficulty selling homes and tight personal finances slowed the migration of retirees during the recession and slow recovery. While North Carolina’s mountains, beaches, golf courses, historic towns and dynamic cities have continued to attract retirees at a faster rate than other states, the pace of this movement slowed 20 percent in recent years.
Again, with an improved economy and housing market, the retirement migration to North Carolina should gradually accelerate. Indeed, the biggest bulge of the baby-boom retirement is yet to come. Retirees, bringing their pensions, Social Security checks and spending will provide a continuing economic stimulus to the state.
These four positive developments should result in at least 400,000 net new jobs in our state over the next five years, resulting in the statewide unemployment rate dropping to near 6 percent. Indeed, the state accomplished this kind of job growth between 2003 and 2008. North Carolina will once again be a leader in economic growth in the country.
The coming economic boom certainly won’t solve all our economic problems and issues. Poverty, income inequality, the urban-rural divide, transportation needs, the energy transition and the necessary training of thousands of our workers to meet 21st century workforce requirements will still remain as challenges. But it will be easier to address these challenges with faster – rather than slower – economic growth.
Michael Walden is a William Neal Reynolds Distinguished Professor at N.C. University.