RALEIGH – Anyone expecting a rapid recovery for North Carolina from the COVID-19 pandemic and its devastating impact on jobs and business is in for a disappointment. Not until 2023 will the state recover fully, says N.C. State economist Dr. Mike Walden.
“The remainder of 2020 will be challenging for the North Carolina economy,” he writes in a new economic forecast.
“After a huge reduction in the state’s aggregate economic production in the second quarter of the year, a rapid snapback is forecasted for the third quarter, followed by strong – but slower – growth in the fourth quarter.
“Still, the state economy is expected to be 20% smaller at the end of 2020 compared to the end of 2019. Economic growth will continue in 2021, but at even slower rates.
“It will not be until 2023 that the state’s aggregate production will exceed pre-virus levels.”
Dr. Mike Walden
Walden also doesn’t expect a swift, consistent rebound in jobs.
May unemployment was 12.%, according to new North Carolina data.
“After peaking at over 14% in 2020 [second quarter], the rate will decline to 9.6% in 2020 [quarter four], 7.4% in 2021 [quarter four], 7% in 2022, and 5.4% in 2023,” he says.
Walden points out a number of factors make predictions difficult about how rapidly the North Carolina economy recovers.
“The mandated recession of 2020 is different than any recession experienced by the country. It is not clear how North Carolina will fare from the recession,” he writes.
“Working against the state is its higher share of workers with lower educational attainment, many of whom work in hospitality, personal services, and retailing. If the percentage of occupations requiring person-to-person interactions contracts in the post-Covid-19 economy, then the state’s economy may suffer relatively more than the national economy.”
Possible accelerators of growth exist, however,
“One is the continued in-migration of households from other states to North Carolina,” he points out. “North Carolina has continually ranked among the leaders in attracting households and businesses from other states. This movement could expand in the post-virus world, especially from the highly dense northeast metropolitan areas – like New York City and Philadelphia – that suffered enormously from the virus.”
And tourism could be a boost “if vacationers prefer shorter trips accessible with personal vehicles rather than commercial airlines.”
“Key points”
In “key points” he selected from the report, Walden points out seven:
1. Measured by job losses as a percent of the labor force, North Carolina did slightly better than the nation for the February-April period. Job losses were one percentage point less compared to the country. However, the job recovery during May was less robust in the state than in the nation.
2. Leisure/hospitality and other (mainly personal) services were the hardest-hit sectors for job losses in both North Carolina and the nation. The same sectors had a strong performance in the May recovery. The information sector lost jobs in both the February-April and May periods.
3. Asheville, Burlington, Hickory, and Wilmington had the largest relative job losses during February-April. Rural North Carolina had the smallest relative job losses.
4. North Carolina is expected to experience an economic recovery path similar to the nation, with the strongest growth period being in the third and fourth quarters of 2020.
5. However, North Carolina’s aggregate production (GDP) will not reach pre-virus levels until 2023. Further, the state’s jobless rate will still be more than 1 percentage point higher in 2023 than in late 2019.
6. The state should be prepared for significant training and re-training of workers as a result of significant virus-related business bankruptcies and a re-mixing of occupations in the post-virus economy.
7. Rural and small-town regions of North Carolina could benefit from new work/living standards based on remote working, cyber delivery of products and services, and an increased desire for lower-density living. However, high-speed and reliable internet service in rural areas will be essential for this lifestyle.
