To the thoughtful observer of the North Carolina economy, it was apparent that the pace of progress over the past year was disappointing. The state’s economy struggled to add jobs, with nonfarm employment rising a disappointing 0.5 percent in 2011, while the unemployment rate edged up 0.1 percent. Now that 2011 is in the rear view mirror, North Carolina’s economy is finally beginning to show some signs of strengthening. Recent economic development announcements in the Charlotte and Raleigh metropolitan areas, continued net in-migration into the state and further diversification of the economy should translate into a much better year ahead for North Carolina. However, the greater job and economic growth will not come easily. Structural issues remain in the labor force as the skills of North Carolina’s workers still do not measure up to the standards demanded by many firms in today’s economy. Urban areas continue to expand more rapidly and experience faster population growth than the state’s more rural counties. While the year ahead may be better than the last, the improvement will not be evenly felt around the state.Current Growth Conditions: Picking Up
Current economic conditions show that growth at the state level has picked up. The North Carolina coincident index provides a monthly snapshot of current economic conditions for the state (Figure 1). The index suggests that current pace of growth is now returning to levels observed before the recession. Economic growth appears significantly stronger to start the year, but questions remain about the sustainability of the current pace of growth. North Carolina’s economy is strongly correlated with swings in U.S. macroeconomic growth (Figure 2). Given the highly cyclical nature of growth, it is likely that the state will face a somewhat slower pace of growth midyear as a slowdown in domestic inventory building will result in slower manufacturing output.