Economist forecasts slow economic growth trend to continue

Is the economic forecast partly sunny or partly cloudy? Both, said UNC Charlotte economist John Connaughton. On the bright side, North Carolina’s unemployment rate is now lower than the U.S. rate, and the economy continues to grow. However, the economic expansion is slowing down, Connaughton stated during the Babson Capital Management/UNC Charlotte Economic Forecast.

“In 2016, our economy is experiencing some mixed signals. On one hand, the Federal Reserve is starting to indicate another round of interest rate increases, which would have a slowing effect on an already sluggish economy. However, the most recent Consumer Confidence Index has increased over the past few months. The index stands at 101.1 as of August, which is only the third month during this 85-month expansion that the index rose above 100,” said Connaughton, during his quarterly economic forecast Sept. 7, he highlighted three areas in particular:

North Carolina unemployment rate: July 2016 is the second month since April 2006 that the North Carolina unemployment rate has been below the U.S. rate, Connaughton said. The United States started the year with an unemployment rate of 4.9 percent, which has remained fairly consistent through July. The North Carolina seasonally adjusted unemployment rates began 2016 at 5.6 percent. By December, the North Carolina unemployment rate is forecast to be 4.3 percent, while the United States rate is expected to fall to 5 percent. Both the U.S. and North Carolina unemployment rates are expected to continue a slight downward trend throughout 2017.

“After almost 10 years, the North Carolina unemployment rate is finally lower than the national rate. This is good news for the N.C. economy, and we will keep watching to see if the trend continues,” Connaughton said.

Slow growth through 2016: After seven years of economic expansion, the pace of growth is slowing down along with job growth, Connaughton said. One indicator to watch: In August, the Congressional Budget Office reduced its forecast of GDP growth, while increasing the budget deficit forecast.

“So far in 2016, the North Carolina economy seems to be experiencing slower growth than has occurred during the last 18 months. What has been happening in North Carolina during the first half of 2016 is not dissimilar to what happened at the national level. It seems that after seven years of economic expansion, a slowdown is beginning. It’s important to remember that the U.S. economy has been expanding for 85 months, which represents the fourth longest economic expansion on record out of the 33 expansions that have occurred since 1854,” Connaughton said.

The outlook for 2017: In 2017, the North Carolina economy is expected to increase by an inflation-adjusted rate of 2 percent over the 2016 level.

Connaughton said, “Positive economic growth in 2017 would represent the eighth consecutive year of economic growth for the North Carolina economy. While this is an impressive trend of growth, the size of that economic growth has been somewhat lacking. In fact, for most of the 21st century, both the U.S. and North Carolina economies have been unable to achieve an average 3 percent real GDP growth rate that had been fairly consistent since World War II. The 2.5 percent real growth rate experienced during the 2014-15 period was stronger than the recent past, but the slower growth expected in 2016 could signal a return to the slow growth pattern.”

Connaughton presented his quarterly forecast to members of the Charlotte business community and the media at a luncheon held at UNC Charlotte Center City. The forecast is funded by Babson Capital Management LLC.