The state will experience another year of economic growth in 2018, with real GDP expanding by 2.8 percent, the headline jobless rate falling to 3.6 percent, and over 70,000 payroll jobs being created, according to Michael Walden, North Carolina State University economist.

The Asheville, Durham, and Raleigh metropolitan regions will have the lowest unemployment rates at the end of 2018, at or near 3 percent.

In his North Carolina Economic Outlook for the first quarter of 218, Walden made the following observations:

  • North Carolina’s economic growth rate has accelerated since 2013 and has beaten the broadest national growth rate for three straight years, although falling short of the Southeast region growth rate in 2017,
  • The Information, Professional and Business Services, and Leisure and Food Services sectors have been the fastest growing since 2010.
  • Non-durable Manufacturing – including tobacco products, textiles, and apparel – continues to contract and is a major factor in the on-going urban/rural divide in the state.
  • Residential construction expanded in 2017 and has grown on trend since 2011; however, economic activity levels in the sector are well below pre-recessionary levels.
  • North Carolina’s payroll job growth rates have exceeded national payroll job growth rates in seven of the past eight years; however job growth decelerated in 2017.
  • Each of the major measures of unemployment in North Carolina have been halved since 2010.
  • The “hollowing-out” of North Carolina’s labor market continued in 2017, although at a slightly less pronounced rate than in the previous seven years.
  • The five largest metropolitan regions in the state accounted for 83 percent of the growth in payroll jobs in 2017.

Tax reduction an avidly debated issue

Walden points out that the impact of significant tax rate reductions in the state that began in 2014 are an “avidly debated issue.”

“For the five years from 2010 to 2014,” Walden writes, “North Carolina’s real GDP growth rate fell short of the national rate in four of the years. But in the three years from 2015 to 2017, North Carolina’s growth rate consistently exceeded the national rate. There is some research suggesting that reductions in a state’s income tax rate – especially the corporate tax rate– can stimulate economic growth.”

However, he adds, “an alternative explanation is that consumers’ slowrecovery from the Great Recession – especially in their spending on manufactured durable goods- delayed the rebound in North Carolina’s manufacturing-heavy economy.