Analysis Brief – April 7, 2014 (NC Economic Outlook Summary)

Don’t forget about our upcoming Summer Conference, July 16th-18th at Grandover Resort in Greensboro (click here for more info).

NC Economic Outlook Summary

Wells Fargo released a seasonal outlook on North Carolina’s economy late last Thursday (click here). The report covers several metrics and provides comprehensive information on statewide trends. Here are the highlights:

  • Statewide employment conditions are improving, with net growth in jobs across all industry groups within the state and significant reductions in the unemployment since last summer. Professional and business services provide the largest share of job growth (4.5%).
  • About 70% of job growth the past 4 years took place in the Raleigh, Durham-Chapel Hill and Charlotte metro areas (MSAs).
  • Statewide manufacturing job growth lags other sectors, creating issues of disparity with manufacturing-intensive areas of the State.
  • Commercial real estate activity improving in areas of strong job growth.
  • Apartment construction in Charlotte is matching demand, while Raleigh’s increased construction rates (compared to demand) provide a slight increase in vacancies.
  • Single-family housing construction permits continue showing some improvement, but they still fall significantly below pre-recession levels.
  • Housing market prices, as measured in North Carolina by the CoreLogic HPI, show continued, modest improvement, with the metric appearing close to pre-recession levels. Nationally, the rate of recent growth is faster, but the index remains significantly below pre-recession levels.

The report also included these highlights regarding North Carolina’s key metro areas:

  • Raleigh experienced 4% year-to-year growth in total nonfarm employment, driven by nearly 10% growth in business & professional services.
  • Employment growth remains slow in Greensboro and Winston-Salem, reflecting continued challenges in the Triad area.
  • Asheville and Charlotte experienced strong growth in line with statewide trends (~3% to 4%), with Asheville’s housing market also recovering at a strong rate.

Following requests from several jurisdictions, we asked for and received chart sets for each North Carolina metro (see links below for PDFs):

North Carolina (Statewide)

Asheville

Burlington

Charlotte

Durham-Chapel Hill

Fayeteville

Greensboro

Greenville

Hickory

Jacksonville

Raleigh

Rocky Mount

Wilmington

Winston-Salem

Connaughton Updates Sector Growth, Job Forecasts

Last month, UNC-Charlotte’s John Connaughton produced his spring 2014 economic forecast, reporting 2013 gross state product (GSP) growth of 2.5% and 2014 GSP growth of 3%. Agriculture experienced the most significant year-to-year growth in GSP for 2013 (+22.7%), following by entertainment & hospitality (+4.9%), transporting, warehousing & utilities (+4.3%) and business & professional services (+4.1%). Manufacturing was relatively unchanged (+0.1%) and reflected about 20% of the total state economy (second to finance, insurance and real estate). Agriculture is expected to grow another 11% in 2014, with manufacturing projecting 2.7% growth, 2.2% for entertainment & hospitality, and 1.8% for business & professional services. Connaughton also anticipates net statewide job growth of 60,200 jobs  (1.5%) in 2014, slightly less than 2013 growth (64,500, up 1.6%). Connaughton found the information sector with the highest rate of growth in 2013 (+7.6%), but he does not anticipate sector growth continuing at the same pace for 2014 (+0.7%), surpassed by transportation/warehousing/utilities (+3.3%), construction (+3.7%), and entertainment/hospitality and business/professional services (+1.7%).

Walden’s LEI Outlook Not Promising

For March, the NCSU Index of Leading Economic Indicators, presented by Dr. Michael Walden, experienced another decline, dropping 1.6% to its lowest level since last August. The overall trend remains positive, and 6% than last March, and is potentially impacted in recent months due to traditional winter slow down and worse-than-usual weather. Permit activity, hours worked and employment earnings all showed declines, as did the number of jobless claims. Click here to review the March report.

PNC Identifies Improved Business Owner Outlook

PNC Bank’s latest survey of NC-based small-and middle-market business owners (click here) provided some room for optimism in coming months. 48% of respondents indicated anticipated growth in sales over the next six months, up significantly from 34% last October. Expectations for increased profit grew slightly from 32% to 37%, while hiring growth expectations grew a little, from 8% to 12%. Increased anticipation for growth was also met with slight reduction in respondents expecting contraction in sales (from 9% to 7%) and profits (from 17% to 16%). An unchanged 8% still anticipate decreasing staff, while 76% anticipated remaining the same. With respect to economic outlook, strong optimism declined with respect to both the national (from 11% to 8%) and in-state economies (from 15% to 10%), with prospects for North Carolina still remaining stronger than nationally. Moderate optimism on the state optimism grew from 41% to 54%, helping reduce pessimism from 42% to 36%. At the same, the survey also showed declines or continued lows in the rates of businesses anticipating upcoming capital investment (53%), pay raises (19%), taking out new loans (14%), and housing price increases (39%). Substantial majority of respondents (70%) do not anticipate increasing prices during the next six months.

Gas Prices, Now and Upcoming

Fuel040714

Crude oil prices have subsided some from recent spikes facilitated by unrest in Ukraine, now within a couple percentage points of last year’s mark. As for fuel, prices for unleaded are picking up with the arrival of the spring, though are still a few cents below their levels 12 months ago. The Energy Information Administration (EIA) will release its next short term outlook this Tuesday. Their March report anticipates stable prices for the coming year, with potential for a decline in annual average price for 2015. Locally, Diesel prices also appear to be showing some reduction, at least not growing in relation to recent increases with unleaded.

 

Analysis Roundup for August 29, 2012

NCLGBA will post a collection of topics discussed in economic reports of note from financial institutions and government agencies on a regular (not necessarily weekly) basis.  Here is what we’ve found recently:

Bureau of Economic Analysis
US GDP Growth Slows Down in 2nd Quarter to 1.7%

Today’s report on GDP performance for the 2nd Quarter of 2012, a benchmark for general direction of the overall national economy, reflected concerns expressed by economists of the past several months of a slowing condition. US Real GDP (indexed for inflation) grew at an annual rate of 1.7% for the last quarter. This is less than the 1.9% growth achieved in the 1st Quarter.

Economists predicted GDP growth would reside between 1.5% and 2%. This snipped from today’s BEA Press Release provides an explanation of the factors contributing to recent performance:

The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed  investment, and residential fixed investment that were partly offset by negative contributions from private inventory investment and from state and local government spending. Imports, which are a subtraction in the calculation of GDP,
increased.

AAA Carolinas/Gas Buddy
Late Summer Gas Price Spike Exacerbated by Hurricane Issac

Late spring and early summer saw a significant drop in crude oil, gasoline and diesel prices from winter and early spring highs, with prices falling about 30% between March and early July.

Unfortunately, fuel-oriented energy prices rebounded from mid-July through August, with gasoline prices increasing at a rate faster than crude and diesel because of the impact of high corn prices due to the use of Ethanol.

Now, anticipated supply disruptions created by the arrival of Hurricane Issac along the gulf coast of Louisiana and Texas is forcing additional price spikes. Today’s daily price report from AAA indicates that the national average increased 1.3% for regular unleaded compared to yesterday, with North Carolina metropolitan areas now at or close to the national average of $3.80/Gallon.

According to this comparative chart from Gas Buddy, North Carolina retail prices for regular unleaded have steadily returned upward to the national average in the second half of the summer.

While the neighboring state of South Carolina has seen price increases as well, they remain significantly below the national average. Over the long run, supply problems can force more localities to see prices move toward the national average, even with their traditional location “discount” and/or lower tax rates.

Source: AAA, 8/29/2012

Bureau of Labor Statistics
NC Metro Nonfarm Employment Falls, Overall Employment Rises for July

Toward the end of each month (or a week or so into the start of the next month), the Bureau of Labor Statistics (along with the North Carolina Department of Commerce Division of Employment Security, a.k.a. ESC) publish employment statistics for metropolitan areas (MSAs). For July, each of North Carolina’s 14 Metropolitan Areas saw an expected decline in nonfarm payroll, and indication of softening conditions this summer with some impact resulting from public sector contraction.

Overall, the State lost 75,200 nonfarm payroll positions in July, though overall employment for the month did increase by 12,900 compared to June as a result of seasonal hires in the agriculture sector. Nine MSAs in North Carolina also saw net job growth in July, with the biggest spike witnessed in the Raleigh-Cary MSA (+8,300).

All but 2 metropolitan areas in North Carolina (Wilmington and Winston-Salem) have seen positive growth in nonfarm payrolls compared to a year ago.

MSA unemployment rates for July range from a low of 7.7% (Asheville) and 7.9% (Raleigh) to a high of 13.1% (Rocky Mount). Eight MSAs had rates higher than the statewide rate of 9.8%.

Richmond Federal Reserve Bank
Nearly 17K Private Sector Jobs Gained in NC in June

The Richmond Fed produces a narrative “Regional Update” of employment conditions of each within their District on a monthly basis, providing additional perspective on monthly employment statistics distributed the third Friday of each month by the Bureau of Labor Statistics. Here is the text of their latest update from today on North Carolina’s job picture:

Labor market indicators for North Carolina were generally mixed in July, but the underlying employment data were encouraging. Private sector payrolls swelled even as the state’s unemployment rate rose. However, the results from our Carolinas Survey of Business Activity for July were disappointing, as more respondents reported that business activity had slowed and labor demand had softened.

North Carolina’s total payroll employment (seasonally adjusted) increased by 1,800 in July — its second monthly increase in a row. However, the relatively small gain in total payrolls belies a much bigger improvement in the private sector. Private sector firms added 16,600 net new jobs to payrolls and the gains were very widespread. Leisure and hospitality employment jumped by 5,900 in July, which reversed all of the losses that the industry had experienced in the first half of the year. In fact, employment in leisure and hospitality stood at its highest level since March 2008. Manufacturing also showed an impressive increase in July, rising by 3,400 jobs. Private education and health services jobs bounced back last month from a rare decline in June. The professional and business services and the other services categories also increased notably during July. The remaining major private sector industries saw more modest gains.

The big drag on North Carolina’s payroll employment during July was the public sector, especially local governments. After trending up between July 2011 and June 2012, local government employment dropped by 14,500 last month, accounting for all of the public sector job losses. State and federal government employment was largely unchanged. Over the year, private sector payrolls were up 42,500 in North Carolina, while government employment was off by 6,600 jobs.

Looking across North Carolina, the data varied widely. Eight of the state’s 14 metropolitan statistical areas (MSAs) showed month-to-month increases in employment, with the largest occurring in the Triangle area (the combination of the Raleigh and Durham MSAs). The Greensboro-High Point MSA was not far behind, with an increase in employment of 2,700 in July. Asheville, Burlington, Greenville, Jacksonville, and Rocky Mount experienced more modest increases. By contrast, the Charlotte MSA lost about 3,000 jobs during July and total employment in the area is off by 5,400 since April. The Winston-Salem MSA also experienced substantial jobs losses in July.

North Carolina’s unemployment rate, which is based on a different survey than the payroll employment estimates, increased for the first time in a year. After coming in at 9.4 percent for three straight months, the state’s seasonally adjusted unemployment rate increased 0.2 percentage point in July to 9.6 percent. The ranks of unemployed workers swelled by a little more than 5,300 workers, even as labor force participation in the Tar Heel state continued to move lower — a trend which started in March. Our Carolinas business activity index dropped into negative territory in July for the first time since last fall. Moreover, the deterioration in current general business conditions was accompanied by continued softness in current labor demand indicators.

PNC
Economic Reports Available for Charlotte & Raleigh Metro Areas

PNC, like other national banks, has an economics division that evaluates and provides research and analysis on national and global economic conditions. PNC also prepares quarterly economic updates on a regional basis for the markets they serve across the United States. A consolidated regional report includes link to metro area reports, including new ones they’ve added to cover their expanded markets in Charlotte and Raleigh as a result of their recent acquisition of RBC Bank.

Click Here for their most recent Regional Outlook

Click Here for their most recent Charlotte Market Outlook

Click Here for their most recent Raleigh Market Outlook

Click Here for their most recent National Economic Outlook Report (Monthly)

Replay information on their economic outlook conference call held August 23rd will be made available as soon as it is posted.

PNC hosts 4th Quarter Economic Outlook Webinar August 23rd

PNC Financial Services, which acquired RBC Bank earlier this year, will host an economic outlook webinar on Thursday, August 23rd, 2-3 pm Eastern.

Click Here for Webinar Information & Registration Access

 

This event will provide perspective on the challenges the national and global economies face over the remainder of 2012

With a presidential election looming and the economy still soft, it can be hard to predict what the fourth quarter will bring. PNC’s economics team provides a baseline forecast for the remainder of the year and addresses issues that could have a major impact, including:

  • Where is the EuroZone headed and how will it affect the U.S. economy?
  • Will Congress back off from the fiscal cliff?
  • What does housing’s modest resurgence mean for the larger economy?
  • Can the economy expect a boost from lower gas prices and lower inflation?

Given recent uncertainty about the overall condition of the economy, the remainder of 2012 possesses the potential for volatility, and could dramatically influence the fiscal condition of state and local governments. This is your opportunity to learn more about the variables in play in order to better prepare staff and leadership, as well as anticipate the need for responsive action.

The webinar will be led by two of PNC’s experienced economists.

Stuart G. Hoffman is senior vice president and chief economist for The PNC Financial Services Group and serves as the principal spokesperson on all economic issues for PNC. Hoffman was recognized as the second most accurate economic and interest rate forecaster for 2006 by USA Today and as the most accurate forecaster for 2004 byBusinessWeek. In addition, he was named one of the top forecasters in the Wall Street Journal economic survey covering the 1988 to 2009 period.

Hoffman joined PNC in 1980 after a six-year tenure with the Federal Reserve Bank of Atlanta. He became vice president and senior economist for PNC in 1987 and was elected senior vice president and chief economist in 1991.

William (Bill) Adams is assistant vice president and senior international economist for The PNC Financial Services Group. His responsibilities include forecasting economic conditions and exchange rates, covering emerging Asia, the European Union, Canada and Latin America. Adams serves as the principal spokesperson on global economic issues for PNC, and frequently presents to PNC clients on the international economic outlook.

Adams joined PNC in July 2011 after serving as resident economist for The Conference Board China Center from 2009 to 2011