North Carolina’s economy is poised for robust growth in 2016, thanks in part to strong hiring, housing gains and consumer savings from low gas prices, UNC Charlotte economist John Connaughton said Tuesday.
As part of his latest quarterly economic forecast, Connaughton also said he “guarantees” that the Federal Reserve will raise short-term interest rates when the central bank wraps up its policy meeting in Washington next week.
Led by productivity gains in the service sector, the North Carolina economy will grow by an annual rate of 2.5 percent next year, Connaughton said. Employers statewide will add 111,200 new jobs, and the jobless rate will fall to around 5.2 percent by the end of 2016, he predicted.
“So, 2016 is going to be a really solid year. There’s nothing on the horizon that suggests that forecast is not achievable,” Connaughton said.
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Economic growth was slow in the first part of 2015 for North Carolina, but by year’s end, Connaughton said, the state economy will have grown by an annual rate of 2.9 percent, a “pretty good rate for us to have.”
Also by year’s end, employers statewide will have added 86,900 net new jobs. Connaughton said. Last year, he had forecast 75,400 for 2015.
The same factors facilitating growth in 2015 will come into play next year, Connaughton said, including low gas prices. There is “no end in sight” for the country’s current low energy costs, which have resulted in a 4-5 percent increase in take home pay this year compared with last, he added.
The state’s unemployment rate was 5.7 percent in October, the most recent month for which data are available and the same level it was at this time last year. Connaughton said the rate might well have fallen, had it not been for unemployed workers moving into North Carolina and starting to look for work.
“The good story gets out that the economy is doing well, and North Carolina is a place that you can get a job and you’ve got some job security associated with it,” he said.
It’s important the area continues to see a 4 percent to 5 percent increase in housing prices, Connaughton said, because it “changes the psychology in the housing market,” giving rise to construction employment and output. 2015 was “breakout year” for construction, Connaughton said, and 2016 is expected to see growth, too.
Connaughton said interest rate increases next year “will be minimal” and won’t affect consumers being able to buy a car or house. The rate hike, he added, will weigh more on business investment and corporations trying to export.