An aging labor force and a deceleration in the housing market will likely slow the economy in North Carolina and elsewhere this year, UNC Charlotte economist John Connaughton said Tuesday.
In his latest quarterly forecast for the state’s economy, Connaughton said signs point to a slight economic slowdown in North Carolina.
Connaughton said North Carolina’s gross state product – a measure of the production of goods and services – is expected to increase by an inflation-adjusted rate of 1.9 percent this year. That’s lower than his previous forecast of 3 percent growth.
He pointed to a slowdown in home sales and prices in the past two months as a worrisome indicator for the state’s economy. Recent weakness in the U.S. housing market has also become a concern for economists and officials with the Federal Reserve.
Older workers leaving the workforce are also expected to be a drag on the economy, Connaughton said. That’s because retired baby boomers are expected to slash their spending, reducing overall consumption, he said.
Another side effect of workers retiring, he said: The absolute size of the labor force shrinks, reducing potential gross domestic product and lowering economic growth.
All 15 of the state’s economic sectors are expected to report increases in output this year, he said, unchanged from his previous forecast.
The agriculture sector is forecast to see the strongest growth at 10.9 percent, followed by mining at 9.4 percent. Coming in third are the hospitality and leisure services sector and the transportation, warehousing and utilities sector – both expected to have 3.3 percent growth.
Connaughton expects North Carolina’s unemployment rate to keep falling throughout 2014 to below 6 percent. By December, he expects the rate to be around 5.8 percent.
He is forecasting a net gain of 59,700 net jobs in the state this year. That’s down from his previous forecast of 60,200 net jobs.
The state is expected to add 101,500 jobs in 2015, and the state’s unemployment rate is forecast to be just above 5 percent by the end of that year, he said.