Economist predicts economic growth at Chapel Hill-Carrboro chamber briefing
There should be several years of economic growth ahead, especially in the Triangle, an economist predicted at an economic outlook briefing hosted by the Chapel Hill-Carrboro Chamber of Commerce Wednesday.
Michael Walden, a professor of agricultural and resource economics at N.C. State University, said he expects as many as 90,000 net new jobs to be added in the state this year, with almost 40 percent of that in the Triangle. He expects the state’s unemployment rate to fall to 8.2 percent this year. The state’s seasonally adjusted unemployment rate was 9.2 percent in December.
“I think there is a strong case to be made that we’re going to be seeing a strong acceleration in the North Carolina economy,” said Walden, who was the keynote speaker at the briefing at Governors Club.
Walden described factors that led to the recession, which he said started in the fourth quarter of 2007 and came to a close in 2009. The loss in the nation’s gross domestic product, which is the sum of all goods and services produced in the U.S., has been recovered, but he said all of the jobs lost in the nation have not.
From a peak in January 2008 to a low in February 2010, he said there were 9 million non-farm, payroll jobs lost. Not all of that has been recovered, he said, but the trend is “at least going in the right direction.” It’s not atypical that in the early stages of recovery, output rises faster than labor, he said, as productivity during a downturn rises as business managers cut costs and rely on fewer workers.
Walden said the housing market, which he said was tied to the start of the recession, is on the mend. Following increases in national housing prices from 1997 to 2006, he said there was a massive retreat in prices.
That pullback, he said, had a big impact. The sector makes up a large part of the overall economy and in addition, for many households, the biggest source of wealth is the equity they have in their homes.
“You had an enormous amount of the economy that hit the bricks, that was in freefall,” Walden said.
Walden said the market is now on the mend, but he doesn’t expect to see it return to 2006 levels of production, prices and sales. In addition to the housing market improvements, he also said personal spending is returning.
For North Carolina, Walden said that because of the size of the manufacturing sector in the state, the state tends to have deeper recessions, but also stronger recoveries. In the next five years, he said he expects 400,000 net new jobs to be added in the state.
The Triangle is going to go to “new heights,” he said, adding that the area including Raleigh, Cary, Durham and Chapel Hill has been adding jobs above national and state trends.
“I think this area is really, really, especially this year, is really poised to take off,” he said.
Walden also added that the talk from some state legislators about tax reform is not new. Since 2000, he said there have been various commissions and study groups formed to look at the state’s tax structure.
Walden said the kind of “revolutionary changes” talked about by some legislators – including getting rid of corporate and personal income taxes paired with new sales taxes – would be “equivalent to an 800-pound dead lift.”
He said that would be an enormous task, and many different groups have stakes in the existing tax structure. He said that if he were to make any recommendation, it would be to focus attention on shaving the top corporate tax rate.
“Unfortunately the empirical work on the relationship between a state’s tax structure and economic growth – there is not a lot of consistency,” he said. “The most consistent relationship I can find, and still this is not a relationship that’s been found in a majority of studies, there does appear to be a negative relationship between a state’s either level of, or relative size of, corporate income tax and economic growth.”