According to one economist, there is a 60% chance of a recession in 2023, but North Carolina and Greenville’s labor markets will likely keep them in a good position to weather the storm.
During the Greenville-Pitt County Chamber of Commerce’s Economic Forecast Luncheon on Monday, Philip Neuhart, director of marketing and economic research for First Citizen’s Bank, presented on global, national, state, and local economic trends to business owners and public sector leaders at the Holiday Inn, 203 S.E. Greenville Blvd.
According to Trent McGee, president and CEO of the chamber, the turnout was one of the highest in years. This could be due in part to the turbulent nature of 2022, which Neuhart noted saw a war break out in Ukraine and seven federal interest rate hikes since March, with an eighth expected this week. Neuhart anticipates two more rate hikes in 2023.
According to the Associated Press, the Federal Reserve raised its key interest rate by a quarter point on Wednesday, the eighth increase since March. In addition, the Fed signaled that, while inflation is easing, it is still high enough to warrant further rate hikes.
Despite being smaller than the previous hike — and even larger rate increases before that the Fed’s latest move will likely raise the costs of many consumer and business loans, as well as the risk of a recession, according to the AP.
With the exception of China, the developed world’s economic growth has slowed, according to Neuhart. He attributes China’s growth to its reopening. Slowing growth contributes to the possibility of a recession, he said, but he added that 60 percent is not “a slam dunk” in terms of certainty.
Inflation continues to be a factor, both in terms of rising goods prices and rising wages. Neuhart stated that the rate of inflation is beginning to smooth out, with rates at 6.5 percent in December after peaking at 9.1 percent in June, as the country finds itself in a position of no money growth following a year of exuberant spending. The Federal Reserve’s target interest rate is 2%.
“We had unbelievably easy money,” Neuhart said. “If you think about some of the behaviors of 2020, 2021, meme stocks, crypto, tech space, that’s what happens when money’s easy.”
According to an index Neuhart uses, supply chains have also loosened, citing factors such as delivery times and backlog. He stated that the system has not cleared out completely, but it is better than it was during the pandemic, which helps with inflation.
Short-term interest rates being higher than long-term interest rates is a strong indicator of a recession, according to Neuhart. A 10-year projection predicts that both rates will fall, owing to an economic downturn caused by what he expects to be a shallow recession.
People who can travel are an example of those who will be less affected by an economic downturn, according to Neuhart, but those who live paycheck to paycheck will bear the brunt.
North Carolina’s continued population growth, as well as investment numbers and labor market trends, place the state in a strong position, according to Neuhart. According to him, the state’s population is growing faster than the national average.
Greenville’s growth rate is slightly lower, but the city has a particularly strong labor market in comparison to other parts of the region, such as Neuhart’s hometown of Rocky Mount, though he cautioned that regional data can be “bumpy” and difficult to collect.
“Not that long ago, Greenville and Rocky Mount had pretty similar per capita personal income, but Greenville has really widened the spread over the past 15 years,” Neuhart said.
According to Neuhart, the city also has two sectors, health care and education, that are typically strong in the face of an economic downturn. According to 2022 data, East Carolina University and ECU Health Medical Center employed 6,120 and 6,400 workers, respectively.
“People still get sick during a recession,” Neuhart said.
Greenville also participated in the “incredible” rise in housing prices over the past two-three years with a downturn recently, Neuhart said.
“That’s because no local economy is immune to what is happening nationally,” Neuhart said. “Mortgage rates are higher here, too, but what we are seeing nationally is that rates are coming down, but so are home prices, at least home price appreciation.
Neuhart said inventories nationally in December were still below the pre-pandemic levels.
Source : reflector