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WNC Business

May 2024 NC Economy Watch

May 09, 2024 05:28PM ● By WNC Business

Welcome to the May 2024 edition of NC Economy Watch: an update on what’s happening in the North Carolina economy and what it means for you, brought to you by the Labor & Economic Analysis Division of the NC Department of Commerce.

The last edition of NC Economy Watch covered recent developments on the supply side of the economy. In this edition, we examine the recent softening in consumer spending and job availability. These trends have helped bring the supply- and demand-sides of the economy into a healthier balance, contributing to slower price inflation and helping keep the economy out of a recession.

The Demand-Side Cooldown

The first two years of the COVID-19 pandemic brought one whiplash-inducing economic turning point after another: a sudden downturn, followed by a swift recovery and, before long, an overheated economy with widespread shortages and rapid price growth. In contrast, the next two years saw a gradual cooldown as the Federal Reserve raised interest rates, leading to a moderation in economic growth and an eventual slowing in price increases.

Consumer demand has moderated considerably from the early days of the pandemic, when many households were flush with cash and eager to spend. Nationwide, over-the-year growth in real consumer spending slowed from 8% in the summer of 2021 to 3% in March 2024 [Figure 1]. 

While there are not directly comparable figures for overall consumer spending in North Carolina, taxable sales data from the state Department of Revenue, which primarily cover retail goods, show spending growth in our state slowing from 13% to slightly above 0% on an inflation-adjusted basis.

Figure 1

As reported in February, employer demand for labor has also moderated, with the number of job openings in North Carolina declining to near its pre-pandemic level. A lower number of job openings means that many employers are having an easier time filling open positions, since there’s now less competition for workers. On the other hand, a lower number of job openings also means fewer employment opportunities for jobseekers, but it’s important to note that job availability remains relatively high in historical terms. The Conference Board’s Consumer Confidence Survey found that 40% of Americans reported “jobs are plentiful” in April 2024 — less than the 57% recorded at the height of the pandemic economy, but similar to the rates seen in 2018 and 2019, which itself represented some of the most favorable labor market conditions in decades [Figure 2].

Figure 2

 A well-functioning economy requires a delicate balancing act between supply and demand. The COVID-19 pandemic knocked our economy out of balance, leading to decades-high rates of price inflation and heightened recession risks. More recently, softening demand for workers and consumer goods, along with growth in the workforce and loosening supply chain conditions, have helped restore balance to our economy, leading to slower inflation, steady economic growth, and renewed hopes that we can avoid a recession and achieve a “soft landing”.

That said, we’re not out of the woods yet. Prices are still rising at an unsustainably fast pace, and consumers and businesses continue to struggle under the weight of higher interest rates. But we’ve come a long way from the early years of the pandemic, and while the months ahead might see further challenges, the past year has brought us closer to an economy that’s not too hot and not too cold but, as Goldilocks would say, “just right”.

Source: NC Department of Commerce
Author: Andrew Berger-Gross