2024 Economic Forecast Forum Presentation

ECONOMIC OUTLOOK 2024
A PRESENTATION TO THE CHAMBER for a GREATER
CHAPEL HILL-CARRBORO
Dr. Michael L. Walden, Reynolds Distinguished Professor Emeritus
North Carolina State University

REVIEW OF THE COVID RECESSION
RESULTED FROM NATIONWIDE SHUT-DOWN POLICIES
14% UNEMPLOYMENT
ECONOMY (GDP) DROPPED 33% ON ANNUALIZED BASIS
GOOD NEWS – SHORT LIVED – REBOUND BEGAN IN MAY 2020

GOOD NEWS – ECONOMY HAS RECOVERED
MOST MAJOR MEASURES ARE NEAR OR BEYOND PRE-COVID LEVELS
* TOTAL JOBS ABOVE PRE-PANDEMIC LEVEL
* UNEMPLOYMENT RATE UNDER 4%
* LABOR FORCE PARTICIPATION RATE INCREASING
* ECONOMY HAS BEEN GROWING

QUARTERLY REAL GDP GROWTH RATE, 2018-23

LABOR FORCE PARTICIPATION RATE, 2003-23

HOWEVER, AN IMPORTANT LAGGING INDICATOR
REPORTS USE “FALLING INFLATION” INSTEAD
OF ”FALLING INFLATION RATE”
PRICES HAVE RISEN FASTER THAN EARNINGS
UNTIL RECENTLY
920
930
940
950
960
970
980
990
1000
1010
1020
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Mar-21
May-21
Jul-21
Sep-21
Nov-21
Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Real Weekly Earnings

GOOD NEWS: INFLATION HAS MODERATED
2.4% IN 2019, 7% IN 2022, NOW 3% TO 4% (all year-over-year)
BUT NOTE: MEANS AVERAGE RATE OF PRICE INCREASES HAVE
SLOWED; NOT THAT AVERAGE PRICES ARE FALLING

HOW DOES LOCAL ECONOMY COMPARE
US NC DURHAM-CHAPEL HILL
JOB GROWTH, 4/20-12/23 21% 20% 19%
JOBLESS RATE 4-20/1-24 14.8%/3.7% 14.2%/3.5% 10.4%/2.8%
REAL WEEKLY EARNINGS
1/21 – 12/23 -4.3% -3.0% 10.7%

JOB GROWTH IS ALSO SLOWING
 AVERAGE MONTHLY NET JOB GAIN
 2ND HALF, 2020: 1,346,000
 2021: 667,000
 2022: 369,000
 2023 , JAN-DEC: 201,750

WHAT’S THE WORRY?
THAT FED’S EFFORTS WILL CAUSE A RECESSION
RECESSION IS A “BROAD BASED DECLINE IN ECONOMIC ACTIVITY
FOR A SUSTAINED PERIOD OF TIME”
RECESSIONS ARE COMMON WHEN FED RAISES INTEREST RATES
BUT RECESSION DID NOT HAPPEN IN 2023

FED IS ALSO REDUCING THE MONEY SUPPLY
(M2 MONEY SUPPLY ADJUSTED FOR INFLATION)

2024 WILL BE A YEAR OF TWO ECONOMIES
FIRST HALF
FED KEEPS INTEREST RATES HIGH
ECONOMY SLOWS MORE
GROWTH MAY BE NEGATIVE
JOBLESS RATE RISES TO 5%
SECOND HALF
FED REDUCES INTEREST RATES
GROWTH REVIVES
GROWTH RATE RETURNS TO 2%
JOBLESS RATE DROPS TO 3.5%

SOFT LANDINGS HAVE BEEN RARE
THERE HAVE BEEN
12 RECESSIONS
SINCE WORLD WAR II
THERE HAS BEEN ONLY
1 SOFT LANDING
SINCE WORLD WAR II

CONSUMER SPENDING CARRIES THE ECONOMY
SUPPORTED BY COVID STIMULUS
PROGRAMS AND
“PENT-UP DEMAND” AFTER THE
PANDEMIC;
CONSUMER SPENDING HAS BEEN
SURPRISINGLY STRONG

BUT NOW COVID SAVINGS ARE GONE,
AND BOTH CREDIT CARD DEBT AND INTEREST RATES ARE UP

HOW WILL NORTH CAROLINA AND THE TRIANGLE DO?
LOOK AT PREVIOUS RECESSIONS
% JOB LOSS DURING RECESSION
2008-2010 RECESSION 2020 RECESSION
US -6.2% -14.2%
NC -8.1% -12.2%
RALEIGH-CARY METRO -6.2% -12.2%
DURHAM-CH METRO -5.2% -10.3%

WHAT SECTORS WILL BE MOST IMPACTED
FROM A SLOWDOWN?
COMMERICAL REAL ESTATE
FINANCIAL SERVICES
MANUFCTURING
RESIDENTIAL REAL ESTATE

BIG ISSUE #2: SOCIAL SECURITY
ESTIMATED THAT BY 2033 WILL ONLY BE ABLE TO PAY 75% OF
WHAT PROMISED
GETS WORSE AS TIME PROGRESSES
LOOK FOR A COMMISSION IN EARLY 2030’S TO ADDRESS THE
PROBLEM

NEW BOOK AVAILABLE NOW:
“THE 60 MINUTE INVESTMENT GUIDE”

A CASE FOR DURHAM/CHAPEL HILL METRO
BEING POISED FOR FURTHER GROWTH
LABOR FORCE
EDUCATION
TRANSPORTATION ACCESS
LOWER COST OF LIVING COMPARED TO
COMPARABLE METROS
EXCITEMENT !!

THE FEDERAL RESERVE IS KEY TO INFLATION
 MOVING THE PUNCH BOWL
 CONTROL OVER INTEREST RATES AND MONEY SUPPLY
 DURING COVID, PUSHED INTEREST RATES TO RECORD
LOWS AND MONEY TO RECORD HIGHS TO ENCOURAGE
SPENDING
 NOW, FED HAS PUSHED INTEREST RATES UP AND REDUCED
MONEY SUPPLY TO SLOW SPENDING AND TAKE PRESSURE
OFF PRICES

BIG ISSUE #1: NATIONAL DEBT
PUTS UPWARD PRESSURE ON INTEREST RATES
CROWDS OUT PRIVATE BORROWING
ONE APPROACH: DIVIDE FEDERAL SPENDING INTO
A “CURRENT BUDGET” AND “CAPITAL BUDGET”

FEDERAL RESERVE IS TRYING TO ACHIEVE A “SOFT LANDING”
MEANING REDUCE INFLATION RATE WITHOUT A RECESSION

The 2024
Economic Forecast Forum
presented by

The Chamber’s
14th Annual Economic
Conditions Survey
February 2024

Diverse, Representative, and
Consistent Respondents
*234 Responses

How many people do you employ locally? (Full and part-time)
Feb 2024 Chamber Member Survey
5%
14%
22%
15%
16%
6%
13%
5%
0
1-3
4-10
11-25
26-50
51-100
101-500
500+

Respondents by Industry Type
32
35
33
31
21
19
16
13
12
9
7
6
6
5
5
5
4
2
1
1
Non-Profit/Social Services
Real Estate/Rental/Leasing
Professional Services (Finance, Insurance, Legal, etc.)
Food Service & Drinking Places
Construction/Manufacturing
Arts, Entertainment and Recrecation
Healthcare
Government/Public Sector
Education
Other Services (HVAC, Mechanic, Plumbing, etc.)
Retail
Utilities
Accommodations
Communications
Information Technology
Personal Services (Hair, Nail, Fitness, etc.)
Transportation
Agriculture
Research & Development
234 Total
Respondents

Where respondents’ businesses are located (checked all that apply)
33
193
49
33
33
17
16
Orange County
Durham County
Chatham County
Wake County
Other
Alamance County
160
53
39
30
26
24
16
12
8
Chapel Hill
Carrboro
Durham
Hillsborough
Raleigh
Other
Pittsboro
Mebane
Unincorporated

How are local
businesses doing?

Strengthening Economic
Expectations

Which best describes your organization's current financial
condition?
21%
56%
21%
1%
Strong/Growing/Optimistic
Steady/Stable/Confident
Tight/Slow/Concerned
Weak/Worried/Pessimistic

Negative Impacts Continue Decline
37
56% (2009)
2%
(2019)
32%
(2021)
10%
(2024)
0%
10%
20%
30%
40%
50%
60%
2008 2009 2012 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023 2024
Negatively
“How is the current state of the economy affecting your organization?” Percent
responding ‘negatively,’ with a score of 1, 2, or 3 on a 1-10 scale

Positive Impacts of Economy Tick Up
38
“How is the current state of the economy affecting your organization?” Percent
responding ‘positively,’ with a score of 7, 8, 9 or 10 on a 1-10 scale
5%
(2009)
73% (2018)
28%
(2021)
39%
(2024)
0%
10%
20%
30%
40%
50%
60%
70%
80%
2008 2009 2012 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023 2024
Positively

How is the Current State of the Economy Affecting
Your Organization?
39
10%
51%
39%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2009 2012 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023 2024
Negatively Not Much Positively

How do you expect your organization's financial condition will
change over the next 12 months?
38%
58%
4%
Better/Stronger
Steady/About the Same
Weaker/Worse

What do you need most in order to thrive in 2024?

7.5
7.0
6.7
6.5
6.0
6.0
5.9
5.7
5.4
5.3
5.0
5.0
5.0
4.9
4.7
4.7
3.0
2.0
0 1 2 3 4 5 6 7 8 9 10
Transportation
Religious Institution
Arts, Entertainment and Recrecation
AVERAGE
Education
Healthcare
Retail
Communications
Utilities
Accommodations
How is current state of the economy affecting your
organization? (February 2022)
1 = Very Negatively
5 = Neutral
10 = Very Positively

7.8
6.6
6.2
6.2
6.1
6.0
6.0
5.8
5.7
5.5
5.5
5.5
5.4
5.0
4.9
4.3
0 1 2 3 4 5 6 7 8 9 10
Communications
Accommodations
Education
Arts, Entertainment, Recreation
Construction + Manufacturing
Utilities
AVERAGE
Retail
Nonprofit/Social Services
Healthcare
How is current state of the economy affecting
your organization? (February 2023)
1 = Very Negatively
5 = Neutral

7.0
6.8
6.4
6.4
6.3
6.2
6.2
6.0
5.9
5.9
5.8
5.7
5.6
5.6
5.2
5.0
5.0
0 1 2 3 4 5 6 7 8 9 10
Accommodations
Information Technology
Retail
Arts, Entertainment and Recreation
AVERAGE
Healthcare
Communications
Education
Utilities
How is current state of the economy affecting your
organization? (February 2024)
1 = Very Negatively
5 = Neutral

How do you expect your organization’s sales/revenue to
change over the next 12 months?
65%
28%
4%
0%
10%
20%
30%
40%
50%
60%
70%
Increase No Change Decrease

How do you expect your organization’s sales/revenue to change
over the next 12 months?
69%
80% 76%
65%
28%
5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2016 2018 2019 2020 2021 2022 2023 2024
Increase No Change Decrease
<2% Unsure

What is the most significant challenge your future growth?

Hiring Challenges
Remain Consistent

Do you expect the size of your workforce to change in
the next 12 months (2023)?
52%
3%
45%
We plan to add workers
We plan to reduce our
workforce
We expect total workforce
to stay roughly the same

Do you expect the size of your workforce to change in
the next 12 months (2024)?
39%
3%
58%
We plan to add workers
We plan to reduce our
workforce
We expect total workforce
to stay roughly the same

Percentage Planning to Add Workers in 2024 Down From 2022
Peak
36%
30%
54%
68%
52%
39%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2012 2013 2014 2015 2016 2018 2019 2020 2021 2022 2023 2024
“Does your organization have plans to increase or reduce its workforce in the next 12 months?”

Has your organization experienced hiring challenges over the
past 12 months?
72%
28%
Experiencing hiring
challenges
Not experiencing hiring
challenges

Has your organization experienced hiring challenges over the
past 12 months?
27%
20%
25%
28%
Yes, hiring is one of our
biggest challenges
Yes, hiring feels harder
lately
Somewhat, but hiring is not
hurting our operation
No, we do not have hiring
challenges

Which factors contribute to your hiring challenges? (check all that apply)
56
28%
16%
15%
30%
43%
Limited housing supply/cost of
housing
Limited transportation
options/cost of transportation
Limited childcare availability/cost
of childcare
We do not have hiring challenges
Other

“Other” Factors - Two Sides of the Same
Coin?
Salary Competition (27)
“Staying competitive with triangle area salaries.”
“Finding qualified candidates at the price point we are promoting.”
“The salary demands (even with a lack of experience) is nearly 50-75% higher than it was 3 years
ago. It is making it incredibly difficult to pay expected wages and turn a profit.”
Available/Qualified Candidates (51)
“The pool of qualified employees is very limited.”
"Lack of professionalism from job applicants/not showing up for interviews.”
“Lack of specific talent close enough to Chapel Hill to support our needs.”
“We are looking for young talent that seem to prefer larger cities with more amenities.”

Other Responses
Costs (6)
“Everyone wants to live in Raleigh, people can't afford to live in Chapel Hill.”
Industry Specific (8)
“Real Estate professionals not moving firms at the same rate.”
"The negative depiction of profession portrayed by our media.”
“Not many are studying the profession of accounting.”
Remote Work (4)
“Workforce who are required to be onsite and in-person versus many industries that have resorted
to virtual schedules”

Inflation Expectations Persist,
Intensity Abates

How do you expect prices YOU PAY for goods/services to change
12%
64%
20%
1% 3%
Increase Significantly
Increase Somewhat
Stay About the Same
Decrease
Not Sure

Do you expect to increase prices YOU CHARGE for goods/services
39%
51%
0%
9%
Yes, we expect to raise our
prices
No, our prices will stay
about the same
No, we expect to cut our
prices
Not Sure

Government Sentiment
Relatively Strong

Would you say local government here is:
63
18%
61%
18%
2%
Strongly Pro-Business
Somewhat Pro-Business
Somewhat Anti-Business
Very Anti-Business
232 respondents

64
22%
59%
16%
3%
Very Anti-Business
134 respondents with Chapel Hill-based businesses

65
15%
57%
28%
0%
Very Anti-Business
46 respondents with Carrboro-based businesses

Over the past 12 months, did your business incorporate artificial
intelligence (AI) tools into normal operations?
28%
63%
9%
Yes
No
Not Sure

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