Professor: Labor market strong; inflation persists into 2023
The gap between the consumer price index for all urban consumers (CPI-U) and the Fed Funds Rate remains too wide to reflect progress toward inflation reduction, according to
"Until the Fed Funds Rate gets closer to CPI-U, we won't see a significant change in inflation," Connaughton said.
According to Connaughton, CPI has increased more than 15% since
"Even when we start slowing price increases, the wages will ultimately need to catch up and may catch up by the end of 2023," Connaughton said. "There will be wage inflationary pressure for most of 2023."
Previous concerns over a recession appear to have dwindled going into 2023. Key indicators, such as consumer behavior and labor market trends, simply aren't pointing toward an economic downturn, according to Connaughton.
"So far, we haven't seen a significant weakness in the job market," he said. "The unemployment rate would need to rise before people begin changing the way they spend their money."
Gross Domestic Product Analysis
For the first quarter of 2023, GDP is expected to grow by an annualized rate of 1.1%.
Connaughton forecasts an output increase for 12 of the state's 15 economic sectors during 2023. The sectors with the strongest expected growth rates include:
Hospitality and Leisure Services: 2.1%;
Business and professional services: 2.5%;
Three sectors are expected to experience growth rates below the overall state growth rate of 1.2%:
Transportation, warehousing and utilities: 1%;
Durable goods manufacturing: 0.8%;
Retail trade: 0.5%.
According to the report, all 14 of the state's nonagricultural sectors are expected to experience employment increases during 2023. The sectors with the strongest expected employment increases are:
Information: 5.7%; and
Other services: 3.6%.
2022: A look back
North Carolina GDP defied the national trend during the first two quarters of 2022, according to Connaughton. At the emergence of the Omicron variant of COVID-19,
According to the report, nine of the state's 15 economic sectors are expected to experience output increases during 2022, a change from the
Business and professional services: 11.2%;
Information: 10.4%; and
Hospitality and leisure services: 8.8%.
Six sectors are expected to decline in 2022:
Construction: 7.4% decrease;
Durable goods manufacturing: 4.4% decrease;
Nondurable goods manufacturing: 2.4% decrease; and
Retail trade: 2.2% decrease.
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