Tariffs, stagnant job market spillover may shadow 2026 economy

A fasten-your-seatbelts warning light flashed repeatedly as the Triad and North Carolina entered 2025 and the first year of the second term of the Trump administration.

Yet, the local and state economies were surprisingly stable and resilient during 2025 in spite of the deck of wild cards that included: undocumented immigrant/worker deportations; new and expanded tariffs; loosening of regulatory standards; slashing or ending federal economic and nutrition subsidies; and another trillion-dollar round of federal tax cuts.

The state's unemployment rate remained at 3.7% for the 14th consecutive month during September, reflecting a stagnant market for both job seekers and employers. Healthcare and professional services hiring were positives, while tariff uncertainty contributed to several manufacturing shutdowns and mass job cuts.

Because of the six-week federal government shutdown, the state jobless reports for October, November and December will be delayed well into 2026.

"So which economy, the good of early 2025 or the not-as-good of late 2025, will prevail in 2026?" asked Michael Walden, a retired economics professor at N.C. State University who continues to release a monthly state economic index report.

"The challenge is that we are entering 2026 with a large amount of uncertainty, and businesses and investors don't like uncertainty because it makes it more difficult for them to plan and anticipate the future," Walden said.

"Will the Federal Reserve cut interest rates, hold rates steady or even raise rates? What will happen with tariffs? Tariffs are important because many economists blame them for the acceleration of inflation in the second half of 2025.

"It appears U.S. companies initially absorbed the cost of tariffs early in 2025, but then began to pass those costs on to buyers by raising prices later in 2025."

Walden said several provisions effective in 2026 from the controversial federal "One Big Beautiful Bill" could have trickle-down impacts on the Triad and North Carolina during 2026.

"Among them are several reducing taxes for both households and businesses," Walden said. "The likely result is more investment, more production and more jobs resulting in higher incomes for households, but with no adverse impacts on inflation."

Walden said he expects less volatility from tariffs in 2026.

"Prices will still be rising, but at a slower rate, therefore setting up a situation allowing more households to see their earnings increase faster than prices," Walden said.

"In terms of business expansion, job growth and economic opportunities, North Carolina will likely continue to come out ahead of the nation in 2026, just as it has in previous years. In terms of the economy, companies and investors have 'Carolina on My Mind.' "

Local projections

Winston-Salem Mayor Allen Joines said that while recruiting economic projects remains a priority during 2026, he is eager to see the growth in locally planted initiatives.

"I believe we will continue to see strong economic growth such as we had this year," Joines said. "We had a goal of 50 new startups and we identified 75 startups."

Acknowledging that Winston-Salen and Forsyth "does not have any large industrial sites," particularly compared with Guilford County, recruitment efforts will remain focused on small- and mid-size companies.

"These sized companies are our sweet spot, and our pipeline is full of additional prospects," Joines said.

Where the local community can benefit from large Triad economic-development recruitment successes, Joines said, is through attracting suppliers, vendors or service companies to projects such as Boom Supersonic and JetZero at the Greensboro airport and Toyota Battery Manufacturing NC plant at the Greenboro-Randolph megasite.

Foremost among those supplier successes has been Toyota Tsusho America Inc., which plans to operate in Whitaker Park a "sustainable and innovative recycling and waste-handling solutions" for the mammoth Toyota Battery plant. Toyota Tsusho America paid $13.7 million for a 110,163-square-foot speculative building.

"As Jet Zero moves toward beginning construction of their new manufacturing facility, Winston Salem and Forsyth County should see related businesses begin to locate here, and of course many local workers will obtain jobs in that facility," Joines said.

"We are fortunate that Forsyth Technical Community College has a robust aviation program and will play a huge role in supplying trained individuals for this company.

"We are very pleased to see the announcement of additional jobs at R.J. Reynolds as that company realigns itself to a new market" with nicotine pouches production.

Mark Owens, president and chief executive of Greater Winston-Salem Inc., said the chamber is "following a robust project pipeline heading into 2026."

"We are confident that the upcoming year will bring location announcements, investment and job creation building on the momentum of the past several years. Our project activity increased by 17% in 2025, and we anticipate a sustained level of activity in 2026.

"Additionally, we are thinking strategically about the city's growth and inviting all to participate in long-term vision planning as we work to improve our community for future generations."

Better than the nation

Several economists project the North Carolina economy to modestly outperform the national economy during 2026.

"North Carolina's economy is expected to maintain its momentum, with payrolls expanding at a faster pace than in the region and nation," said Jay Hawkins, senior economist for The PNC Financial Services Group.

"Healthcare, finance and technology will drive near-term growth due to significant investments in data centers, hospitals and banking.

"Longer term, outsize population growth and a constant flow of investment will keep the North Carolina economy a top performer," Hawkins said.

Hawkins cautioned that the North Carolina housing market "continues to cool with existing single family home sales down nearly 29% in the third quarter of 2025 while home prices have surged more than 50% since the first quarter of 2020

"The meteoric increase in home prices, however, has lowered home affordability and sidelined some potential homebuyers," Hawkins said. "The median home price was up just 1.4% year-on-year in the third quarter of 2025."

Mark Vitner, chief economist with Piedmont Crescent Capital, said health care should remain "a bright spot" in the Triad and North Carolina, while manufacturing h"as been soft, as businesses have had to navigate the tariff turmoil and folks are maintaining low inventories."

"We are looking for 2026 to start off slow but finish strong. Tax cuts, capital spending and a modest housing rebound will drive growth next year."

NC falling behind?

The New Year "will bring little certainty to everyday North Carolinians," cautioned Alexandra Forter Sirota, executive director of the left-leaning N.C. Budget & Tax Center.

"State legislators have failed to use the policy tools available to them to address rising costs for the basics, from food to child-care to housing.

"They are now planning to work on a comprehensive state budget only after another round of tax cuts for the wealthy and profitable corporations goes into effect — leaving child-care centers on the brink of closure, health care premiums rising and providers unpaid."

Although House and Senate Republican leaders could not agree on a 2025-26 state budget compromise, they did act during the 2025 session to ensure that automatic state tax cuts took effect on New Year's Day — 3.99% individual rate and 2% corporate rate.

The corporate tax rate has been lowered steadily from 6.9% in 2013. Already the lowest among the states who have a corporate tax rate, it is scheduled to decrease to 1% in 2028 and be completely phased out in 2030.

"These tax cuts were scheduled years ago, before inflation surged, corporate profiteering accelerated, and federal cuts and costs shifted to the states," Sirota said. "It is past time to revisit them.

"The federal government has pushed new costs onto states and cut back on investments that have helped keep people housed, responded to disasters, and support small business start-ups and expansion.

"North Carolinians understand that our state's economy depends on people being able to stay connected to good jobs — supported by affordable child care and transportation — while paying for the rising cost of food and health care and accessing quality public education and training. "

The 2026 N.C. economic forecast from TD Economics said the state will continue to benefit that the state's fundamentals "remain solid."

Toronto Dominion Bank has expanded significantly in Charlotte and western N.C., in terms of branches in recent years, although the Triad remains unserved.

"Population growth is expected to stay well above the national rate, providing a strong foundation," according to the TD Economics forecast.

"North Carolina continues to attract plenty of new investment, supporting its slight economic-growth edge over the nation. We expect the state to retain a growth pace of 2.4% in 2026, just above the national pace."

"Ongoing investments and expansions reinforce the positive outlook. These span a variety of sectors, including finance, professional & technology, and healthcare — which have been key jobs contributors so far this year."

The forecast highlighted the 14,500-job, $4.7 billion JetZero project at Piedmont Triad International Airport as a sign of the state's advanced aviation manufacturing promise.

UNC Charlotte economics professor John Connaughton listed in his 2026 economic forecast that the growth of artificial intelligence in North Carolina "is a factor to watch."

"An economic boom brought about by the efficiency benefits of AI and the resulting productivity gains could occur in 2026, but is more likely in 2027, Connaughton said.

Yet, he asked "will we see an AI bubble? Will runaway capital investment in AI technology lead to a stock market sell-off of tech stocks and slow consumer spending?"

Connaughton said N.C. is projected to add 80,800 net jobs during 2026 — a slight improvement over an estimated 72,500 in 2025. Top areas for growth are expected to be information technology, private education and health services, and business and professional services.