Surging dollar to blame for blip in 'Carolina Comeback'
Posted June 12, 2015
Updated June 15, 2015
Raleigh, N.C. — Gov. Pat McCrory frequently touts what he calls the "Carolina Comeback," the economic recovery over the past two years that has added jobs to the state's employment rolls. State lawmakers routinely credit their tax, regulatory and unemployment insurance reforms with that same recovery.
But numbers out this week from the U.S. Department of Commerce's Bureau of Economic Analysis paint a less rosy picture.
According to the BEA's GDP figures for 2014, North Carolina's economic growth last year was 1.4 percent – definitely in the black, but well below this year's national average growth rate of 2.2 percent and far short of the state's 2.3 percent growth in 2013.
It's also below the regional average for the Southeast, which is 1.7 percent. South Carolina, by comparison, posted a 2.2 percent growth rate. Georgia's GDP grew 2.3 percent, and Florida's grew 2.7 percent.
Overall, North Carolina's growth rate was seventh out of the 12 Southeastern states and was ranked 25th nationally.
North Carolina State University economist Mike Walden says there wasn't much state leaders could have done about that. The manufacturing sector pulled the state's average down, he said, even though other sectors such as finance and professional services showed healthy growth.
"Despite the fact that it has declined, North Carolina is still more of a manufacturing state than the nation," Walden explained. "About 20 percent of our GDP – our productive output – is in manufacturing. It’s about 10 percent for the nation.
"What happened in 2014 was the strength of the dollar," he said. "The dollar went up. That made our exports more expensive. We saw a drop-off in exports that came back and hurt our manufacturers."
In 2013, Walden pointed out, when the dollar was weaker, the state's GDP growth was above the national average.
"I don’t think this is anything the state did wrong. It’s simply that our economy is more susceptible to ups and downs in the manufacturing sector," he said.
South Carolina is also a big manufacturing state, yet its growth rate did not take a similar hit last year. Walden says that's because its manufacturing sector is less reliant on exports.
"I think they benefited from the fact their manufacturing composition is different – a lot of auto manufacturing, and auto sales domestically are just skyrocketing," he said. "So, they’re not quite as dependent in terms of their composition on foreign sales."
South Carolina landed a Volvo plant, which North Carolina recruiters also pursued, in April. The state also has a substantial aerospace sector.
Walden advised against reading too much into the 2014 drop.
"I don’t think it means anything in terms of what we can do in the state. We are what we are. We’re continuing to try to diversify our state, bring in high-skilled, good-paying jobs." he said. "These things ebb and flow."
Graham Wilson, a spokesman for the state Department of Commerce, pointed out that GDP is not the only means of measuring the economy.
“North Carolina continues to be a leader in competitiveness and economic growth," Wilson said. "In May, 'Site Selection' magazine named North Carolina No. 1 on its list of Top Competitive States awards. From January 2013 to April 2015, 207,800 private-sector jobs have been added to the North Carolina economy – a 5.1 percent increase. The state’s unemployment rate in January 2013 was 9.5 percent; in April 2015, it was 5.5 percent.”