North Carolina’s economy is projected to see continued growth in 2025, with a 2.7% increase in real — inflation adjusted — Gross Domestic Product, for the fifth full year of growth since COVID-19. The biggest increases in new jobs are anticipated in information, educational and health services, and construction.
Despite expectations of continued economic growth in the state, other factors bring uncertainty, said UNC Charlotte financial economist John Connaughton, as he presented the North Carolina Economic Forecast 2025 Second Quarter Report on May 19 at The Dubois Center at UNC Charlotte Center City. The report has been a leading source of economic information for North Carolina for nearly 45 years.
“For four years, we have focused on the Federal Reserve actions and inflation,” Connaughton said. “In just 120 days, tariffs and trade have joined these as key factors to watch.”
In a period of heightened attention around fiscal policy, trade decisions and other factors, Connaughton puts the chance of a return of inflation in 2025 at 60-to-40. He sees a 30% chance of recession, a 60% lesser chance of recession and a 10% chance of an economic boom.
“In addition to fiscal policy concerns, we have seen the U.S. unemployment rate rise from 3.3% in May of 2023 to 4.2% in March and April of 2025,” Connaughton said. “As a result of the weakness in the labor market, the Fed began reducing interest rates in September of 2024. By December of 2024 the Fed Funds rate dropped by 100 basis points.”
During 2025, depending on economic data, the Fed could continue with interest rate reductions by up to another 50 basis points by year-end. However, if Congress does not begin to control fiscal spending, inflation could return in 2025, which could disrupt the Fed’s plans, he said.
“The wild card in all of this is tariffs, which could slow the economy further and cause a mild bump in inflation in the short run,” he said.
For North Carolina specifically, sluggish growth during the fourth quarter of 2024 is a direct result of Hurricane Helene and its impact in Western North Carolina, Connaughton said. Recovery will take time, because of the nature of the damage and the impact of the lack of flood insurance.
“In addition to the slow overall state growth in the fourth quarter, we have seen a significant decline in establishment employment in October,” he said. “Total North Carolina establishment employment dropped by 7,200 jobs in October compared to September. Employment bounced back in November, but the hurricane’s impact affected the overall employment growth for the year. The state only added 47,200 jobs during 2024. Clearly, Western North Carolina has been severely impacted and that has spilled over to the state economic performance.”
2025 Numbers
For 2025, North Carolina’s real — inflation adjusted — Gross Domestic Product is forecast to increase by 2.7% over the 2024 level. All 15 of the state’s economic sectors are expected to grow during 2025. GDP is the main measure of economic output. The sectors with the strongest projected growth rates are:
- Agriculture: 27.2%
- Information: 5.3%
- Retail trade: 3.9%
- Nondurable goods manufacturing: 3.3%
- Mining: 2.9%
- Educational and health services: 2.8%
- Business and professional services: 2.8%
North Carolina establishments are expected to add 72,400 net jobs in 2025, an increase of 1.4% over the December 2024 level. The state’s unemployment rate is expected to increase to 4.2% by December 2025. Twelve of the state’s 14 nonagricultural sectors are expected to show employment growth during 2025. The sectors with the strongest projected increases are information at 4.2%, education and health services at 2.2% and construction at 2.2%.
2024 Numbers
GDP reached a level of $839,122.2 million in 2024. Real GDP increased by 3.7% over the 2023 level. Of the state’s 15 economic sectors, 12 grew during 2024. The sectors with the strongest growth rates were:
- Agriculture: 40.2%
- Retail trade: 10.0%
- Mining: 8.4%
- Construction: 6.4%
- Nondurable goods manufacturing: 5.8%
- Educational and Health Services: 5.8%
- Finance, insurance, and real estate: 4.3%
- Information: 3.7%
North Carolina establishments added 47,200 net jobs by year’s end, an increase of 0.9% over December 2023. Of the state’s 14 nonagricultural sectors, six saw employment increases in 2024. The sectors with the strongest employment increases were education and health services at 3.4% and government at 3%. By December 2024, the state’s unemployment rate was steady at 3.7%.
