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10 <br /> <br /> Like most states, North Carolina’s economy in 2018 will be strongly influenced by <br />national economic events. A large majority of contemporary economic forecasts are presently <br />indicating a continuation of national economic growth in 2018. <br /> With a new national income tax plan enacted for 2018, North Carolina could see some <br />added economic growth motivated by the plan’s lower marginal tax rates. If a national <br />infrastructure plan is submitted and passed during 2018, more state construction programs could <br />be planned. However, there are rumors a national plan would require an 80% funding <br />commitment from states. If true, there would be a challenge about how North Carolina would <br />generate its contribution. <br />The North American Free Trade Agreement (NAFTA) is currently being renegotiated by <br />treaty partners Mexico, Canada, and the U.S. If negotiations fail, there is a likelihood NAFTA <br />would be terminated. While a termination would create both winners and losers in North <br />Carolina, a recent study suggested the short-run impacts would be relatively minor in the context <br />of the total state economy.3 <br /> For 2018, it is forecasted North Carolina real GDP will increase by 2.8% - one-tenth <br />percentage point faster than the national rate - and payroll employment in the state will grow by <br />1.6% - the same rate as the nation. The payroll job growth rate will translate to <br />approximately 71,000 net new positions. <br /> Predicting the most-used unemployment rate – the “headline rate” - is more difficult. <br />The rate will drop as more jobs are added and nothing else changes. But if some individuals who <br />had dropped-out of the labor force because they could not find work – and therefore are not <br />officially counted as unemployed – resume looking for work as labor market conditions improve, <br />the jobless rate can remain the same, or perhaps rise, as jobs increase. <br /> The lowest state unemployment during the economic expansion of the 2000s decade was <br />4.6%; the lowest state rate during the economic expansion of the 1990s decade was 3%. <br />Economic conditions today – such as globalization - are much more like the 2000s than the <br />1990s, with an estimated 100,000 to 300,000 able-bodied, working-age individuals having left <br />the labor force in North Carolina. As labor market conditions continue to improve, it would be <br />expected significant numbers of this “hidden labor force” will actively look for work, thereby <br />moderating any reductions in the unemployment rate. Therefore, a year-end statewide <br />unemployment rate of 3.6% is expected in 2018. This would represent half the drop seen in <br />the 2017 jobless rate with a comparable number of payroll jobs added. <br /> Regional unemployment rate forecasts are presented in Table 1. Asheville, Durham, and <br />Raleigh are predicted to have the lowest end-of-year jobless rates in 2018, at or near 3%. <br /> With a tighter labor market, real (inflation-adjusted) wage growth should accelerate <br />from its 0.8% rate in 2017 to 0.9% in 2018. This represents a major improvement over the <br />fall in real wage rates in the state between 2010 and 2014. <br /> <br /> <br />3 Michael L. Walden, “How Would Ending NAFTA Impact the North Carolina Economy?” Studies in the North <br />Carolina Economy, November 2017, https://ag-econ.ncsu.edu/wp-content/uploads/2015/11/nceconomy- <br />nafta2.pdf. <br />16