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We all know that it seems like our economy is struggling. We can feel it, see it at the gas pump, hear it on the news. But what do economists look at to determine the health of a region?
Economists look at jobs, homes to diagnose the Charlotte area's financial health, and these indicators are often related. The construction of new homes creates jobs for carpenters, painters, bankers, landscapers, and appliance sales people. And these employed people are consumers, keeping restaurants, and retail shops in business.
Recently, the Charlotte Observer had an article that took an overview of the four key parts of the Charlotte region's economy, as well as what to watch in the months ahead. The key elements are jobs, housing, retail and commercial construction and highlighted below:
JOBS
Right now, Charlotte's unemployment rate is at 6.8 percent, a five-year high. This is a sharp rise since April. This is even more impactful because of Charlotte's recent population growth - in July Charlotte had almost 59,000 unemployed people. Part of this are seasonal jobs that are most filled at the height of the summer. Additionally, many companies have cut hours and reduced overtime.
August employment numbers for the Charlotte area are released by Federal officials Friday. An increase is expected, but how much those numbers increase from July will predict the employment outlook for the rest of the year.
The region's total number of jobs typically jumps from July to August, and a small increase - or worse, a loss - could send unemployment surging even higher. The last time the unemployment rate jumped this high, this fast, was in 2001, and it kept going up for more than a year and didn't start falling steadily until mid-2003.
HOUSING
Charlotte's new home construction boom has slowed, and existing home sales are down due to rising foreclosures across the country and new restricted lending.
The housing industry accounts for at least one-fifth of the economy according to economists. Charlotte, by contrast to many parts of the U.S., is still considered healthy in the housing sector-helped by steady home values that never shot up as high as they did elsewhere, so there wasn't far to fall.
However, Charlotte still has many homes selling at reduced prices and more renters than before as newcomers wait to sell their homes, unable to capitalize on the current "buyers market."
Watch for sales to continue to be sluggish until the market rebounds across the country-probably in early 2010.
RETAIL
After years of record growth in Charlotte, consumer spending has significantly slowed. In the last year, (July 2007-June 2008), Mecklenburg County retail sales increased less than 1 percent-the lowest increase since 2002. In recent years, sales growth was between 3 and 12 percent. However, surrounding counties saw even slower sales according to the North Carolina Department of Revenue.
Two-thirds of the U.S. economy is driven by consumer spending, and less buying means less work for retail employees and the companies that supply the shops. Many people in Charlotte are strained by rising gas prices, rethinking purchases and are concerned about their jobs and retirement funds.
Watch for retail sales are not expected to gain any steam through the holidays, so watch for a conservative shopping season.
COMMERCIAL CONSTRUCTION
Today, Uptown construction is still going strong in Charlotte with approximately 4.6 million square feet of office buildings under way in the region, but several projects have slowed or been put on hold. While the Charlotte office vacancy rate dropped to 11.5 percent in the second quarter from 12.6 percent a year earlier, the warehouse vacancy rate rose 1.4 percent - a sign that there is less demand for the space.
Developers are restricted with the tighter financing available, and will be for the next few months. This should last into the first quarter of 2009. One question mark is the amount of space that banking giants Wachovia and Bank of America will occupy as the fall-out from the current crisis and restructuring happens.
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Mint Hill Homes, Matthews Homes and the Weddington Waxhaw Union County Matthews Mint Hill NC Charlotte North Carolina and the surrounding areas. www.RichFerretti.com
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