Economist Bullish on N.C. Jobs Outlook
Charles Lunan, Charlotte Observer
June 2, 2004

One of North Carolina 's leading economists upped his estimate of job creation for the state dramatically Tuesday, citing a raft of new data released by the government since Friday.

Mark Vitner, a senior economist with Wachovia Corp., said he expected North Carolina to create 90,000 new jobs this year, up from the 65,000 he forecast in mid-April.

Vitner said N.C. job numbers released Friday showed that the unemployment rate dropped in 84 of the state's 100 counties in April. That indicates businesses are gaining confidence in the economy and hiring workers to increase production.

Vitner's bullish employment outlook comes as some economists fret that rising gas prices could quell consumer spending. But Vitner said rising incomes will more than compensate consumers for rising fuel prices.

"We've gone from irrational exuberance to excessive caution," Vitner said.

Vitner cited a gain of 34,000 payroll jobs in the first four months of the year, but said job growth is probably significantly higher because the payroll numbers do not include agricultural workers, the self-employed and workers at newer companies.

Vitner cited the following evidence for his forecast:

.  The state's unemployment rate fell 0.8 of a percentage point in March, when an unprecedented 100 counties reported a decline in unemployment.

.  Federal data released Friday showed personal income grew much more dramatically from October through March than previously estimated. That means the economy may have created up to twice as many jobs during the period than previously thought, said Vitner.

.  The employment outlook for manufacturing rose for the fourth month in a row in May, the Institute for Supply Management reported Tuesday. The institute, which surveys purchasing managers at major corporations, said textiles, furniture, chemicals, paper and industrial equipment -- all major industries in North Carolina -- were among 17 sectors that were growing.

The report indicates nationwide manufacturing employment may have grown by as much as 100,000 in May, Vitner said. Economists expect government estimates due this month will show employers created 220,000 new nonfarm jobs in May. Vitner said he now expects that number to hit 280,000.

.  Corporate profits for N.C.-based companies or companies with major operations in the state are up 23 percent from a year ago. Sales by those companies are up 10 percent.

One of the areas of highest job growth has been construction. Contracts let for commercial construction and road-building projects rose 62.2 percent to $1.2 billion in the first quarter over the same quarter of 2003, according to the Carolinas Associated General Contractors. That pace slowed to 33 percent annual growth in the next month, April.

The association said Tuesday that a fourth-quarter survey of contractors in an area including the state's three largest cities showed a 19-percent jump in the number of companies planning to hire in 2004.

In Wilmington , which showed the highest percentage growth in employment of the state's six largest metropolitan areas, housing starts are up 20 percent from a year ago, said William Hall, an economics professor at UNC Wilmington. Retirees are driving much of the growth in the region, which had an unemployment rate of 4.1 percent in April.

In Asheville , contractors are beginning to worry about finding enough workers for all the housing, hotel and commercial development, said John Winkenwerder, principal with South Asheville Hotel Associates, which develops and operates hotels. The company is now building a 94-suite hotel with Hilton in Asheville .

Local builders and Hilton executives have told Winkenwerder that architects have seen a big surge in business in the last six months.

"I think the fires are starting to roar," he said.

Even the state's manufacturing sector appears to be hiring, particularly in the Raleigh-Durham area, where pharmaceutical, software, research and other high tech companies operate.

Even the furniture industry is hiring again, said Jerry Epperson, who follows the industry for the banking firm of Mann, Armistead & Epperson Ltd. in Richmond , Va.

Epperson said fatter corporate profits have led to bigger bonuses, which helps the high-end furniture manufacturers in North Carolina . He expects domestic furniture shipments will continue to grow at the 6 percent pace of the first quarter for the whole year.

In Caldwell County , many are hopeful furniture manufacturers will lay off workers for only a week this July 4, said Sue Land, acting manager of the Employment Security Commission's office in Lenoir. During the last two years, plants laid off workers for two weeks around the holiday.

"I can only think of one major layoff we have had in the furniture industry in the last six or eight months," Land said. "From that point of view, things seem to be stabilizing."

The bottom line, said Vitner, is companies are recalculating the costs of not hiring. "They've figured out that you can lose more by not hiring than hiring."