The economy was thriving before the COVID-19 pandemic struck, pulverizing economies globally. But with the mass roll-out of the vaccine, and the virus subsiding, world economies are rising out of the ashes. Most areas in the US, including in North Carolina and especially in the Triangle, are now experiencing a steady increase in economic growth.
The current state of the economy
There has been a significant change in various sectors of the economy from the last quarter of 2020 and the first quarter of 2021. Here is the current state of the economy in post-pandemic times:
Inflation becoming healthy
A healthy economy needs to have an inflation rate of 2%. Inflation is the increase in prices in the everyday products that you buy. A healthy inflation rate means that you expect prices to go up. This expectation pushes demand and thus the economy grows. When the inflation rate is too low, it shows that the market demand is too low to push product prices up. By the first quarter of 2021, the inflation rate was 0.8%, although inflation appears to be quickly increasing in Q2 2021.
Decreasing unemployment and joblessness rates
The pandemic came with massive job losses, evidenced by the loss of 20.4 million jobs by the first quarter of 2020, with 1.3 million jobs lost in the manufacturing industry alone. At the time, the unemployment rate skyrocketed to 14.7 percent. Companies laying off workers was an indication of a recession.
The Bureau of Labor Statistics conducted research on how many jobs were added by the first quarter of 2021. According to their findings, the unemployment rate was 5.8 percent by the end of the first quarter of 2021. Unemployment indicates an economic lag since companies will only employ when they have enough demand to warrant new employees. Even with the creation of thousands of jobs in 2021, it will take a while to recover from the massive job loss that occurred in 2020.
Rising Gross Domestic Product (GDP)
The most recent GDP rate was 6.4 percent for the first quarter of 2021. This follows a GDP rate of -31.4 percent between May and June 2020. A healthy economy has a GDP of 2 percent. Anything higher than 3% shows that the economy is overheating and below 2 percent shows a contraction in the economy.
A GDP of below 0% shows a recession in your economy. The recession in the second quarter of 2020 was one of the worst ever in US history. Before then, the worst recession was in the first quarter of 1958, where the GDP dropped by 10 percent.
Lower interest rates
Lending leads to economic growth. Healthy federal interest rates should be around 2% or higher. Currently, the fed funds rate stands between 0 and 0.25%. This was a move by the Federal Reserve to encourage lending and boost the economy.
Interest rates determine the rate of borrowing from banks. Lowered interest rates encourage consumers to borrow from banks. If the rates are too low, people won’t be in a hurry to take out loans and banks will not benefit from the borrowed funds. This creates a liquidity trap whose remedy is to increase the interest rates just enough to benefit banks, attract and keep consumers.
The stock market is reawakening
The stock market reflects investors’ view of your economy. The stock market has been doing really well post-pandemic. S&P 500 started hitting new highs in the third quarter of 2020 and was up by early June 2021 at 11.63 percent year to date (YTD). The Dow hit a record high in the second quarter of 2021, going past 34,000 and pushing 35,000 in early June 2021.
North Carolina’s recovery steps
In recent months, the Triangle has seen some great wins with companies setting up shop here, including Apple’s recent announcement. Apple plans to invest $1 billion in a tech campus in Research Triangle Park. This will create more than 3,000 tech-based jobs in software engineering, machine learning, and other fields. This has great implications for an area already experiencing huge growth in tech.
The Triangle has been abuzz with new innovations for decades. Today, RTP occupies 7,000 acres of land and hosts hundreds of tech companies, startups, government agencies, and non-profit organizations. These companies flood this region because of the technological infrastructure and affordable cost of living.
Raleigh’s investment towards a reliable workforce
The city is investing in development programs to nurture talented individuals and create equitable communities. This is in line with its 2021 strategic plan to grow the city’s diverse economy through equal employment opportunities for all communities, local partnerships, and supporting businesses and entrepreneurs through technology.
Raleigh aims at creating a workforce that is so diversely talented that it encourages investors to stay and invest in the city. Raleigh’s strategy states that talent development is vital to economic growth.
Durham’s steps to encouraging startup growth
The city of Durham is using several criteria to choose projects in the city. Some are selected by the mayor and city manager, while others are stipulated within the strategic plan. The plan involves creating innovative opportunities across the city and building equitable, diverse, and engaging communities.
Other projects come from IdeaStarter — a program that encourages the city staff to forward their creative ideas that nurture innovation and improve city processes. Another program is Innovate Durham, which allows the city to test out new ideas, businesses, products, and services for viability and sustainability.
The workforce situation in North Carolina
As much as the Triangle is making remarkable strides in job creation, it still has a long way to go to recover from the massive job loss caused by COVID-19. Thousands of jobs, from tech to hospitality, still remain vacant. This is because many members of the workforce are uncomfortable with exposure to the virus and this is reducing the potential candidate pool.
As the pandemic subsides, and people go back to their workplaces in North Carolina, and particularly in the Triangle, investors are gaining confidence again.
Our Business Law Team Can Help
Whether you’re just starting your business here in the Triangle, if you need help with business operations, or if you’re looking to exit your business, our legal team here at Wilson Ratledge can help. Reach out to us today to schedule a consultation with our experienced business law team.