Is Charlotte recession proof? >> https://lnkd.in/gfRCTxtg
In the September 2024 edition of the Charlotte Business Journal, John Norris, Chief Economist, discusses why Charlotte—location of our newest market —may not experience as severe a recession as other areas of the country.
Wherever I go, people seem to have the same two questions:
- Is the U.S. going to slip into recession?
- When will the Federal Reserve finally cut the overnight rate?
Depending on the situation, I either give an extremely detailed analysis or virtual non-answers like, “If so, it won’t be as bad you fear,” and “Soon.”
However, on a recent visit to the Queen City, I said the following to a college friend who was worried about the same things: “What difference does it make? You live in Charlotte.”
I was only half kidding.
While it might seem everyone in Charlotte is involved in banking, finance or real estate, the metropolitan area’s economy is incredibly diversified. In fact, there are approximately 18 Fortune 500/1000 companies headquartered in the region and another 60+ in the Inc. 5000. As if that weren’t impressive enough for a metro area the size of Charlotte, there are more than 120 companies with major operations in the region, each with revenues in excess of $100 million.* That is nothing short of impressive.
In case I forget, the Bureau of Labor Statistics notes that although employment in financial activities is statistically higher than the national average, it accounts for less than 10% of the local workforce. That is probably a little surprising. However, it demonstrates just how much Charlotte has diversified in a relatively short period of time.
This bodes well for the future.
While the financial crisis of 2008-2009 still weighs heavily on many people’s minds, it was 15-16 years ago. People graduating college during that time are now in their late 30s and hopefully established in their careers. In the meantime, the region has become a massive economic engine, one that attracts businesses and workers from across the globe.
The younger generations are smarter than we often give them credit for. They go where the opportunities are. After all, the biggest career decision anyone will make is where they want to live. Given the data the government publishes, as well as the sheer volume of new living units going up every day, people obviously want to live here.
And who can blame them?
While no one can predict the future with crystal clarity, it is safe to say the U.S. will eventually suffer through another recession. Unfortunately, Charlotte will not be completely immune. However, absent another financial system collapse, any local economic decline will seem relatively mild compared to 2008-2009.
Further, because of the region’s economic dynamism, it should be much less severe in Charlotte than elsewhere. As I told my friend, a slump here would seem like an expansion in many metro areas across the country. Trust me on that.
But if or when will this happen? This recession that won’t be as pronounced in Charlotte? That is still the question on the table.
The question would be much easier to answer if there were an ironclad definition of what a recession actually is. The National Bureau of Economic Research (NBER) is the official arbiter of such things, and it tends to be a bit vague. Perhaps we have already had a recession. Maybe we are currently in one. It could be just around the corner. You never know until you know, you know?
However, I believe it’s safe to say you likely know someone whose business or industry has experienced a downturn or is currently facing one. After all, a lot of folks are already struggling.
- Perhaps a friend or acquaintance has had an involuntary change in employment.
- It could be that you budgeted for 10% growth this calendar year, and 3% is looking more realistic.
- Maybe you are eating out at restaurants less and have put off redecorating the house. However, even by eating out less, you are overwhelmed by prices at the grocery store (watch my related video below).
- It is possible the unemployment rate in the Charlotte region exceeds 4% at some point over the next year, but that would have seemed miserly not so long ago.
The list is endless.
All of those things are symptoms of a traditional economic slowdown. However, that isn’t what has people worried, now is it? No, of course not. It is the prospect of another financial system collapse, am I right? You know, will the big banks downtown still be in business tomorrow? Will the world stop spinning? That sort of thing.
Fortunately, there is nothing in the crystal ball, tea leaves or Magic 8 Ball that portends a downturn of that severity anytime soon or anywhere close. As for unimpressive national growth and a return to some sort of normalcy in Charlotte? If you are personally asking the question, you already know the answer, and you can expect it to last for another couple of quarters.
Thank you for reading.