Welcome to the August 2026 edition of NC Economy Watch: an update on what’s happening in the North Carolina economy and what it means for you, brought to you by the Labor & Economic Analysis Division (LEAD) of the NC Department of Commerce.
In this edition of NC Economy Watch, we unpack recent estimates indicating that North Carolina’s labor force is smaller now than it was a year ago. Our labor force is under pressure from slowing population growth and a decades-long decline in the labor force participation rate. Given the persistence of these trends, North Carolinians should prepare for the possibility that our labor force may continue to shrink in the years to come.
The Incredible Shrinking Labor Force
North Carolina’s economy is growing at a healthy clip. Its labor force? That’s another matter entirely.
The size of the labor force is defined as the number of employed plus the number of unemployed individuals in a given area—or, in other words, the number of people who are either working or actively looking for work. Even with a growing economy, North Carolina’s labor force level has been roughly flat the past couple of years and appears to be heading for an outright decline. In June 2026, North Carolina’s labor force shrank 0.5% over the year to 5,263,213 [Figure 1]. This mirrors a broader, nationwide trend of slowing labor force growth. A recent analysis from Indeed Hiring Lab suggests that the U.S. labor force is likely to start shrinking as soon as this year.
Figure 1
North Carolina’s labor force decline is being driven by slowing population growth and a falling labor force participation rate—our state is attracting fewer new residents, depriving us of an important source of population growth, and the population we have is less likely to participate in the labor force than they were just a few years ago.
Monthly growth in our age 16+ population slowed from an average of 0.2% in 2023 to 0.1% in June 2026, while our labor force participation rate declined from 61.4% to 58.6%.1 As a hypothetical exercise,
- If our population growth had maintained its 2023 pace, our state’s labor force would have grown 0.1% over the year in June 2026, rather than shrinking 0.5% [Figure 2];
- If our labor force participation rate had remained at its 2023 level, our state’s labor force would have grown 1.3% over the year; and
- If both our population growth and our labor force participation rates had held at 2023 levels, our state’s labor force would have grown 1.9% over the year.
Figure 2
Neither slowing population growth nor declining labor force participation rates are new developments. Even though North Carolina is growing faster than many other states, our growth rate is a lot slower now than it was during the 1990s. Meanwhile, labor force participation rates in North Carolina and nationwide have been falling for the past 25 years. More than half of the long-term decline in our state’s participation rate is driven by the aging of our population, and most of the remainder is accounted for by a declining youth labor force participation rate, which itself is driven by higher rates of school attendance [Figure 3].
Figure 3
Despite our best efforts, these trends are unlikely to reverse themselves. The long-term slowdown in population growth and the aging of our population are the direct results of a decline in fertility that spans not only the rest of the country but most of the rest of the world. Absent a resurgence in immigration, North Carolina’s population growth will continue to slow and its population will continue to age. It might be possible to bring more school-aged youth into the labor force through an expansion of work-based learning programs, but we’re unlikely to return to the high youth labor force participation rates we saw during the 1990s, when dropping out of high school was much more common and college enrollment rates were much lower than they are today. Given the persistence of these trends, North Carolinians should prepare for the possibility that our labor force may continue to shrink in the years to come.
For inquiries and requests, please contact:
Meihui Bodane, Assistant Secretary for Policy, Research and Strategy
NC Department of Commerce, Labor & Economic Analysis Division (LEAD)
- 1
Here “age 16+ population” refers to the civilian non-institutionalized population aged 16 years or older, which is the population used for estimating labor force participation rates in the United States.