December 2023 NC Economy Watch: Putting the Recent Manufacturing Slowdown in Context

Welcome to the December 2023 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 provide some context for the recent manufacturing slowdown. The manufacturing sector experienced turbulence during the past year and has declined as a share of the North Carolina economy since the 1980s, but a nationwide surge of new investment in manufacturing facilities offers hope for a potential renaissance in the years to come.

Putting the Recent Manufacturing Slowdown in Context

As we mentioned in our October 2023 edition of NC Economy Watch, the number of jobs in our state’s manufacturing sector has been treading water for the past year. Although these employment data are still preliminary, they appear to reflect a nationwide manufacturing slowdown.[1] The Institute for Supply Management’s measure of nationwide activity in the manufacturing sector indicated decline in November for the 13th consecutive month as consumer spending slowed and demand for manufactured goods softened [Figure 1]. Growth in both the manufacturing and service-providing sides of the economy has slowed over the past year, but while service providers have continued to expand slightly, manufacturing has experienced an outright contraction.

Figure 1

North Carolina’s manufacturing sector has seen ups and downs throughout its history, but during the last 40 years, it’s been mostly down. North Carolina first developed into a manufacturing powerhouse in the early-to-mid 20^th century [Figure 2]. Following this period of rapid growth, our state’s manufacturing footprint started to shrink; since the 1980s, the share of North Carolinians employed in manufacturing has declined from 30% to 11%.[2] Meanwhile, the share employed in service-providing sectors—from retail to healthcare, from restaurants to financial services, and everything in between—has risen steadily to 79%. North Carolina now has an overwhelmingly service-based economy.

Figure 2

Despite the recent turbulence in manufacturing and its long-term decline as a share of the economy, there are emerging signs of a shifting manufacturing landscape. New federal incentives for microchips and electrification have fueled an investment boom around the country. Nationwide construction spending on manufacturing facilities jumped from $6.5 billion in nominal terms prior to the COVID-19 recession to $17.2 billion in October 2023 [Figure 3]. Most of this was driven by an unprecedented surge in computer/electronic/electrical manufacturing investment, which rose from $0.8 billion in February 2020 to $9.4 billion in October 2023—an astonishing 12-fold increase.

Figure 3

This nationwide investment boom, coming on the heels of Toyota’s 2021 selection of North Carolina for an automotive battery plant, could yield even more opportunities for our state in the future. Although manufacturing employment is expected to decline nationwide over the next decade, employment projections for North Carolina point to a slight increase. Moreover, 27% of workers in our state’s manufacturing sector are age 55 or older, and we will need a growing pipeline of new workers to take their place as they retire.[3]

The recent manufacturing slowdown is certainly a cause for concern, especially for displaced workers and communities impacted by mass layoffs. But this isn’t the first time our manufacturing sector has confronted challenges. The final chapter in the story of manufacturing has yet to be written. Manufacturing is likely to remain an important source of employment and wealth-generation in our state, and there are reasons to believe the sector might even experience a renaissance in the years to come.

If you’re interested in learning more, check out LEAD’s recent series of articles on the past, present, and future of manufacturing in North Carolina.

For inquiries and requests, please contact:

Meihui Bodane, Assistant Secretary for Policy, Research and Strategy

NC Department of Commerce, Labor & Economic Analysis Division (LEAD)

mbodane@commerce.nc.gov­