September 2023 NC Economy Watch: Meet the New Normal, Same as the Old Normal

Welcome to the September 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 our last edition of NC Economy Watch, we described some of the ways in which our economy has changed during the COVID-19 pandemic. In this edition, we examine aspects of our economy that have not changed during the COVID-19 pandemic. For the most part, people are still working in the same industries; the labor market is tightening at the same pace; and the rise of e-commerce is where we’d expect it to be based on trends that preceded the pandemic.

Meet the New Normal, Same as the Old Normal

In certain ways, the COVID-19 pandemic and the government’s response to it resulted in a “new normal” for our economy. More people are now working from home or starting new businesses. Price inflation and interest rates have risen to levels unseen in decades. And, lest we forget, many lives were lost to the novel coronavirus, and many communities are still struggling to recover from the impact of the pandemic.

But surprisingly, for all the ways our economy changed during the COVID-19 pandemic, there are just as many respects in which our economy has not changed. Employment and gross domestic product in North Carolina fully recovered to pre-pandemic levels in 2021. As our previous research has shown, the pandemic also had relatively little lasting impact on displaced workers, wage inequality, or the employment of women.

It might have been reasonable to expect permanent shifts in our economy following the massive layoffs in service-providing sectors that accompanied the early months of the pandemic. However, these sectors recovered rapidly following the lifting of coronavirus restrictions and, three years later, it’s hard to detect any lasting evidence of large-scale restructuring in our state. North Carolina’s industry composition in July 2023 was nearly identical to what it was in February 2020 [Figure 1]. None of our broad industry sectors shifted by more than one percentage point as a share of overall employment between then and now.

Figure 1

The relative stability of our industry structure during the pandemic period has been remarkable compared to earlier periods of restructuring in North Carolina. For instance, manufacturing declined from 27% to 10% of employment as our state deindustrialized between 1990 and 2019. Relative to other changes we’ve experienced during our lifetimes, COVID-19 had little impact on the industry composition of employment in North Carolina.

Some economic trends commonly attributed to the pandemic were, in retrospect, merely a continuation of trends that preceded it. North Carolina’s labor market tightened during the pandemic, leading to increased employment opportunities for jobseekers and hiring difficulties for employers. But this tightening trend is hardly unique to the present moment: our labor market had been tightening for over a decade before the pandemic as our economy recovered from the Great Recession and our workforce matured into retirement age. North Carolina had only 0.9 jobseekers per job opening in June 2023, which is precisely the number we’d expect to see based on the pre-COVID trend [Figure 2].[1] 

Figure 2

Looking at the trend over time, the only noticeable impact of the pandemic was a brief spike in the number of jobseekers per job opening in 2020 during the height of coronavirus lockdowns; otherwise, the tightening of our labor market during the COVID-19 pandemic has been consistent with the pre-COVID trend.     

The decline of in-person retail and the rise of e-commerce is another trend mistakenly associated with the pandemic. The share of nationwide retail sales occurring online jumped from 11% to 17% in early 2020 as stay-at-home orders and infection fears drove many consumers away from brick-and-mortar stores and toward the safety of online retailers [Figure 3]. But this sudden shift proved short-lived; the increase in online shopping quickly stalled out as consumers left their homes and returned to their favorite stores. As of spring 2023, the share of sales occurring online stood at 15%—higher than in 2019, but lower than its peak in 2020.

Figure 3

The rise of e-commerce is nothing new; rates of online shopping had been trending higher for more than a decade before the pandemic, and the current rate is in line with its pre-COVID trend. With the benefit of hindsight, it’s now clear the rise of e-commerce during the pandemic was merely a temporary acceleration of changes that were already underway for years beforehand. 

COVID-19 has left an imprint on certain aspects of our economy, but in many respects, the economy of 2023 remains much like the economy of 2019. For the most part, people are still working in the same industries; the labor market is tightening at the same pace; and the rise of e-commerce is where we’d expect it to be based on trends that preceded the pandemic.

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