Dec. 17. By Erica Batten. The economic outlook is very positive right now and into the new year—especially for Charlotte.

Wells Fargo economist Charles Dougherty, who spoke at the November Newsmakers Breakfast hosted by Business Today, said, “Things are really good right now.”

GDP growth is at 3 percent, there have been 100 consecutive months of gains in the labor market, and unemployment is as low as it’s been since 1969, Dougherty said. He expects unemployment to go as low as 3 percent.

Led by the surging information and business service sectors—Charlotte’s strong suit—as well as the construction industry, North Carolina employment continued to grow in 2018.

The Charlotte metropolitan statistical area is adding jobs faster than the rest of North Carolina and faster than the nationwide rate.

Charlotte’s diverse business base also provides stability. Dougherty said that manufacturing, often overlooked, is actually a vital part of Charlotte’s robust economy.

“Even if there were a downturn, this city would be well-equipped,” Dougherty said. “Every industry is hiring.”

Employment compensation is also rising, making labor more expensive, he said. But the boost in income has supported consumer spending, a key element in overall economic growth.

“When wages are rising, that is a very positive indicator of where consumer spending will go,” Dougherty said. Since the 2008 recession, consumer spending has moved away from owned housing, food eaten at home and apparel toward areas such as entertainment, food away from home and rental housing.

The housing sector was one “soft spot” in the economic outlook—but geography makes a big difference.

Western real estate markets like Las Vegas, Seattle and San Francisco have seen between 8 and 13 percent annual growth in home prices. Charlotte saw a more modest 5.2 percent year-over-year advance in home prices but still ranks in the top 20 of U. S. metropolitan areas for home price growth.

The Southeast is especially hot right now because of its climate, its relatively low cost of living, and its friendly business environment. Higher housing costs in other regions have spurred movement toward cities with lower costs of living, Dougherty said. This has boosted Charlotte’s population growth to nearly 40,000 people a year.

Looking ahead, demographics should favor a boost to the owned-housing market in years to come as millennials reach their mid-30s. Consumers who do buy a home do so before age 38, said Dougherty.

Representing 5 percent of GDP, housing “plays a huge role” in the economic outlook, Dougherty said, but he’s “very optimistic” about the housing market.

Both new and existing home sales have been on an upward trajectory since 2011. Inventory still lags behind demand, though, which is good news for rentals and apartment construction.

Mortgage rates as a percent of income have climbed from below 4 percent in 2012 to around 5 percent currently. Home buyers, especially first-time buyers, are facing affordability issues because of higher home prices and rising mortgage rates.

Tariffs on lumber and steel have pushed up prices, but strong demand has caused building material prices to rise across the board, and a shortage of skilled labor has contributed to further price increases.

“Persistently lean inventories of single-family homes and deteriorating affordability are providing a second wind to the apartment market—stronger than most people have anticipated,” Dougherty said. Industrial properties are also one of the hottest areas of commercial real estate growth.

With real estate price increases part of a larger trend, investors may be concerned about inflation, but economists say that prices are going up at a healthy rate. The Federal Reserve uses indicators like inflation and unemployment when setting monetary policy. Already, there have been three rate hikes this year and four more are expected by the end of 2019.

Changes in federal tax laws have also spurred growth. The corporate tax rate was reduced from 35 percent to 21 percent, which Dougherty said “encourages businesses to spend more on themselves [and] become more productive.”

Other tax code changes affecting business included a repeal of corporate alternative minimum tax, a cap of 30 percent of EBITDA on business interest expense deductions and immediate expensing of business capital investments.

While Dougherty called tax reform a “net positive” for the economy, he downplayed the effect of trade policy.

“Our exposure is limited because of consumer spending and other domestic factors,” he said.

The Presenting Sponsors of the Newsmakers Breakfast Economic Outlook were Dixie Dean and Christina Stone, a Realtor team at Allen Tate in Cornelius. Breakfast Sponsors were Carolina Trust Bank and Ckezepis Law. Davidson Wealth Management, Jack’s Corner Tap and KS Audio were Breakfast Sponsors.