Carolina Economy Adding Few New Jobs

By John Hood

RALEIGH — Over the past year, North Carolina has posted one of the largest employment gains in the country. Alas, that’s not saying much.

During the most recent 12 months for which we have full data, February 2025 to February 2026, American employers added 149,000 net new jobs, a growth rate of only 0.1%. By comparison, our state’s 0.7% rise in employment looks healthy.

It’s not, though. In a normal, non-recessionary year, North Carolina typically adds about 80,000 to 90,000 net new jobs. The COVID era was far from normal, with employment plummeting in 2020 and then rebounding strongly in 2021 and 2022. Still, if you combine all three years, the average annual job growth was, you guessed it, 90,000 positions.

For the 12 months ending in February 2026, however, North Carolina employers added just 36,000 positions. Employment was essentially flat within goods-producing industries — manufacturing, agriculture, mining, and the like — while the service sector added positions, although not as robustly as in the pre-COVID era.

While many North Carolinians are experiencing economic distress, we’re not actually in a recession. According to the latest estimates from the U.S. Bureau of Economic Analysis, our state’s gross domestic product grew 2.6% in inflation-adjusted terms over the course of 2025, higher than the national average (2%). In our region, only Florida (2.7%) had stronger GDP growth. But just like the Tar Heel State, the Sunshine State posted lower-than-normal job gains.

Nevertheless, our headline unemployment rate — the number of jobless North Carolinians actively looking for work divided by the total labor force — is only 3.8%. Adding in discouraged workers, family caregivers, and involuntary part-timers pushes the rate to 6.4%, still low by historical standards.

Our current mix of okay-ish GDP growth, weak job growth, and low unemployment is a nationwide phenomenon, one that economic analysts of varying persuasions have explored in significant depth. They offer at least four plausible explanations.

The first is a post-COVID scrambling of economic conditions, locations, and choices. Firms, workers, and households haven’t reverted to pre-pandemic “norms,” goes this argument, and may never do so. Some older workers, forcibly sidelined during the early days of COVID, decided to retire rather than return to the workforce. Some younger workers, especially mothers with young children, did return but in part-time rather than full-time positions, often by preference and facilitated by the explosion of remote work.

The second explanation is a more specific version of the first: the rise of artificial intelligence is bringing dramatic change to the workplace. Some firms are experiencing dramatic gains in output per worker, allowing them not to hire as they grow and, in some cases, even to shrink their payrolls. In other cases, firms hope to realize productivity gains, haven’t yet, but are loath to hire people whom they may have to lay off in a few months or years.

A third explanation is that the Trump administration’s crackdown on illegal immigration has resulted in lower employment across a range of sectors. Remember: job creation is fairly low but so is the jobless rate. Yes, lots of people are still moving to North Carolina, but a smaller share of them are working-aged arrivals from other countries while a larger share are retirement-aged arrivals from other states.

Finally, analysts point to another Trump administration policy that has created pervasive uncertainty: import taxes. It isn’t just that high tariffs distort consumer decisions and raise operating costs for many businesses that use imports to produce goods and services. The mercurial nature of the president’s tariff rates — on-again, off-again, sometimes altered according to personal whims or daily headlines — makes it challenging for businesses to plan for the future. As a result, some are hesitant to add new workers whom they might have to let go if future tariff changes disrupt their operations or the retail markets they serve.

Whatever the explanation, our present reality is a growing North Carolina economy with surprisingly anemic rate of net new jobs. Policymakers, please take note.

John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy with American history (FolkloreCycle.com).