Economic news at the national level continues to send remarkably mixed messages.
On the one hand, proven economic indicators around the so-called “yield curve” suggest a reason for economic pessimism. On the other hand, still-strong labor news supports the idea that increasing wage growth will be linked to optimistic demand for goods and services.
In short, the future remains uncertain because even the best data is conflicting.
That national-level data can be hard to understand, and perspective helps. Rather than try to assess planning and probabilities for the future starting at the national level, it can be helpful to try another approach–understanding the national economy from the “bottom-up”- at the local level first.
In short, what does all this conflicting news mean for us?
Let’s think about one aspect of our national economy that helps make our region unique – we’re overwhelmingly a “service” economy as opposed to a “goods” economy.
Services in our region are things like healthcare, education, and hospitality sectors–in practice, it’s no surprise to see those sectors as far and away our largest employers with healthcare alone being the largest employer in Eastern North Carolina.
As the US economy has grown, much of that more recent growth has come in the service sector (that growth is measured in both economic value and job creation).
That’s good news for us – wage growth supports increasing demand for services, and as a result, we remain optimistic about the potential within our visitor and service economy.
In practice, we see that trend at work in market cycles with things like the prices of real estate on the Outer Banks–during the last significant market recalibration in 2008 the prices of real estate as a “good” fluctuated significantly while the demand for vacations as a “service” remained remarkably consistent.
That notion – the service demand remaining relatively consistent or even growing in our region even while the prices of goods fluctuate – is one explanation for why folks in and out of market cycles still come on vacation.
Our challenge, then, acknowledges the flip side of that growth coin–the ability to meet the service demand is linked to a labor force that reflects population growth.
Generally, one growth correlation is population growth. Said differently, the more our population as a region grows, the more we’ll be able to deliver growth in our service economy as well.
That’s the catch though – our regional population isn’t growing and current demographics don’t suggest growth in the short term (as an example, our state’s glorious university and community college systems predict flat to slightly down enrollment in the next ten years).
So, on the one hand, we have good news – our vibrancy as a visitor economy is remarkably resilient as a reflection of its inherent nature as a service economy.
On the other hand, a growing service economy is predicated on a growing population. That challenge (housing, for example) will define our economic growth in the years to come.
It’s a good problem to have, of course, as many other places would love the challenge of meeting a growing economic demand. Our ability to fully understand our service economy is perhaps the best indicator of all.
Of course, we are reminded as we allocate resources and develop priorities of the famous George Box quote that suggested, “all models are wrong, but some are useful.”
Here’s hoping that national economics are useful and that we’re able to use them from the “bottom up.”
“Sound Strategy”, a weekly commentary from our publisher Clark Twiddy, features issues, ideas and information focused on our mission statement of “Covering the Business News of the Greater Outer Banks”.
- Sound Strategy: Addressing health of Eastern N.C. residents will improve rest of our quality of life
- Sound Strategy: Competing while cooperating can be a benefit to entire greater Outer Banks
- Sound Strategy: Seasonal and full-time residents can work together to improve the greater Outer Banks
- Sound Strategy: Good sign for our region to see leaders gathered around rostrum with common goals
- Sound Strategy: Further incentives can help address the region’s essential housing issue
- Sound Strategy: Five important questions for greater Outer Banks region’s economy in 2023
- Sound Strategy: If history repeats itself in real estate market, Outer Banks will be ready
- Sound Strategy: Consider “three C’s of context” when looking ahead to 2023’s visitor economy
- Sound Strategy: End of year reflections
- Sound Strategy: “The past is a foreign country; they do things differently there.” – L.P. Hartley
- Sound Strategy: Sound preparation for bad weather is good strategy
- Sound Strategy: Linking our state’s visitor economy to our own