An increasingly hostile borrowing climate, plus eroding consumer and business confidence, appears to be exerting drags on the Charlotte economy. A moderating pattern of job-growth activity is reflected in the gradual slowing of employment change from its recent high of +3.3% year over year in February 2007 to +2.1% in December 2007.

From an industry perspective, significant slowing has occurred in manufacturing, as well as in financial services, construction, professional/business services and in retail and wholesale trade. Sectors which expanded over the past year included leisure and hospitality (+4.4%) and government services (+1.2%).

Troubled Financial Sector
While the fundamental drivers of the Charlotte economy remain solid over the longer term, the metro area’s near-term outlook is threatened by its significant exposure to the troubled financial services sector. Declines in the net income of Charlotte’s two largest banking firms — Wachovia Corporation and Bank of America — are likely to cause hiring to stall, or quite possibly decline, in financial services in the coming months, thereby exacerbating an already weakening job market.

Some Projects put on Hold — but Others will Pick up the Slack
There is evidence of a significant deterioration of investor confidence due to slowing employment /income growth. One example is the recent announcement by Portman Holdings that it is postponing development of One Charlotte, a luxury 40-story condo development with an estimated cost of $150 million.

In addition, Spectrum Properties announced that it was putting on hold its plans to build 300 South Tryon, a 32-story condo-office tower with an estimated cost of $200 million. Spectrum announced that it was postponing construction despite the fact that vacancy rates in the central business district, at 2.0%. are among the lowest in the country.

Projects which should help maintain construction activity in Charlotte over the next several quarters are a 345,000 square foot IKEA store as well as the Bank of America Ritz Carlton Tower, the Bryant Park Project and the Bryton mixed-use project.

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