In This Edition: The 2023 economy avoided recession as inflation cooled, but high mortgage rates and rising debt kept households under pressure. In Hickory and Catawba County, Corning, CommScope, and Microsoft advanced major investments even as manufacturing employment fell. Across the Foothills and North Carolina, industrial expansion contrasted with weaker global trade and costly financing.
Economic Stories of Relevance — 2023
Resilience Under Restraint — Disinflation, High Rates, and the New Industrial Buildout
THE LEVELS REPORT — 2023
Entering 2023, the economic system was bracing for an inevitable downturn.
Over the course of 2022, the Federal Reserve executed one of the most aggressive interest rate hiking campaigns in modern history, raising its benchmark rate from near zero to between 4.25% and 4.50% in just nine months. Mortgage rates doubled and housing activity slowed as financial markets repriced across the board. Although inflation had cooled from its June peak of 9.1%, it remained high at 6.5% by December. Households were rapidly spending down their pandemic-era savings while credit card balances surged, forcing consumers to adjust to higher borrowing costs after more than a decade of cheap money.
Yet, despite widespread predictions that such severe monetary tightening would trigger a recession, the economy proved remarkably resilient.
January 2023 delivered a surging 517,000 new payroll jobs and pushed the unemployment rate down to a historic low of 3.4%. While inflation remained persistent at 6.4%—with shelter costs up 7.9% year-over-year and grocery prices remaining elevated—there was little sign that employers were curtailing hiring or that consumer spending was stalling. Consequently, the Federal Reserve faced an unexpected possibility: central bankers might succeed in cooling demand and lowering inflation without causing a major downturn in the labor market. (Bureau of Labor Statistics)
This setup paved the way for one of the most notable economic surprises of the post-pandemic era: inflation steadily declined while unemployment stayed low and overall economic growth accelerated rather than contracted.
However, this headline stability masked a far more complex structural shift taking place beneath the surface.
The first major strain emerged in March within the banking sector. Silicon Valley Bank collapsed on March 10 with roughly $209 billion in assets, followed two days later by Signature Bank with approximately $110 billion, and First Republic in May with over $200 billion. Though individual circumstances varied, all were caught off guard by the rapid rise in interest rates, which eroded the market value of their low-yielding bond portfolios while digital banking enabled nervous depositors to withdraw funds at unprecedented speed. To stem a wider panic, the Federal Reserve launched the Bank Term Funding Program, allowing financial institutions to borrow against government securities at face value rather than forcing them to realize losses in a depressed market. (FDIC)
The banking crisis revealed that rapid rate hikes could disrupt financial balance sheets long before impacting headline employment numbers.
Even so, the turmoil was contained and credit conditions tightened without triggering a broader panic. By May, inflation had moderated to 4%. The Fed slowed its pace, opting for modest 25-basis-point hikes in February, March, and May before pausing in June with rates at 5% to 5.25% to evaluate how prior rate hikes were filtering through the system. During their June meeting, policymakers described job growth as robust and the banking system as sound, while noting that tighter credit would continue to weigh on economic activity. (Bureau of Labor Statistics)
Simultaneously, a distinct industrial transformation was unfolding.
Real spending on manufacturing facility construction doubled between late 2021 and mid-2023, driven largely by investments in high-tech manufacturing, technology, and electronics. Legislative packages like the CHIPS and Science Act, the Inflation Reduction Act, and the Infrastructure Investment and Jobs Act provided targeted incentives that channeled massive private capital into key domestic industries, offsetting the broader drag of higher borrowing costs. (U.S. Department of the Treasury)
This divergence was clearly visible in North Carolina, where overall employment rose even as traditional factory jobs gradually contracted. The state secured $12.9 billion in announced industrial investments during 2023, headlined by clean energy projects such as Toyota's additional $8 billion expansion of its Randolph County battery plant. North Carolina's population grew by nearly 140,000 residents, tourism hit record levels, and unemployment dropped to 3.3% by midyear, even as net manufacturing payrolls edged downward. (NC Commerce)
The Hickory and Catawba County region offered a localized version of this economic dynamic. Corning opened a new optical fiber manufacturing facility following a $150 million commitment, CommScope announced a $60.3 million expansion adding 250 jobs, and Microsoft advanced its multi-billion-dollar data center development. Meanwhile, municipal infrastructure investments helped catalyze hundreds of millions in private development and residential housing across the area.
At the same time, regional manufacturing employment in the Hickory-Lenoir-Morganton area slipped from 42,100 positions in January to 40,300 by December, while the labor force shrank slightly from 173,400 to 171,400. Despite these shifts, local unemployment held steady around 3.4%. (Catawba County)
This trend highlights a key insight of 2023: low unemployment did not guarantee expansion across all sectors, nor did major capital announcements immediately translate into payroll growth. Falling inflation rates did not mean prices returned to pre-pandemic levels, rising home values did not improve housing affordability, and strong headline labor metrics coexisted with ongoing household financial strain. Even as industrial construction surged nationally, manufacturing employment experienced regional softness.
Rather than simply dodging a recession, the economy was actively being reshaped by higher interest rates, targeted industrial policy, demographic constraints, and varying sector resilience.
I. GROUND LEVEL
Entering 2023, households were receiving two distinctly different economic messages depending on where they looked.
The labor market said the economy remained exceptionally strong. January unemployment was 3.4%, payroll employment increased by 517,000 and hiring remained widespread across leisure and hospitality, professional services, health care and government. A worker losing one job still encountered a labor market with considerably more opportunity than during most of the preceding fifteen years. (Bureau of Labor Statistics)
The household budget, however, painted a much less comfortable picture. Overall consumer prices were 6.4% higher than in January 2022, driven by severe increases across daily living costs: shelter was up 7.9%, food prices remained over 10% higher across several categories, and transportation services ran in the double digits. While the rate of inflation had dropped significantly from its summer peak, overall prices were still high. A grocery staple that jumped from $4 to $5 didn't fall back to $4 just because inflation slowed; disinflation simply meant that the $5 price tag was climbing at a much slower pace. (Bureau of Labor Statistics)
This contrast heavily influenced household attitudes throughout the year. National indicators were improving, yet families continued to absorb the compounding weight of several years of price hikes. While official metrics tracked the immediate speed of price changes, consumer memory measured every grocery receipt, insurance premium, rent payment, and restaurant bill against what those same items cost prior to 2021.
Energy costs offered a welcome exception, as regular gasoline averaged $3.52 per gallon in 2023—43 cents lower than the prior year and well below the $5.01 peak reached in June 2022. Even when prices briefly ticked up to $3.88 in September, they remained far below the prior summer's extremes. For drivers in car-dependent suburban and rural communities like the Foothills Corridor, lower fuel costs provided direct financial relief without needing a pay raise. (U.S. Energy Information Administration)
Housing, on the other hand, became harder to afford because rising interest rates altered borrowing costs far faster than property prices could adjust.
Although many expected mortgage rates above 6% to push house prices down, housing supply tightened unexpectedly instead. Millions of homeowners who secured 2% to 4% mortgage rates during the pandemic were reluctant to sell, knowing that trading homes meant giving up cheap financing for significantly more expensive loans. As a result, existing homeowners chose to stay put.
While the Federal Reserve could dampen buyer demand by making mortgages expensive, it couldn't compel current owners with ultra-low rates to list their properties.
By October 26, average 30-year mortgage rates climbed to 7.79%—a 23-year high—yet national home prices ended the fourth quarter 6.5% higher than the previous year. This generated an unexpected paradox: housing sales dropped sharply without a corresponding drop in home values because high rates limited available inventory just as much as buyer demand. (Freddie Mac)
Existing homeowners with low fixed rates were effectively shielded from central bank rate hikes, preserving their home equity and keeping monthly costs stable.
For renters and first-time buyers, however, homeownership became increasingly out of reach.
New buyers had to absorb high purchase prices while financing them at interest rates double what they were two years earlier, making higher monthly payments the main barrier to entry even as home price growth leveled off.
Consumer balance sheets felt the strain as total household debt expanded to $17.50 trillion by year-end, up $604 billion. Mortgage debt grew to $12.25 trillion, auto loans reached roughly $1.61 trillion, and credit card balances jumped by $143 billion to hit $1.13 trillion. More concerningly, credit card and auto loan delinquencies began to rise, particularly among younger and lower-income households. (Federal Reserve Bank of New York)
While overall household wealth remained solid, steady employment supported debt repayment, and mortgage defaults stayed historically low, pandemic-era savings cushions were wearing thin. The combination of sustained inflation, elevated borrowing costs, and the end of extraordinary federal aid meant more families were relying on credit cards to cover everyday expenses.
Financial pressures grew further in late autumn when interest on federal student loans resumed on September 1 after a three-year pause, with payments restarting in October. This restored a substantial monthly obligation for millions of borrowers just as credit card balances reached record levels. (FSA Partner Connect)
Despite these headwinds, conditions around July 1 looked noticeably better than the dismal forecasts from early in the year.
The May Consumer Price Index, released June 13, showed annual inflation dropping to 4%—its lowest reading since March 2021. Energy costs fell 11.7% year-over-year, gasoline dropped nearly 20%, and food price increases slowed. Shelter costs remained the main inflation driver, rising 8% over 12 months and accounting for more than 60% of core CPI increases. (Bureau of Labor Statistics)
At the same time, the labor market remained resilient under monetary tightening. June employment data showed unemployment at 3.6% with 209,000 jobs added, keeping the unemployment rate comfortably between 3.4% and 3.7% for over a year. While job growth had moderated compared to 2022—achieving the cooling effect policymakers desired—there was no sign of a broad labor market contraction. (Bureau of Labor Statistics)
July 12 inflation reports provided even clearer evidence of progress: annual CPI fell to 3%, backed by a 16.7% drop in energy prices and a 26.5% decline in gasoline. However, shelter costs remained 7.8% higher, continuing to generate the bulk of remaining inflation pressure. (Bureau of Labor Statistics)
By midyear, the prospect of a soft landing had transformed from wishful thinking into a realistic economic path.
Rather than implying zero consumer hardship, a soft landing meant interest rate hikes were lowering inflation without triggering the mass layoffs historically required to curb price growth.
That trajectory gained momentum through the second half of the year.
Although late-summer energy bumps caused occasional monthly bumps, inflation remained well below its 2022 high. Wage increases began outpacing price gains again, with average hourly earnings rising 4.1% year-over-year in December against 3.4% CPI inflation—reversing the trend from 2022 when inflation ate away worker paychecks. (Bureau of Labor Statistics)
Census data later confirmed that real median household income rose 4% to $80,610 in 2023, marking the first statistically significant annual gain since 2019 along with improved real earnings for full-time workers. (Census.gov)
These gains represented meaningful progress for American households, even if overall living costs did not return to pre-pandemic levels.
Without outright deflation, the general price baseline remained high, mortgage rates hovered near multi-decade highs, credit card debt surpassed $1.1 trillion, student loan bills returned, and housing costs stayed elevated, with shelter making up over half of December's CPI increase. (Federal Reserve Bank of New York)
While real income grew, households still had to manage an economic landscape shaped by permanently higher price tags.
The Ground Level section concluded 2023 on firmer footing than it began, as financial pressure shifted away from rapid inflation toward navigating the overall higher price level and the elevated cost of financing daily life.
II. LOCAL — HICKORY / CATAWBA COUNTY
Hickory and Catawba County entered 2023 from an unusually strong headline position.
Manufacturing had substantially rebuilt itself following the pandemic collapse, keeping local unemployment historically low. At the same time, Microsoft's November 2022 announcement to invest at least $1 billion across four planned data centers in Conover, Hickory, and Maiden injected an extraordinary amount of digital capital into the development pipeline, even though the facilities were expected to create only about fifty permanent direct jobs. Overall, the regional economy was simultaneously supporting traditional manufacturing, fiber optics, automotive suppliers, packaging, warehousing, and a new layer of infrastructure-intensive digital development.
Financial reporting from Catawba County in 2023 continued to show manufacturing representing 30.9% of the local workforce while highlighting broader diversification into professional services, technical fields, transportation, warehousing, construction, recreation, wholesale trade, and real estate. The report also emphasized the county's role as a major hub for fiber-optic and telecommunications manufacturing, carrying forward major capital commitments made by Microsoft, Pregis, and Pasta Piccinini in late 2022. (Catawba County)
That momentum gained further traction in March when Corning officially opened its expanded optical-communications manufacturing campus near Hickory.
Supported by a $150 million commitment and 200 planned jobs, the new facility was designed to produce the specialized cable needed by network operators extending high-speed broadband into underserved and rural communities. In effect, what had long been a specialized local industry was now directly aligned with a major nationwide infrastructure initiative. (Catawba County)
This direct connection between federal policy and local manufacturing proved vital.
Surging demand for optical fiber was not just coming from routine consumer upgrades; it was driven by long-term public and private funding under the Infrastructure Investment and Jobs Act designed to expand digital access across the country. Because Hickory already possessed the specialized companies, skilled workers, suppliers, and technical expertise required for this expansion, it entered 2023 with a distinct industrial advantage that went far beyond cheap labor or vacant industrial space.
Specifically, the region held specialized industrial knowledge directly tied to a major national investment cycle.
At the same time, however, manufacturing employment figures were beginning to drift downward.
Revised labor statistics show seasonally adjusted manufacturing employment in the Hickory-Lenoir-Morganton area slipping from roughly 42,100 positions in January to around 41,500 by June, while the regional labor force gradually contracted from 173,400 to 172,800 over the same span. (FRED)
These revised numbers offer a useful contrast to what community leaders were seeing in real time. Looking back through June, Catawba County's fiscal-year report continued to highlight a strong post-pandemic recovery, pointing out that the metropolitan area had added 4,839 jobs over the preceding two years and that local unemployment remained low at 3.4%. (Catawba County)
Both perspectives were accurate: the area had successfully recovered thousands of jobs lost during the pandemic, yet the manufacturing engine driving that recovery was starting to lose momentum around the edges. Uncovering these underlying nuances is precisely what this annual reconstruction is designed to do.
By midyear, Hickory presented a dual economic picture where headline employment numbers appeared exceptionally strong while underlying industrial trends had begun to soften.
The metropolitan unemployment rate stood at roughly 3.3% in June with no signs of a conventional recession, yet factory employment was lower than in January and the post-pandemic expansion of the local workforce had stalled. (FRED)
Shortly after this midyear mark, a major corporate announcement made this underlying contrast even sharper.
On July 25, CommScope—a company originally founded in Hickory—announced plans to invest $60.3 million and add 250 local jobs to expand its fiber-optic production, responding to the same national broadband buildout that drove Corning's expansion. (NC Commerce)
Viewed solely through economic development announcements, the local fiber-optic sector seemed to be booming; however, CommScope's broader financial results told a more challenging story as annual net sales fell 23.1% from $7.52 billion in 2022 to $5.79 billion in 2023, driven by a drop of more than 25% in domestic sales as corporate clients trimmed inventories and paused capital expenditures. (SEC)
These contrasting signals highlight the defining economic narrative of the year: a major manufacturer could face broader market headwinds across its global business while simultaneously expanding local capacity to serve specific sectors boosted by public infrastructure spending.
Holding these overlapping realities together provides a much clearer picture than reducing the story to simple headlines of growth or decline.
Meanwhile, Hickory continued strengthening its long-term industrial recruitment strategy. By 2023, the city's bond program was credited with generating over $846 million in private investment, 2,066 jobs, and thousands of new housing units around the Trivium Corporate Center and the Hickory Trail network. Educational partnerships also expanded as Appalachian State University welcomed the inaugural class to its new Hickory campus, adding a key institutional link between community development, higher education, and workforce training. (Hickory NC)
These investments become increasingly crucial as available labor tightens, because regional competitiveness relies on interconnected factors like housing, education, recreation, and transportation to attract and retain workers.
During the second half of the year, current manufacturing employment continued to ease even as future capital commitments remained strong.
Regional manufacturing employment fell to 41,200 in July, 40,700 in September, and 40,300 by December. The regional labor force experienced a similar, gradual decline to roughly 171,400 by year-end—about 2,000 workers fewer than in January—even as unemployment rose only slightly from 3.3% to 3.4%. (FRED)
This combination reveals an important dynamic: when a shrinking manufacturing workforce coincides with a contracting overall labor pool, low unemployment numbers can mask underlying economic shifts.
As a result, the local economy ended 2023 undergoing a broader structural transition where traditional jobs and new investment were no longer tightly linked.
Major data centers brought significant tax base with relatively few direct jobs, federal policy supported fiber-optic expansions even as private spending slowed, municipal improvements aimed to attract talent, and legacy manufacturing softened while remaining a central pillar of the regional economy.
By December 2023, the local economic landscape was increasingly differentiated: traditional manufacturing slowed while specialized tech manufacturing, digital infrastructure, and quality-of-life investments grew in importance.
The key question moving forward was no longer whether Hickory could attract new investment, but rather how effectively the community could evaluate what different types of development truly contribute to the local economy.
III. FOOTHILLS CORRIDOR
The broader Foothills Corridor entered 2023 in a financial environment that heightened the value of its abundant inherited assets.
When interest rates are low and financing is cheap, companies can easily justify buying land, expanding infrastructure, and constructing facilities from the ground up. However, as the Federal Reserve pushed benchmark rates above 5% and commercial loans grew significantly more expensive, existing physical capacity gained newfound strategic value.
Under these tighter financial conditions, a usable factory building was no longer just a relic of industrial history—it represented capital already embedded directly in the landscape.
The Corridor was well-positioned to take advantage of this shift, boasting thousands of such assets accumulated over generations as furniture, textile, machinery, glass, and wood product manufacturers built out western North Carolina's industrial footprint.
The first half of 2023 demonstrated that this legacy footprint remained vital to the modern regional economy.
In February, Cleveland County secured support to repurpose a 253,500-square-foot facility in Shelby for Robert Bosch Tool, a project expected to create 78 jobs. By April, ACTEGA North America was renovating another Kings Mountain facility to produce specialty coatings and chemicals for printing and packaging. Shortly after in June, Burke County received funding to update an 80,000-square-foot building in Morganton for Maynard Electric, adding 25 new jobs. (NC Commerce)
While none of these individual projects transformed the regional economy on its own, together they point to a broader structural trend: the Foothills' older industrial geography was not simply being erased, but rather recomposed.
Facilities built for past industries were repurposed to host new ones, while production skills and infrastructure funded by earlier generations helped reduce the initial capital outlay required for modern investments.
This same principle of asset reactivation extended beyond traditional manufacturing.
On May 21, NASCAR's All-Star Race returned to North Wilkesboro Speedway, one of the sport's historic venues, following decades of inactivity. Supported by roughly $18 million in American Rescue Plan funds for facility upgrades, the project generated over $20 million in direct construction and infrastructure investment in Wilkes County. Attracting approximately 39,000 attendees, the event generated an estimated $29 million in visitor spending, $42.4 million in statewide value-added economic impact, and supported 625 job-years of employment—representing temporary economic activity rather than permanent workforce expansion. (NC Commerce)
From an economic perspective, the revival of the North Wilkesboro Speedway shared the same underlying logic as factory reuse: a legacy asset created during an earlier era retained enough cultural, physical, and geographic value to be reactivated for a new economic purpose.
Rather than importing an entirely new venue into Wilkes County, the community unlocked the dormant potential of an existing site—a key advantage for a region seeking economic growth through established assets rather than ground-up development.
By July 1, economic conditions across the region were growing increasingly selective.
Revised labor data showed manufacturing softening around the central industrial hub of Hickory, while high mortgage rates and elevated commercial borrowing costs slowed residential and business development. At the same time, rural building reuse, tourism, and targeted industrial expansions continued to move forward, sustained by unique combinations of existing physical assets, public support, and localized market demand.
This internal variation illustrates why the broader Foothills Corridor cannot be defined solely by Hickory's manufacturing trends; one community might experience industrial softening while a neighboring area gains from tourism, factory reuse, or investment in higher education, healthcare, and outdoor recreation.
Much of the region's overall resilience stemmed from this diversification, as its economic drivers were no longer tightly linked to a single industry like furniture, textiles, or hosiery.
Watauga County highlighted the strength of this amenity-driven economy during the second half of the year, as visitor spending reached $517.5 million in 2023 and supported roughly 3,064 direct tourism jobs. Expanding far beyond its initial post-2020 recovery, tourism in the High Country had evolved into a major economic engine in its own right. (Visit North Carolina)
However, this growth brought its own operational challenges. While strong demand from tourists and second-home buyers bolstered local property values, it made workforce housing increasingly unaffordable for service employees in hospitality, dining, and recreation. Additionally, local infrastructure designed for resident populations faced added strain from seasonal and event traffic, illustrating how a key regional asset can simultaneously stretch the housing and labor systems needed to support it.
The region's most strategically notable initiative emerged in October from Burke County.
The Appalachian Regional Commission awarded The Industrial Commons in Morganton a $10 million grant to construct a 40,000-square-foot textile upcycling and advanced-manufacturing hub on the former Drexel Heritage Furniture site. Designed around circular production—converting textile waste into new yarn and usable industrial inputs—the project incorporated workforce training in upholstery and industrial sewing. Moving beyond conventional county-level recruitment, the initiative established a multi-state supply chain connecting North Carolina, South Carolina, and Tennessee. (NC Commerce)
This project represented a significant evolution in the region's industrial narrative: rather than simply clearing a former furniture factory for an unrelated business, it recombined the area's legacy strengths in furniture, textiles, sewing, and worker training with modern concepts like waste recovery and regional supply chains.
Crucially, the initiative crossed jurisdictional boundaries. While labor, supply, and trade flows naturally move across county lines, economic development strategies often remain localized. The Industrial Commons project provided an innovative model by organizing production and training around an active regional supply network rather than a single local municipality.
By December, the region's traditional manufacturing base continued to generate modest expansions, including Chaddock Furniture's plan to renovate 287,000 square feet in Morganton to create 25 jobs, and Quantum Power's reuse of a 300,000-square-foot Lawndale facility for renewable energy production, adding 34 jobs. (NC Commerce)
While these individual developments did not match the capital scale of mega-projects like Toyota's battery plant or Microsoft's data centers, they aligned with the Corridor's historic economic model, which relied on a dense network of factories, suppliers, skilled trades, and logistics across small-city centers rather than a single dominant employer.
Throughout 2023, the region made clear progress toward rebuilding a modern equivalent of that interconnected industrial network, as North Wilkesboro reactivated a legacy cultural venue, Burke County repurposed a furniture site into an advanced textile hub, Cleveland County adapted existing industrial space, Watauga expanded its tourism sector, and Hickory built out fiber-optic and digital infrastructure.
While the region's economic assets were growing more diverse, the connective network linking them remained unfinished. Realizing full regional leverage requires more than isolated local successes; it depends on creating supplier, workforce, and housing networks that mutually reinforce one another across county lines.
By the end of 2023, the Foothills demonstrated that its legacy industrial and cultural infrastructure retained substantial value, with higher borrowing costs further enhancing the relative appeal of existing facilities. However, these same interest rates compressed housing affordability and increased development costs, making fragmented regional capacity harder to overcome.
Moving forward, the region's main strategic task is to transition from simply reusing individual properties toward building an integrated regional system capable of compounding their value.
IV. STATE — NORTH CAROLINA
North Carolina entered 2023 with an economy expanding rapidly enough that unemployment stood at 3.8% and nonfarm employment reached approximately 4.87 million jobs. Manufacturing added 1,400 positions in January alone, while construction, leisure and hospitality, government, education, and health services also expanded. (NC Commerce)
That broad employment picture carried forward the remarkable state-level momentum built up over 2021 and 2022, though the underlying productive composition began shifting almost immediately.
Current revised data places North Carolina manufacturing employment around 474,200 in January, declining gradually toward 471,900 by June. While manufacturing remained a vital pillar of the state's economy, the post-pandemic employment recovery was beginning to soften at the margin. (FRED)
This dynamic highlights a crucial distinction between current employment levels and future industrial capacity. North Carolina was embarking on one of the largest manufacturing investment cycles in its history, even as the number of people actively working in the sector began to edge downward.
Several factors explain this divergence. First is timeline: a battery facility announced today requires years of site preparation, construction, equipment installation, and supply-chain development before thousands of operational workers appear on payrolls.
Technology plays an equally significant role, as advanced manufacturing demands far more capital investment per worker than the factories that drove North Carolina's twentieth-century industrial economy.
Finally, sector selection matters. The industries attracting the largest capital commitments—batteries, semiconductor materials, clean energy, and advanced transportation—were bolstered by federal incentives and strategic supply-chain priorities strong enough to outweigh short-term borrowing costs.
Around July 1, the state's aggregate labor market appeared exceptionally robust. June unemployment stood at 3.3%, compared with 3.6% nationally, and more than 5.04 million North Carolinians were employed—an increase of nearly 61,000 working residents over the previous year as nonfarm employment continued to rise. (NC Commerce)
Yet revised figures revealed that manufacturing remained roughly 2,000 jobs below its January level. Understanding the state's economic story therefore required looking through three analytical lenses simultaneously: a conventional lens showing one of the tightest labor markets in North Carolina history, an industrial lens showing current manufacturing payrolls softening, and a capital lens showing a massive future productive buildout taking shape.
The second half of the year made that capital investment story impossible to ignore. On October 31, Toyota announced an additional $8 billion and 3,000 jobs for its Randolph County battery facility, raising the total planned investment at the site to $13.9 billion and projected employment to over 5,000 positions. (NC Commerce)
That single expansion exceeded the capital value of entire years of economic development announcements during earlier reporting periods. Toyota was part of a much broader trend: North Carolina Commerce's year-end accounting tracked 134 supported recruitment, expansion, and rural-development projects representing 14,114 announced jobs and $12.9 billion in capital commitments during 2023, with clean-energy industries leading the way. (NC Commerce)
This momentum signaled more than just another record-breaking economic cycle; it reflected North Carolina's integration into an emerging Southeastern industrial corridor built around automobiles, battery production, electrical systems, semiconductor materials, and advanced manufacturing. For decades, the state had watched major automotive assembly plants locate elsewhere in the region while cultivating its own strengths in finance, pharmaceuticals, technology, furniture, agriculture, and specialized manufacturing. The battery and clean-energy boom fundamentally reshaped that economic landscape.
Meanwhile, population growth helped expand the workforce and consumer base required to support these investments. Census estimates placed North Carolina's July 2023 population at 10.84 million, an increase of approximately 139,500 residents over the previous year. This 1.3% growth rate represented the third-largest numerical gain in the nation. (Census.gov)
However, population growth alone does not eliminate labor constraints. New residents do not automatically settle where industrial facilities are built, nor do they always possess the requisite technical skills. Many are children or retirees outside the active labor pool, and incoming families simultaneously increase demand for housing, schools, transportation, and health care even as they expand the tax and talent base. As a result, the state's economic focus was shifting from a recruitment challenge to an absorption challenge.
Tourism added further demand to that regional capacity. Visitor spending reached a record $35.6 billion in 2023—a 6.9% increase over 2022—while direct tourism employment grew to roughly 227,200 positions. (NC Commerce) With manufacturing, tourism, health care, construction, and professional services all competing for workers from the same population pool, the pressure on supporting civic infrastructure intensified.
These constraints prompted a notable policy response in December, when North Carolina Commerce established a dedicated Child Care Business Liaison. Recognizing that an inadequate supply of affordable, high-quality child care was directly limiting workforce participation, state officials reframed child care as vital economic infrastructure. Just as development strategies once focused on roads and utilities, and later expanded to include broadband and job training, child care is now treated as an essential component of workforce capacity. (NC Commerce)
Year-end employment figures underscored why this broader approach was necessary. North Carolina finished 2023 with 3.5% unemployment and 99,400 more nonfarm jobs than in December 2022. Growth was led by education and health services (up 35,000 jobs), professional and business services (up 23,100), leisure and hospitality (up 21,000), and government (up 17,000). Conversely, manufacturing lost 4,000 positions over the twelve-month period and construction declined by 3,700. (NC Commerce)
Ultimately, North Carolina closed out 2023 with higher overall employment, more residents, record tourism, and substantial commitments of future industrial capital—even as active manufacturing payrolls dipped. Rather than indicating a failing industrial policy, this divergence reflects a buildout phase where future manufacturing capacity is being established ahead of operational hiring.
Capital announcements like Toyota's represent future production, which requires time to construct facilities, train workers, integrate suppliers, scale power grids, build housing, expand transportation networks, and secure accessible child care. The gap between project announcements and a fully functioning regional economy has become the key strategic space shaping North Carolina's economic future.
As a result, the state level poses a broader strategic challenge that extends beyond recruitment alone: Can North Carolina build the supporting ecosystem around these factories as quickly as it wins the facilities themselves?
V. UNITED STATES
The United States entered 2023 with monetary policymakers actively working to cool an economy that stubbornly refused to slow down.
Even with the benchmark federal funds rate already set between 4.25% and 4.50%, inflation remained elevated at 6.4% in January. Meanwhile, the labor market showed remarkable strength as unemployment stood at a low 3.4% and payrolls expanded by over half a million jobs that month alone. (Federal Reserve)
In response, the Federal Reserve continued its campaign of rate hikes, though at a noticeably more measured pace than the aggressive increases deployed the previous summer.
A modest quarter-point increase on February 2 raised the target range to 4.50–4.75%, followed by another quarter-point bump on March 23 to reach 4.75–5%, and a third increment on May 4 that brought the target to 5–5.25%. (Federal Reserve)
Between those late winter meetings, however, the financial sector offered a stark demonstration of how rapidly rising interest rates can destabilize the broader system.
A swift domino effect shook regional banking, beginning with the collapse of Silicon Valley Bank on March 10, followed two days later by Signature Bank, and culminating in the failure of First Republic on May 1. According to FDIC data, these institutions held vast sums, with Silicon Valley Bank carrying roughly $209 billion in assets, Signature holding $110 billion, and First Republic managing over $200 billion. (FDIC)
While bank collapses inevitably spark fears reminiscent of the 2008 financial crisis, the core vulnerability this time was fundamentally different.
Rather than a flood of defaulting subprime mortgages eroding the value of complex securities, banks were caught holding large portfolios of low-yielding, fixed-rate government bonds bought during the era of near-zero rates. As market interest rates shot up, the resale value of those older bonds dropped significantly. While those paper losses posed no immediate threat if held to maturity, sudden surges in depositor withdrawals forced banks to sell those assets early at a loss to generate cash—a vulnerability that proved fatal at Silicon Valley Bank due to its heavily concentrated and largely uninsured deposit base.
The Federal Reserve's response highlighted a key policy strategy: rather than abandoning its fight against inflation, central bankers established the Bank Term Funding Program, allowing institutions to pledge qualifying securities as collateral at face value. This effectively separated monetary restraint from banking liquidity, keeping benchmark interest rates high enough to cool price growth while providing a safety valve so banks wouldn't have to lock in bond losses to meet customer withdrawals. (Federal Reserve)
This dual strategy stood out as one of the most consequential institutional shifts of the year, enabling the central bank to stabilize the financial sector with targeted emergency credit while keeping its primary interest rate tool focused firmly on taming inflation.
By June, conditions had stabilized sufficiently for policymakers to pause rate increases and assess the cumulative impact of their policy decisions. Meeting on June 14, the Fed held the target rate at 5–5.25% as annual inflation fell to 4% and banking pressures receded enough for officials to describe the system as sound and resilient. (Federal Reserve)
Around July 1, this midyear checkpoint offered a surprisingly steady landscape: the predicted recession hadn't materialized, the banking turmoil was contained, inflation was coming down, hiring remained solid, and the Fed had paused its rate hikes, though it was still unclear whether the delayed effects of high interest rates were yet to be fully felt.
That ongoing uncertainty was understandable given how rapidly benchmark rates had risen from near zero to over 5% in little more than a year. Because long-term financial commitments like mortgages, commercial debt, and corporate credit don't reset overnight, the economic weight of higher borrowing costs accumulates gradually whenever loans mature or projects require new financing.
At the same time, major strategic investments were defying the broader drag of high borrowing costs.
By late June, inflation-adjusted spending on domestic factory construction had doubled since late 2021, propelled largely by high-tech, electronics, and semiconductor manufacturing. Direct federal subsidies, tax credits, and grants were reshaping project economics, making strategic buildouts financially viable even as the central bank raised overall capital costs. (U.S. Department of the Treasury)
This dynamic created two distinct financial realities across the country.
While everyday homebuyers faced steep mortgage rates, property developers coped with expensive commercial loans, and small businesses encountered stricter lending criteria, high-priority projects in semiconductor and battery manufacturing benefited from robust public incentives designed to expand domestic industrial capacity.
While the Federal Reserve worked to restrain broad economic demand to curb inflation, federal industrial policy sought to build out targeted long-term supply, creating an environment where investment capital moved selectively toward government-supported priorities.
After delivering one final quarter-point rate hike on July 27 to reach 5.25–5.50%, the Federal Reserve held rates steady through the end of the year. (Federal Reserve)
The second half of the year provided convincing evidence that the economy was weathering tighter monetary policy better than anticipated, supported by resilient consumer spending, steady business investment, active public sector spending, and continuous job creation.
Initial government estimates indicated real GDP expanded by 2.5% in 2023—up from 1.9% in 2022—a figure later updated to 2.9% in comprehensive statistical revisions. (Bureau of Economic Analysis)
Rather than suffering a sharp contraction, the labor market cooled gradually, adding approximately 2.7 million payroll jobs during the year (an average of 225,000 per month) while maintaining a low 3.7% unemployment rate in December and a 4.1% annual increase in average hourly earnings. (Bureau of Labor Statistics)
This deceleration was precisely what policymakers aimed for: reducing excess labor demand and economic heat enough to bring inflation down without stalling employment altogether.
By December, consumer price inflation had dropped to 3.4%, clearly trending toward central bank targets. (Bureau of Labor Statistics)
While a soft landing became increasingly plausible, the experience of 2023 showed that higher interest rates did not affect the economy evenly.
Instead, financial pressure was concentrated in specific areas: vulnerable banks collapsed, home sales slumped as mortgage costs soared, and commercial borrowers faced stricter terms, even as targeted manufacturing construction surged in subsidized strategic sectors.
Ultimately, the United States absorbed monetary tightening because underlying strength in consumer spending, employment, and targeted capital buildouts offset headwinds in interest-sensitive sectors, redistributing economic pressure rather than succumbing to a general downturn.
VI. INTERNATIONAL
Entering 2023, the international economy faced a fundamental question on a global scale: could central banks curb inflation without triggering a widespread recession? Policymakers from Washington to Frankfurt were actively tightening monetary policy as the war in Ukraine continued, and Europe struggled to adjust to the loss of inexpensive Russian energy. At the same time, China abandoned its zero-COVID stance with expectations of a swift economic rebound, while a strong U.S. dollar and elevated borrowing costs placed significant pressure on developing nations. All the while, strategic competition, industrial subsidies, and efforts to fortify supply chains against geopolitical friction were reshaping the global trade landscape.
Although the global economy ultimately avoided the broad downturn many analysts feared, it became increasingly divided. China's initial reopening boosted output, driving official year-over-year GDP growth to 4.5% in the first quarter and 6.3% in the second. However, persistent housing market weakness and subdued consumer confidence cooled momentum to 4.9% in the third quarter before closing the year at 5.2%. (National Bureau of Statistics of China) For an economy accustomed to regular 8% to 10% annual gains, a 5.2% expansion marked a clear structural slowdown, even if it still outpaced most advanced economies.
Europe faced a very different set of challenges. While a severe winter energy crisis was averted, higher energy costs and aggressive monetary tightening heavily weighed on industrial output. The European Central Bank raised its deposit rate by another 200 basis points in the first nine months of the year, bringing it to 4%. Consequently, real GDP in the euro area grew by just 0.4% in 2023, as manufacturers grappled with elevated energy bills, sluggish foreign demand, and tighter credit conditions. (European Central Bank)
This contrast between American and European trajectories defined the international economic landscape in 2023. The U.S. combined robust consumer spending with major industrial construction, government incentives, and a favorable domestic energy position. In contrast, Europe contended with softer industrial demand and deeper exposure to the Ukraine energy shock, while China's reopening fell short of restoring its historical role as the primary engine of global growth. Meanwhile, emerging economies navigated their own distinct challenges.
Around July 1, the world economy had sidestepped a severe downturn, even if it had not returned to the synchronized expansion of 2017. Inflation was cooling in many regions, energy markets had stabilized, banking disruptions in the U.S. remained contained, and China had reopened. Yet rising interest rates, historically slow global growth, and an uncertain outlook for worldwide manufacturing continued to pose headwinds.
By October, the International Monetary Fund projected global economic growth of roughly 3% for 2023 and 2.9% for 2024—well below the 3.8% annual average recorded between 2000 and 2019. The IMF described the year's defining characteristic as divergence: U.S. growth forecasts were upgraded, while outlooks for China and the euro area were marked down. Although inflation was declining, core inflation remained stubborn. (IMF)
While the IMF noted that the likelihood of a soft landing had increased, it stopped short of calling the global economy strong. Instead, it pictured an international system that was managing to absorb a series of major shocks without collapsing. (IMF)
Global trade patterns provided clear evidence that traditional models of globalization were no longer driving overall expansion. Global merchandise trade volume contracted by 1.2% in 2023, as inflation and elevated interest rates weakened demand for manufactured goods. However, sectors connected to the green energy transition—such as electric vehicles and solar technology—outperformed the broader market, pointing to a shifting industrial landscape. (World Trade Organization)
The decline in international merchandise trade stands in sharp contrast to the industrial investment boom across the United States and North Carolina. Even as cross-border goods trade shrank, domestic factory construction surged, with North Carolina securing nearly $12.9 billion in capital commitments focused heavily on clean energy and advanced manufacturing. Rather than indicating a general decline in industrial activity, these trends reflect a fundamental realignment in the geography and logic of global production.
Corporate messaging reflected this shift. IMF research highlighted a surge in corporate earnings-call references to concepts like reshoring, near-shoring, and friend-shoring, driven by concerns over supply-chain concentrations and geopolitical stability. However, the Fund cautioned that market fragmentation carries real economic costs, potentially dampening long-term growth and global efficiency if investments are directed by political alliances rather than market efficiency. (IMF)
This changing environment creates a notable historical parallel for regions like the Foothills Corridor. While earlier industrial losses were driven by a globalization model focused on minimizing costs through distant supply chains, the policy landscape of 2023 placed renewed value on assets the region retained: domestic manufacturing sites, existing factory space, skilled labor, land, energy access, transport links, and proximity to major U.S. markets.
This shift does not mean legacy factory jobs will simply return. Modern reshoring and supply-chain adjustments rely on highly automated, capital-intensive facilities rather than the workforce levels of the 1990s. Instead, the primary opportunity lies in integrating regional assets into strategically critical supply networks where reliability, logistics, and domestic presence outweigh pure cost minimization.
By the close of 2023, global inflation had moderated significantly, but international trade remained soft, Europe stagnated, China grappled with structural property challenges, and manufacturing policy became explicitly aligned with geopolitical priorities. Globalization had not ended—hundreds of billions of dollars in trade and capital continued to cross borders daily—but its core logic had evolved: economic security was now factored directly into the global cost equation.
THE SYNTHESIS — THE WRAP
By December 2023, the economic system stood on considerably firmer ground than many reasonable observers had anticipated twelve months earlier—a fact worth emphasizing before examining the underlying vulnerabilities. Between March 2022 and mid-2023, the Federal Reserve pushed interest rates from near zero to over 5%. In quick succession, several major banks failed, mortgage rates approached 8%, housing activity slowed, credit conditions tightened, global merchandise trade shrank, China’s economic reopening fell short of expectations, and Europe barely grew. Yet, despite these headwinds, the United States avoided a broad recession.
Instead, employment expanded by approximately 2.7 million jobs, unemployment finished the year at 3.7%, real GDP growth reached an initial 2.5% (later revised upward to 2.9%), and inflation dropped steadily from 6.4% in January to 3.4% in December. Real median household income also rose 4%, marking an outcome noticeably better than traditional inflation-versus-employment trade-offs suggested was possible. (Bureau of Labor Statistics)
However, analyzing the individual levels reveals why framing 2023 merely as a successful soft landing overlooks essential details. At the household level, a resilient labor market allowed wages to outpace inflation again, gas prices eased, and real household incomes climbed as the immediate inflation crisis abated. Yet families did not return to 2019 conditions: home prices rose another 6.5%, mortgage rates touched 7.79%, credit card debt surged to $1.13 trillion, student loan payments resumed, and delinquencies began ticking up among financially vulnerable borrowers. In short, households gained relief from the pace of price increases without seeing relief from the accumulated level of prices. (FHFA.gov)
This distinction explains much of the divide between encouraging economic data and public perception. The rate of inflation could drop in half without grocery bills, insurance premiums, or home prices returning to prior levels. The economic progress was real, but so was the memory of past living costs.
The Hickory area offered an even clearer look at this changing economic structure. Major commitments continued to roll in: Corning opened a $150 million manufacturing facility, CommScope announced a $60.3 million fiber-optic expansion, Microsoft’s multi-billion-dollar data center project progressed, and public infrastructure investments helped catalyze hundreds of millions in private development. Yet local manufacturing employment in the Hickory-Lenoir-Morganton region fell by roughly 1,700 jobs between January and December, the labor force shrank by about 2,000, and unemployment held nearly flat at 3.4%. (Catawba County)
These figures challenge the traditional metrics of economic progress. Capital investment could rise even as manufacturing employment dipped, and unemployment could remain low while the overall labor pool contracted. A major manufacturer could expand regional capacity while navigating a 23% decline in global sales, just as a billion-dollar tech project might create only a few dozen permanent positions. Rather than a temporary statistical quirk, this reflects a structural shift: the local economy is becoming less labor-intensive even as its reliance on robust infrastructure grows.
Across the broader Foothills Corridor, 2023 demonstrated a similar capacity for adaptation as communities put legacy assets to work. Robert Bosch repurposed industrial property in Shelby, Maynard Electric expanded within an existing Morganton building, North Wilkesboro Speedway returned as a tourism and cultural hub, Chaddock expanded furniture manufacturing, Quantum Power prepared to reuse a large industrial site, and The Industrial Commons began transforming the former Drexel Heritage property into a regional textile upcycling and training center across three states. (NC Commerce)
Rather than restoring the old industrial economy, the region began repurposing the physical facilities, technical skills, civic institutions, and cultural assets built by earlier generations. Elevated interest rates made replacing facilities from scratch far more expensive, increasing the relative value of existing sites. While the Corridor still needs stronger regional coordination, workforce mobility, housing strategy, and capital flow to turn individual successes into shared prosperity, 2023 showed that industrial legacy can serve as stored capacity rather than a sign of permanent decline.
At the state level, North Carolina reflected these same broader trends. Statewide nonfarm employment grew by 99,400 jobs, population increased by nearly 140,000, visitor spending hit a record $35.6 billion, and state-backed development projects brought 14,114 announced jobs alongside $12.9 billion in planned capital—headlined by Toyota’s additional $8 billion battery commitment. Even so, manufacturing employment slipped by 4,000 jobs year-over-year. (NC Commerce)
This divergence does not point to an industrial downturn, but rather a buildout phase where future manufacturing capacity is being established faster than immediate hiring reflects. That lag makes infrastructure, utility scaling, housing development, supplier integration, and workforce support like child care all the more essential, as major capital commitments require time to translate into active, fully staffed operations.
Nationally, 2023 showed that higher interest rates could curb inflation without triggering widespread layoffs. Bank failures like Silicon Valley Bank, Signature, and First Republic revealed vulnerabilities on financial balance sheets while unemployment remained low around 3.5%, leading the Federal Reserve to deploy emergency liquidity through the BTFP to protect banking stability while keeping interest rates elevated to tackle price growth.
Simultaneously, national manufacturing facility construction doubled. Higher borrowing costs made housing, commercial loans, and traditional business expansion more expensive, yet federal incentives channeled significant capital into strategic sectors like semiconductors, batteries, and clean energy. In effect, interest rates acted as a filter, shifting investment toward policy-supported priorities rather than causing a general collapse in capital spending.
A similar reordering occurred internationally. Global merchandise trade contracted 1.2%, European growth stagnated, and China encountered real estate friction, leading corporate leaders and international institutions to focus increasingly on geoeconomic fragmentation, reshoring, and supply-chain resilience. While globalization did not end, its guiding principle shifted: supply-chain security and domestic reliability were now factored directly into corporate costs alongside sheer efficiency.
This evolution anchors 2023 within the broader chronology: 2015 marked normalization without restoration; 2016 brought recovery without reassurance; 2017 saw expansion constrained by capacity; 2018 brought the costs of growth; 2019 relied on household strength as manufacturing slowed; 2020 saw physical activity freeze under public support; 2021 turned reopening into inflation; 2022 forced deliberate monetary tightening; and 2023 delivered disinflation without breaking the labor market—even as higher interest rates created a clearer divide between subsidized strategic capital and the households, housing markets, banks, and legacy industries absorbing the cost of expensive money.
The year handed forward an economy where inflation had cooled without being fully resolved, rate hikes had paused without reversing, banks had stabilized while remaining exposed to high rates, real incomes were growing alongside high debt levels, home prices continued to rise despite low sales volume, and significant industrial investment still faced construction, workforce, housing, and infrastructure constraints.
Ultimately, the economy entering 2024 avoided a collapse without returning to the old baseline. Instead, it established a new operating environment defined by expensive money, tight labor, selective strategic capital, constrained housing, and shifting industrial geography. The key question moving forward was no longer whether monetary policy had worked, but how effectively the economy could operate under ongoing restraint and manage the divide between capital formation, employment, affordability, and physical capacity.
