As we close out the year and plan for 2026, North Carolina occupies an enviable space in the national economic landscape.
Job announcements continue. Consumers are still spending. Markets remain elevated. On the surface, the state looks steady, even strong. But beneath that stability are signals that deserve more careful attention — signals that help explain why confidence feels fragile even when the data looks fine.
I’ve spent much of this year speaking with economists, investors, and business leaders to better understand that disconnect. Two recent conversations stood out.
One was with Dr. Matthew Martin, regional executive at the Federal Reserve Bank of Richmond. The other was with Theodore Hicks, chief investment officer of Hicks & Associates Wealth Management and a board member of the John Locke Foundation. Together, their perspectives help translate national forces into what North Carolinians are actually experiencing.
Martin’s assessment of the broader economy was calm and grounded. Inflation remains above the Federal Reserve’s 2% target, but well below the post-pandemic highs. Unemployment sits near what economists consider full employment.
From a macro view, the economy is holding up. At the micro level, North Carolina consistently outperforms most of the country, benefiting from population growth, capital investment, and a seemingly never-ending pipeline of new jobs.
Yet Martin was equally clear that the labor market has changed over the past year. Employers are moderating hiring new people, but they aren’t laying people off in large numbers either. We’ve entered a low-hire, low-fire environment. Workers are staying put.
He described it as “job hugging” — people holding onto what they have rather than taking risks. That dynamic allows unemployment to remain low, but it also limits wage growth and economic mobility.
This also explains why consumer spending is resilient even as households feel stretched. Most household spending is tied to recurring obligations — rent/mortgage, transportation, food, utilities. As long as people are employed, that spending continues. But the strain shows up elsewhere.
Martin pointed to elevated delinquencies in credit cards and auto loans, particularly for vehicles purchased during the high-price period of 2021 and 2022. This isn’t a replay of 2008. Mortgage delinquencies remain relatively low. Still, it signals that many households are operating with less margin than the topline numbers suggest.
From the investment side, Hicks offered a complementary lens. His focus is not on narratives, but on evidence. Markets, he argues, often move ahead of fundamentals or in narrow ways that don’t reflect broad economic health.
When people talk about “the market,” they usually mean an index. But indexes can rise even when most stocks are flat or declining, driven by a small number of large companies.
That distinction matters for North Carolina because market performance shapes sentiment, retirement accounts, and business confidence. A strong index can create the impression that everything is working smoothly, even when participation is thin and risks are concentrated. Hicks cautions against confusing headline strength with underlying durability. The market may be signaling optimism, but it isn’t telling the whole story.
This dynamic mirrors what Martin described in the real economy.
Growth remains steady, but it is uneven. Much of the momentum is tied to productivity gains and investment in advanced technologies, including artificial intelligence. Productivity growth is beneficial over the long term — it raises living standards and competitiveness. In the short term, it can also reduce hiring needs and create mismatches between existing skills and emerging jobs.
Trade policy has added another layer of complexity. Martin noted that tariffs introduced earlier this year initially created uncertainty for businesses. Over time, companies adjusted, but not without cost.
Some input prices rose. Margins narrowed. Consumer-facing businesses, in particular, have struggled to pass higher costs along fully. Those pressures may persist into 2026, quietly influencing hiring and investment decisions even if they don’t dominate headlines.
The risk heading into 2026 is not collapse. It’s complacency. Stability can mask fragility, especially when households and investors mistake strong averages for universal strength. North Carolina has momentum. Preserving it will require paying attention not just to what looks good on paper, but to the quieter signals underneath.
