As the national economy slows and policymakers in Washington hope for a “soft landing,” one state is quietly demonstrating the value of economic freedom. North Carolina entered 2026 with a 3.9% unemployment rate — half a percentage point below the national average — and added more than 80,000 jobs over the past year, far outpacing national growth. While the country decelerates, North Carolina is holding its footing. That contrast is not accidental.
The resilience is broad-based. Ninety-seven of North Carolina’s 100 counties reportedunemployment rates at or below 5% in December. Major metro areas continue to post particularly strong numbers: Raleigh’s unemployment rate stands at 3.0%, Durham-Chapel Hill at 3.1%, and Charlotte at 3.6%. Even as the national labor market has cooled and unemployment has risen, North Carolina remains below the national rate and has experienced a smaller year-over-year increase.
Why is North Carolina outperforming?
Several structural factors are at work. The state has benefited from strong in-migration, a diversified, service-based economy, and sustained growth in construction, professional services, and health care. But policy has played an important role as well.
Over the past decade, North Carolina has implemented one of the most significant tax reform efforts in the country. Since 2013, the state has reduced its top personal income tax rate from 7.75% — once the highest in the Southeast — to 3.99%, with further reductions scheduled, and lowered the corporate income tax rate to 2.25%, with a full phaseout planned. These reforms helped move North Carolina from one of the worst business tax climates in the nation to one of the best, while income and GDP growth outpaced national averages. At the same time, disciplined budgeting allowed the state to build billions in reserves. The result was not a short-term stimulus spike, but a stronger long-term competitive position — one that is now proving its value as the national economy cools.
When lawmakers enacted tax reforms in 2013 and further reforms in successive years, criticswarned that lowering tax rates would undermine the state’s fiscal stability and fail to deliver meaningful economic benefits. Some argued that the changes would erode revenue and strain public services. More than a decade later, the evidence tells a different story. North Carolina has built one of the largest savings reserves in its history, strengthened its balance sheet, maintained manageable debt levels, and consistently outperformed national labor market trends. The dire predictions of fiscal collapse did not materialize. Instead, the reforms coincided with stronger income growth, rising employment, and sustained in-migration. While reasonable people can debate the distributional effects of tax policy, the state’s economic and fiscal performance over the past decade suggests that pro-growth reform did not weaken North Carolina — it strengthened it.
The result is an economy with underlying momentum. When the national economy slows — as it is now — states with strong structural fundamentals tend to experience softer slowdowns. North Carolina’s faster job growth, lower unemployment, and broad geographic strength indicate that it entered this period of national cooling from a position of relative advantage.
North Carolina’s resilience is evident not only in employment data but also in its balance sheet. As of June 30, 2025, the end of the last fiscal year, the state’s Savings Reserve (the Rainy Day Fund) stood at $3.62 billion — more than 12% of prior-year appropriations. Governmental revenues grew faster than expenses in fiscal year 2025, resulting in a $5.02 billion increase in net position. Meanwhile, debt service remains well below established limits. These indicators reflect not only economic growth but also fiscal discipline — a combination that enhances the state’s ability to weather national slowdowns.
This does not mean North Carolina is insulated from a deeper national downturn. Manufacturing employment has softened, mirroring national trends, and a more severe recession would affect the state. But in a soft-landing scenario, where inflation eases and growth moderates rather than collapses, states that have built durable economic foundations are better positioned to outperform.
As policymakers consider the next phase of reform, the lesson is clear: long-term competitiveness is not built through short-term stimulus or targeted incentives. It is built on economic freedom — consistent, predictable, broad-based policies that reward work, investment, and entrepreneurship. North Carolina’s relative strength in a cooling national economy is not accidental. It reflects a deliberate commitment to economic freedom — and the resilience that freedom creates.
