(upbeat instrumental music) - [Narrator] This is "Carolina Business Review."

Major support provided by High Point University, The Premier Life Skills University, focused on preparing students for the world as it is going to be.

BlueCross BlueShield of South Carolina, an independent licensee of the Blue Cross and Blue Shield Association.

Sonoco, a global manufacturer of consumer and industrial packaging products and services with more than 300 operations in 35 countries.

- As we began 2025, the big issues we were facing then, a year ago now, were national debt and deficits, still some echoes of that COVID large commercial real estate pressure.

AI was becoming more central and more of a central meme, immigration, from a different point of view than it is now, and tariffs also began emerging as a possible threat to undermine the uncertainty of business confidence.

I'm Chris William.

Welcome again to the most widely watched and the longest-running dialogue on Carolina Business Policy and Public Affairs.

And as we do right about every time, right now is the look back on this year in 2025.

And then part two next week is our 2026 forecast.

It is always a lively discussion with our four resident economists.

They act more like siblings than colleagues, but it's fun.

And we begin right now.

- [Narrator] Major funding also by Foundation for the Carolinas, a catalyst for philanthropy and driver of civic engagement, helping individuals, nonprofits, and companies bring their charitable visions to life.

Truliant Federal Credit Union, proudly serving the Carolinas since 1952 by focusing on what truly matters, our members' financial success.

Welcome to brighter banking.

And Martin Marietta, a leading provider of natural resource-based building materials, providing the foundation on which our communities improve and grow.

The "Carolina Business Review, Economic Year In Review," featuring Laura Ullrich from Indeed, Dr.

John Connaughton of UNC Charlotte, Dr.

Joseph C. Von Nessen of the University of South Carolina, and Dr.

Frank Hefner from the College of Charleston.

(dramatic instrumental music) - Happy holidays, Merry Christmas.

Glad to have you all here.

This is fun.

(panelists greeting) Yeah, this is really great.

These are, these two programs back to back in the next couple weeks are my favorite, just because it's unscripted and just kind of a bit of a free-for-all.

(panelists laughing) Laura, I'm gonna start with you.

And by the way, before we go any further, you have been so nice in the last couple years to step in as guest moderator.

Thank you for doing that.

- Yeah, absolutely.

Thanks for the opportunity.

It's been fun.

- I'm hovering over you (Laura laughs) and the crews been... - It's great.

- And you were very elegant about it, so thank you.

I do wanna start with this question.

So, we're looking back now on 2025, what was textbook about this year?

- Yeah, I think when I think about 2025, the first word that does come to me is uncertainty.

And I think that the fact that people and companies have a hard time making decisions in the presence of all the economic uncertainty that's been going on with tariffs and immigration and other policy, it slows down economic activity.

And we've seen that in the labor market, and seen that amongst small businesses.

And so, I think that's the one thing that comes to mind in terms of things worked out the way I would've thought.

- Okay, so textbook, Joey, you still teach a class, right, at USC?

- Yes.

- So, that's fair.

So, what would be textbook that you would've taught about economics that actually panned out?

- Well, I would zoom out a little bit and look at trends that we've seen that are long term and that haven't been disrupted, just because of the uncertainty that we've seen this year.

One would be the growth in healthcare demand.

And it's a major driver for long-run growth because of the retirement of the baby boomers.

And also the population growth that we're seeing in the Southeast, especially in the Carolinas region.

That is a long-term trend that's likely to accelerate going forward.

And both of those have been very steady, and really haven't seen any disruption this year.

- Textbook, John, what do you think?

- Well, I think there are a couple of things about '25 that are interesting.

One was a positive move, and that was the passage of the, as they call it, the "Great Big Beautiful Bill" to keep tax rates where they were as opposed to them rising up again.

And then on the negative side, it was tariffs.

I mean, tariffs were a crazy thing.

I'm not necessarily saying I'm against tariffs or for them, but just the way they bounce around left and right.

It creates that uncertainty Laura was talking about.

It makes it really difficult.

One day you're looking at a 39% tariff like Switzerland, and then the next day you're looking at 15% but you're not sure the 39's not coming back.

- Yeah, yeah.

Dr.

Hefner, what do you think?

- That's a very good question because I don't have a textbook that has a single model in it that would actually describe effectively what has happened in the past year.

Basically, if you took all of the dissension in economics, and there is a little bit sometimes, I mean, we disagree.

There's a left hand, the right hand, and who knows where else things are coming from.

And put it all together, pretty much nobody would be able to hit a blender and say tariffs are gonna cause this problem.

The uncertainty issue for sure.

But we go back to history, Smoot-Hawley Tariff, and this created the Depression.

Look at that as a trend, we would've thought things are gonna be pretty bad.

We don't have good models for this.

We do have a situation where if the supply-side say, "This is gonna create an inflation," and if the demand-siders say, "This is gonna create an inflation," I bet we're gonna have an inflation.

- Okay, so you all in some, referred to tariffs.

Let's talk about this for a second and try to zoom out if you can, and not, you all don't politicize.

I don't mean that, but try to look at it scientifically.

Are tariffs, John, are tariffs bad if they blow something up and cause creative destruction?

- Oh sure, if they blow something up.

But that's- - But isn't that creative destruction?

Doesn't that- - Not, not, okay, Chris, slow down.

(panel laughing) Okay.

- Okay, here comes, here comes that part of John.

(panel laughing) And I love this about him.

- All right, so tariffs this year have created problems for individual countries and companies, okay, that are domiciled in the US.

So, countries have had problems because the tariff rates have bounced around.

Companies have had problems because their supply chain has tended to be international.

But in terms of the overall effect on the economy, I mean, even Powell said the other day in his press conference that they really don't, haven't seen a big impact of tariffs on inflation, which was the real concern, at least initially, that we had.

If you look at the CPI and the Core CPI from the peak when it was 9.1%, they've come down, down, down, down, down, down, down.

And what they've done is flattened the last year or so.

And so, tariffs may have caused the prices to stop coming down, but it hasn't risen them back up yet.

- So, Laura, you're a recovering Fed banker, right?

- Yes.

(panelists laughing) - Does the Fed, you think the Fed was, the Fed was initially worried about tariffs?

I'm not asking you to speak for the Fed, but I mean you kind of know the thought there.

Were they worried about it, not worried about it now?

It's not a big deal.

- I think people are still worried about it.

There's still so much uncertainty about where this lands.

But also, I will say that I actually saw a great graph Joey had produced where he showed the amount of the, just the skyrocketing imports that we had leading up to the tariffs.

There was, as you mentioned, at the beginning of the year we kind of knew this was coming.

So, companies brought in a bunch of stuff from overseas.

And so, I'm not sure we're done seeing the impacts of tariff-related inflation yet.

And one of the reasons I say that is because we're not just, we're not just putting a tariff on final goods.

We're putting them on intermediate goods.

So, we're putting them on the goods that BMW's using in Spartanburg and Toyota's using up in Chatham County, right?

So, it does impact US companies, manufacturing companies heavily.

And we have seen manufacturing employment, for example, has been quite, quite restrained this year.

And so, I do think there are impacts and there might be more to come.

- Joey- - And that's- - Yeah, thank you.

Go ahead.

- Oh, I was just gonna add to that, that the uncertainty is almost certainly, uncertainty is certainly not going away with respect to the tariffs because we also have to look at the Supreme Court right now, which is evaluating some of the legal precedents of how these tariffs have been imposed.

If they are ruled unconstitutional at any level, what does that mean practically speaking?

I mean, are we gonna pay this money back to the companies?

I mean, how does that work?

So, even if we say, "Okay, well maybe the tariffs, the impacts on inflation are limited or we've seen most of that," the uncertainty associated with that and other things are gonna continue into 2026.

- But, and I'm not arguing for the current administration, but the bell's already been rung.

The tariff effect - Yes.

- has already happened.

- The bulk of it, - Some of it.

- at least in terms of the impact on inflation.

So, as we look forward, we're not necessarily anticipating a significant increase.

- So, I wanna shift, hold on, I wanna shift, 'cause we'll go down this rabbit hole on tariffs.

And I want to, so in 2025- - But I wanted to talk about coffee, milk, and beef (laughs).

- We're getting to the inflation.

- And eggs.

And eggs.

- And eggs.

- So, in 2025 - Yeah, always eggs.

- we saw inflation dramatically come down.

Is that, we'll talk about where that goes next year.

You don't buy - I don't think it dramatically went down.

- that it went down?

- Not in 2025.

- No, no, no.

- From what, 9% to 3%?

- Well, from 2022.

- Yeah, from the peak of 9.1 it came down, but it's been sticky for the last year.

- It's actually went up over the last 12 months from 2.4 to 3.0 as of September.

- Okay, so is it finding- - But when you look at the trend line it's, there's that little dip.

- Yeah, it's slowly, yeah.

- And it's just, it's like this, I mean, it's like this.

- So, is it finding a natural level?

- Well, the problem is is that are we finding it?

I mean, are we actually measuring it correctly now given everything that's been going on with the dislocations in the government, everything else?

I mean, the classic story was the two people in Omaha that did all the survey work were removed from their position.

Well, then who's doing the survey work there?

- Yeah, they're not, they're imputing, they're imputing more and more of the data.

So, they used to have people, I mean, they still do have people all over the country, but they closed some of those offices.

So, they have to just impute those numbers now.

- Which is a nice way of saying guessing.

- [Laura] Yeah (laughs).

(Frank laughing) - [Laura] Fancy guessing, fancy guessing.

- [Chris] Use AI.

- Yeah.

- Yeah, good luck.

- Yeah.

- The other thing that kind of happened in the background, and John, you've talked about this over and over.

And I know you all have on this program, was the baby boomer demographic is slowly, and maybe not so slowly.

There's a cliff that's probably gonna happen, is leaving (laughs), is leaving the workforce.

When does that happen?

- What do you mean when?

- Yeah, right (laughs).

- Does it happen now?

Is it happening now?

- It's been going on for quite, two things about the baby boomers.

Every time they reach a certain threshold in your life cycle, they've created problems.

The baby boomers were the, no, seriously.

The baby boomers were the problem in the '80s with the dual income, no kids concept.

- [Chris] Right.

- And the other problem is that it's not, institutions could have seen this coming.

And they went blindly along in their constant paradigm.

Healthcare costs, we're complaining about healthcare costs going up?

All right, the big reason it's going up is 'cause all the old people get sicker more.

And that's- - Using the system.

- Using the system, and that's making the cost go up.

And we don't have the medical, the supply-side medical competency to handle the amount of patients that we are dealing with now.

And the medical community could have seen this coming, the government could have seen this coming, nobody paid any attention to it.

- Okay, so that, yeah, so thank you.

Director of Research at Indeed, do you know a little something about hiring?

- Yes.

- And about jobs?

- Yes.

- Do you see that differently?

- No, I don't see it differently.

I would add onto that, and then I'll make a comment about the jobs.

I see it the same, but also I think what we didn't know and maybe couldn't have seen coming was how wealthy this generation was gonna be.

And the increase in asset values over the last five years has exacerbated that problem.

So, it's not just that there's a giant generation.

There's a giant wealthy generation that has a high taste for healthcare consumption.

So, they have the money to consume it, and other services too.

In R&D data we absolutely see this.

The demand for jobs in the healthcare sector remains extraordinarily strong in South Carolina.

The number one job, if we look at it in terms of like how demand has grown, the number one job in South Carolina for demand is physicians and surgeons.

There's a tremendous demand for healthcare.

And not, you know, the four of us, we all have PhDs, but we can't snap our fingers and become healthcare workers, right?

You have to have certain training, right?

You have to have the skills related to it.

And so, it's a problem because of the supply constraints we have as well in education.

- Okay, in about 30 seconds, and I promise I'm gonna pull you in about 30 seconds, you said that the wealth has gone and gotten much larger with... - Absolutely.

- Won't that transfer to the next generation?

- Right, and that's problematic as well, right?

Because.

(panel laughing) Because- - Taxes, taxed twice?

- Well, there's actually, no, I mean, it'll reduce the work effort of those children.

And there's actually, I've read some things that are predicting- - You sound like a parent.

- I know, I am a parent, right?

But there's also some people that think that Gen X, the Gen Xers and the older millennials will actually retire much younger than the baby boomers did because of that wealth transfer.

And if that happens, there's additional labor supply issues.

So, that transfer of wealth is gonna be great for some people, but could be problematic for the labor supply.

- So, let's switch gears a little bit.

In South Carolina and in North Carolina, North Carolina had its historic capital investment number, or pretty close, it was 9-plus billion.

35,000 employees added.

South Carolina, substantial capital investment.

How much more red is left on this candy of that kind of growth in capital investment and growth?

- Well, in South Carolina, I think there is a lot of room for further expansion and growth.

And we have, we've certainly seen that in the last several years.

We've continued to see capital investment, and at record levels, since the pandemic in general, if we look at the 2020s overall.

And South Carolina is very aggressive at recruiting manufacturers to the state.

We've done a very good job of that in recent years.

And we are historically a manufacturing state, and we are very well set up to recruit that type of industry, particularly from a workforce perspective where we, again, because we have that history, we have a strong technical college system that is good at meeting the needs of employers, identifying what those needs are.

And that combined with our geographic location, puts us in a very good position for manufacturers who wanna locate in the Southeast where we have a growing population, manufacture their products here, and then they can send them either abroad or to an increasingly concentrated population base in the US which is more and more moving towards the East, towards the East Coast.

- Does South Carolina have the capacity for that growth as it is right now?

- That's a good question.

- Education accelerator.

- Well, I was thinking about the labor force issue.

And that's been one of the prevailing common complaints is labor force.

Yes, we have a very strong technical system.

There's no doubt about it, it's a good technical program.

Students aren't going into it, and they're not picking majors that allow them to do these interesting jobs.

One quick example, welding.

We are short welders.

If you want to weld on an assembly line, there's a robot for that.

But if you wanna do any other kind of welding like cranes at the port or something like that, that's a very skilled, high-paying job.

And we're just not attracting the people into that field.

- If it's, gotta be six-figures.

- And that's broader too.

That's nationwide too, - That's nationwide.

- what we're saying, yeah.

- Yeah, but a lot of the technical colleges right now, I've spent a lot of time with them, and a lot of them have wait lists for these technical trade programs right now.

The problem is they're very expensive to scale.

- Right.

- And the funding model does not reward them for scaling it, right?

- Well, does the technical college and the community college in North Carolina not scale that in a cost-effective way?

They say they do.

- So, North Carolina has, there's NC Propel, which is a new model that's on the table that will incentivize scaling.

Different for high demand, these high tech, high-demand skills.

But right now, you get the same amount of money for a student, whether they're in one of these high tech, high-demand fields, in South Carolina as you do a student that is not.

- Okay.

- And so, the funding model in North Carolina is a little different.

And the high-demand fields, they get slightly more money per student.

- And the other problem that we've solved in the past was immigration from other states.

And with the high price of housing now, that makes it that much more difficult, you know?

So, it's gonna be hard to attract those high-skilled jobs from the Northeast back to South Carolina.

- Housing for those workers that are getting these new jobs and moving in because of all this capital investment, we saw housing continue to go up in 2025.

- Yeah, but it slowed in '25 compared to previous years in terms of prices, so.

But we've got supply-side issues in the housing industry, both locally and nationally, that are creating these problems.

And a lot goes back to the types of corrections that were made because of the Great Recession, and the fact that we had the crash in the housing industry back then with the, you know, what do they call 'em?

NINJA loans.

- Yeah.

- No income, no job, no assets.

So, yeah, that's been a drag for quite some time.

And it has, and now it's even more problematic because people aren't doing what they typically do.

And that was buy a house, three or four years later, income goes up, buy another house.

They're staying because they've, how many people have 3% mortgages?

- Yeah, absolutely.

- Lots of folks.

And a 6 1/2% mortgage doesn't look all that attractive when you've been paying for the last five years on a 3%er.

So, we've got supply-side problems on the housing side, particularly in North and South Carolina, because we have influx of people.

I mean, Charlotte gets 25,000 new people, immigrants, a year.

- Just the Metro?

- Just the Metro, no, just the, yeah.

- The Charlotte Metro?

- Yeah.

- Well, okay, go back to, you said because of supply problems.

Are you talking about the cost of construction, of building a house?

- There's that, but there's also the skills to build the house.

I don't know whether anybody paid any attention to what happened when there was the ICE crackdown in Charlotte.

If you were to go by housing construction, there's nobody there where those houses were being constructed for about two weeks.

And they're just slowly starting to come back now.

- Was the immigration, you call it a crackdown, John, but it clearly was front and center.

Did that piece surprise you this year?

- Well, it's hard to get a read on specifically how much it's affected different industries.

- Jobs and immigration, yeah.

- But it didn't surprise me in terms of what we have heard in terms of disruptions, at least anecdotally, among businesses, so construction, but also agriculture, retail trade to some extent as well.

So, it's hard to put numbers on it.

I don't know if anybody else has been able to do that.

- Yeah, so we have some data at Indeed - But we do have, yeah.

- that is interesting because we can tell when people are searching for jobs from overseas.

And so, I think one of the things that's interesting is it's easier to think sometimes about the impact that it's having on the kind of lower end of the wage distribution in jobs, in landscaping, leisure and hospitality, construction.

But it's also having a major impact on the upper end, so physicians, engineers, professors like us.

And one of the things that we've seen in our data is that the demand for people overseas, high-skilled demand for coming to the US and have to get jobs, has plummeted.

And it is because of the fear, we think, around immigration.

And the idea that even if you came on a visa it might not be safe, you might be detained.

And so, we've seen a real change in interest from abroad.

And the reality is that if you go into a company that has a focus in engineering or life sciences, or whatever, there's gonna be a lot of immigrants that work there.

We don't produce enough people with PhDs and graduate degrees in these programs.

And so, those sectors are having serious constraints as well.

- And where we do possibly, could educate them, most of those PhDs in the STEMs are also non-US citizens.

- Correct.

And they're cutting back because their funding's been cut too.

- Right.

- So, it's a bad- - Yeah, we've seen a real decline in foreign students, graduate programs at our university.

And speaking of that, I mean, not only that.

There's also the H-1 visa cost.

That's real money now, and we don't know how that's gonna play out going forward.

- And this filters.

- Well, we'll- Go ahead.

- Oh, I'm sorry.

I was gonna say this filters up to Fed policy as well in terms of looking at the impact on the job market.

Because one of the things that Jay Powell has talked about is the uncertainty, or trying to tease out how much of the slowdown in the labor market is a lack of demand versus a lack of supply.

- Yes.

- And if we're in a situation going forward where immigration is gonna be lower in the next several years, then we may not need as much job creation for sustained economic growth.

And so, that changes the sweet spot, what that looks like.

- Okay, so just in general, Joey, what does the impact of immigration have on that employment number for the US?

- Well, the sweet spot right now is generally between 100 and 200,000 jobs per month.

- No, I'm talking about a percentage so people can get their head around the grand scale of this.

- Well, I don't know that I could give a percentage on that, but we've seen some sense of estimates of what that could look like.

Maybe the lower bound goes down to about 50,000 jobs per month.

- [Chris] Okay.

- Compared to 100, so it cuts down maybe by half in terms of what we need.

But again, this is part of the uncertainty.

We really don't know what that base level is.

And that's one of the things the Fed's dealing with.

- I do know that in North Carolina, 12% of all workers are foreign born.

But interestingly, 21% of all children under 18 have at least one foreign-born parent.

So, this also impacts the future workforce.

So, if you look at fertility rates, we've had very low fertility rates in the United States, but immigrant families have higher fertility rates.

And so, it has a serious impact, even- - So, the animal spirit of that effect is going to have, may be immeasurable.

- It's hard, like Joey said, it's hard to impact directly, but if you think about the fact that it's 21% of children, that's a lot.

- Yeah, and we have a, a large percentage of our labor force is made up of non-Americans, I guess you could say, non-native born.

And the problem we've been having for the last 50 years is that we don't actually have an immigration policy.

- [Chris] Right.

- And you look at a lot of other countries, like Canada, their immigration policy has an economic base to it.

In other words, they take a look at what they're going to need, where they have problems with lack of supply of certain professions and occupations, and those people get an easier end to Canada.

Other countries, you gotta come in with a million dollars and you can get in, and that kind of thing.

But nobody has this crazy policy that we have, which is (vocalizes).

- Okay, well as we work (panelists laughing) through whatever that policy is, one of the things we've heard about over and over- - No, Chris, we should have an immigration policy that works for America.

- Okay, and I'm not discounting that, but one of the things we heard over and over again, decades on this program, was as we face growth in the Carolinas, our biggest challenge is finding talent.

- Yeah.

- I'm sorry, it sounds a little like the sky's falling folks.

Because we've been hearing that for so long, but yet companies continue to grow here.

- Right.

- So, where's the disconnect between what, even what we're saying now, the growth we just posted in the Carolinas and the jobs either coming or not coming.

Where's it not working here?

- Well, for a lot of the positions, for a lot of the companies that are coming in, they're not hiring as many people as they used to.

So, we don't really need to generate higher-level jobs that we were talking about maybe 20 years ago.

- But a Scout Motors, what is that, 3 or $5,000 jobs?

- 5,000 actually.

- 3 or 5,000 jobs.

- Well, I think the disconnect is also regionally versus nationally.

And there are pockets of the United States that are not growing or growing very slowly.

So, more and more of the population is coming to this region.

And so, that's unique.

Not every Southeastern state, but most are really benefiting and are outpacing these national trends.

So, I think part of it is just the regional difference.

- But Joey, how much longer are we gonna be benefited by that before we wind up having the congestion problems that these folks are- - Right.

- That gets back to your housing, - That's the question.

- yeah, housing supply.

- Yeah, and the price of housing here in the Carolinas compared to what it was say five years ago.

And how long is it going to be before we start having those congestion problems, and it makes it more difficult to live here?

- Go to Charleston, right?

- Right, yeah.

Try to leave Charleston.

- But we also have to compare it to New York where they're coming from, so where is that, - Right.

- where's that cutoff?

- Well, but there, also I think about not everybody is mobile and we have been the recipient of a lot of migration, but in theory over time there's fewer and fewer people that would be willing to migrate, right?

- Because the wealth effect, it tends, it's getting- - Yeah, and there's just people that wanna stay where they are, right?

Because of family connections or whatever.

So, you've got some people that are really eager to leave, and some people are a little eager, and then people that are never gonna leave, right?

And so, over time you would expect that spigot to kind of maybe not run dry, but to slow down a bit.

And I don't know, I don't know when that is.

- The other side of the housing market is that- - You've got 10 seconds.

- That restricts the number of people that are mobile.

- Yes.

- Because the house becomes an anchor.

- Yes.

- And that's another issue.

- Unless we can fix transportation, which could be a completely different dialogue, but.

- Right.

- You're gonna have to end right there.

- You're gonna fix transportation and healthcare.

(panel laughing) - And we're gonna do all that before the next show.

Thank you, we're done.

Thank you.

Thank you.

Thank you.

Thank you.

Thank you.

Stay here, part two next week.

Until next week, I'm Chris Williams.

See you.

Bye.

- [Narrator] Gratefully acknowledging support by Martin Marietta, Truliant Federal Credit Union, Foundation for the Carolinas, Sonoco, BlueCross BlueShield of South Carolina, High Point University, and by viewers like you.

Thank you.

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