North Carolina's Stable Unemployment Masks Sectoral Risks: Navigating Investment Opportunities Amid a Regional Slowdown

North Carolina's unemployment rate has held steady at 3.7% since December 2024, defying broader national trends. However, beneath this surface stability, sector-specific shifts reveal vulnerabilities in key industries and opportunities in others. For investors, the state's mixed performance underscores a critical question: How should portfolios adapt to a potential slowdown in manufacturing and tech while capitalizing on resilient sectors?

Sectoral Divides: Growth vs. Decline

Recent data highlights a stark divide between sectors. Year-over-year, construction (+2.5%), trade/transportation (+1.2%), and education/health services (+2.9%) are expanding, while manufacturing (-1.1%) and professional services (-0.4%) lag. This divergence reflects broader economic pressures, including rising production costs from tariffs and shifting consumer demand.

The state's unemployment rate has consistently outperformed the national rate, but the margin narrowed from 0.5% in 2024 to 0.5% in May 2025—a sign of waning resilience.

Risks: Manufacturing Decline and Consumer Spending

Manufacturing, which shed 5,400 jobs annually, faces dual challenges:
1. Tariff-Driven Costs: Federal tariffs on imported steel and semiconductors have raised production expenses, squeezing margins.
2. Global Competition: Weak export demand, particularly in textiles and machinery, has accelerated layoffs.

This sector's decline risks spillover effects. In counties like Edgecombe (5.3% unemployment), manufacturing job losses could reduce local consumer spending, particularly in autos and home improvement—a blow to retailers like Lowe's (LOW) or Home Depot (HD). Meanwhile, real estate markets in manufacturing-heavy regions may face downward pressure, as seen in Catawba County's flat housing prices.

Opportunities: Contrarian Plays in Resilient Sectors

While manufacturing stumbles, other sectors offer stability:

1. Healthcare and Education

North Carolina's education/health sector added 18,100 jobs in 2024–2025. Wellstar Health System (WELL) and UNC Health are expanding rural clinics, addressing care gaps. Investors might consider Community Health Systems (CYH) or regional hospital stocks, which often outperform during economic slowdowns due to inelastic demand.

2. Trade and Logistics

Trade/transportation grew 1.2% annually, fueled by e-commerce and port activity. C.H. Robinson (CHRO), a logistics giant with a strong NC footprint, benefits from rising delivery demands. The sector's resilience aligns with Wealth Enhancement's analysis: “Logistics firms with automated warehouses and rural distribution centers thrive in uneven recoveries.”

3. Government and Public Services

Government jobs rose 2.1% year-over-year, a rare safe haven. Public service ETFs (IGOV) or municipal bond funds tied to NC's stable tax base could offer steady returns.

Bond Yields and Economic Sentiment

Bond markets reflect cautious optimism. NC's municipal bonds (e.g., NC GO 2040) yield 3.8%, slightly below the 4.1% national average—a sign of investor confidence in the state's fiscal health. However, if June data (due July 18) shows rising claims in manufacturing, yields could dip further as funds flee risk assets.

Investment Strategy: Sector Rotation and Tariff Hedges

• Short-Term: Rotate out of manufacturing-linked equities (e.g., Hanesbrands (HBI)) and into healthcare/education plays.
• Long-Term: Target companies insulated from tariffs, such as Wabash National (WNC) (truck manufacturing with domestic supply chains) or Duke Energy (DUK) (regulated utilities with steady demand).

Conclusion: Monitor the July Data Release

North Carolina's economy remains a microcosm of national challenges. While the state's unemployment rate holds steady, sectoral declines in manufacturing and professional services suggest underlying fragility. Investors should prioritize defensive sectors like healthcare and logistics while hedging against tariff risks. The July 18 jobs report will clarify whether the slowdown is deepening—or if NC's resiliency is a mirage.

As Wealth Enhancement's analysts note: “In uneven recoveries, contrarians win by backing sectors that defy the downturn.” For now, that means looking beyond the unemployment rate to the sectors powering—or faltering—beneath it.