Overview

As the state’s economy continues to diversify, the broad service sector increases in importance. Especially noteworthy has been the rise of several of the larger banks to national prominence. This has led Charlotte to become the second largest banking center in the nation, a remarkable feat for what not long ago was a relatively poor, heavily rural state! Much of the credit for this rise to prominence, as noted in The North Carolina Atlas, goes to the 1929 General Assembly. In that year, the state became one of the first to authorize statewide branch-banking. This act permitted banks to become larger than those in most other states. Later the state’s banks led the charge to permit inter-regional banking and North Carolina’s banks grew through aggressively pursuing the acquisition of banks in other states. As noted in the following section, these mergers continue today and the state is now headquarters to three of the country’s top 15 banks.

Retail stores provide goods and services to the state’ growing and increasingly affluent population. They also serve a strong flow of visitors to the state. Thus, these two economic sectors are closely inter-related. Business travelers as well as vacationers have become major contributors to the economies of the state’s urban areas, helping to support their shopping centers, restaurants and other retail businesses. These concentrations of stores, in turn, attract shoppers from many surroundings counties. But not all retailing clusters are in the cities. A number of mountain and beach recreational/retirement areas count on their visitors to support higher levels of retailing than could the resident population alone. These shopping centers add to the appeal of broad beaches and mountain vistas in attracting millions of tourists to the state, some of whom decide to move their residences here. These tourists, new residents and the retail stores that they support, in turn, bring more business to the state’s banks, helping them to grow even bigger. Thus, there is a strong symbiotic relationship between these three types of economic activities that, at first glace, may appear to be unrelated.

Charlotte, US's Second Largest Banking Center. Bank of America building (right) and the Wachovia Building ( far left).	Banking Retailing Travel & Tourism	Shops & Stores in historic downtown Asheboro (Mike Teague)
Bank of America Stadium, Home of the Carolina Panthers
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Banking

North Carolina continued to be a major player in national banking circles during the early years of the 21st century. As Table 1 shows, seven of its banks ranked among the nation’s top 200 in terms of the assets they controlled as of March 31, 2003. Bank of America ranked third largest in the country and Wachovia came in fifth. Together, these two mega-banks had assets in excess of $1 trillion. Both banks are headquartered in Charlotte, ranking that city second only to New York as a leading banking center.

Wachovia is the product of the recent merger of two other large institutions, Winston-Salem based Wachovia and Charlotte’s First Union. Not shown in the table is the fact that BB&T acquired First Virginia Bank and its $3.1 billion in assets in July, 2003.

Even more dramatic was Bank of America’s acquisition of Fleet Boston. This $47 billion merger, announced in October, 2003, was the third largest in US history. It provided Bank of America with a new and significant presence in eight Mid-Atlantic and New England states. However, this merger may not be entirely good news for the bank’s Charlotte headquarters. Two business units, small-business banking and asset-based lending, will be moved from Charlotte to Boston, leading one analyst to observe that the center of the bank will move farther north.

In June, 2004, Wachovia announced its acquisition of Sun Trust Corporation of Alabama for $14.3 billion in stock. This deal gives Wachovia the largest share of deposits in the entire southeastern US and increase its assets to $464 billion. This moves it to 4th place in assets among all US banks.

These recent mergers serve to further elevate the national status of the state’s largest banks. Adding Fleet Boston’s assets to Bank of America’s portfolio raised its total to $933 billion, second only to Citigroup, Inc. and BB & T’s recent merger moved it to 13th with $90 billion in assets.

These large banks have played a pivotal role in bringing Charlotte and the rest of the state to the attention of business decision makers and others across the country. For example, its commonplace to see both Bank of America and Wachovia logos on national television at major sports events.

The national role of North Carolina’s banks is further exemplified by the magnitude of deposits they hold in other states. All told, banks headquartered in the state controlled over $458 billion in deposits in 28 other states as of June 30, 2002. As shown in Figure 1, almost $111 billion were held in California, with another $86 billion in Florida. Total deposits in excess of $30 billion each were held in Georgia, Texas, and Virginia. Five other states, as geographically dispersed as New York and Washington, each had at least $10 billion in deposits.

Retailing

North Carolina’s retail establishments recorded an estimated total of nearly $91 billion in retail sales in 2002. This was equivalent to $10,933 for every resident. Figure 2 displays the extent to which metro areas dominated these sales. Mecklenburg and Wake, the state’s two most populous counties, together accounted for one-fifth of the state total, led by Mecklenburg’s $10.6 billion. Forsyth and Guilford, the core areas of the Triad metro region, together accounted for another $11.2 billion. Other state leaders were Cumberland and New Hanover, sites of Fayetteville and Wilmington, respectively, each with just over $3 billion. The central counties of all the rest of the state’s metro counties had at least $1 billion dollars, including Buncombe’s $2.7 billion. In fact, all of the 22 counties with $1 billion or more in sales are in metro areas. Collectively, these 22 counties accounted for over $62 billion in sales, better than two-thirds of the state total.

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A rather different pattern emerges when sales are calculated on a per capita basis. This is perhaps a better indication of the relative importance of retailing in the local economy. There were 10 counties that recorded retail sales of $14,000 or more per resident (Figure 3). Four were the central counties of the state’s three largest metro areas (Forsyth, Guilford, Mecklenburg and Wake). However, the statewide leader was New Hanover, site of Wilmington and a major trade center for the beach communities in southeastern North Carolina, at $18,862 per capita. Second place went to Dare County, along the Outer Banks, with $17, 473 for every resident. Other non-metro counties that serve as major recreational/retirement areas and which averaged over $14,000 per capita were Pasquotank, along the coast, and Watauga, site of ski areas, affluent retirement centers and a college town.

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Places with high levels of retail sales typically have greater aggregations of stores which provide better opportunities for comparison and multi-purpose shopping, as well as more competitive prices. As a result, they tend to attract shoppers from other areas in addition to meeting the needs of their own residents. This is particularly the case with the larger metro counties, which capture a good part of the customer demand from other counties. This generates a surplus in sales above and beyond those made to local residents. The areas from which these shoppers are drawn therefore suffer some “leakage” of sales, potential purchases that were lost to the nearby urban concentration of stores. An estimate of surplus or leaked sales was calculated by assuming that residents spent 55.5 percent of their total disposable personal income in retail stores, the statewide proportion in 2002. That proportion was applied to each county’s total disposable personal income to derive the estimate of potential retail sales generated by local residents. This figure was then compared with the actual sales reported for each county. Total sales that exceeded the potential were recorded as a surplus but when the potential was greater than sales it was treated as a deficit, or “leakage.” This method is very approximate and provides only a rough approximate of trade flows.

Figure 4 displays the pattern of retail sales surpluses and leakages. Some 35 of the state’s counties recorded retail sales surpluses while the remaining 65 had leakages. . Only three had surpluses of $1 billion or more (Mecklenburg, New Hanover, and Wake) but the Wilmington area was the state’s highest at over $1.3 billion, more than any of the central counties of larger metro areas. Other centers of metro areas recorded surpluses of between $250 million and $1 billion, including Guilford, Buncombe, Catawba and Pitt Counties. Dare, Pasquotank, Watauga, and Wilkes are non-metro mountain or coastal recreational/retirement areas that recorded surpluses of $150 million or more. Generally, the smaller counties that surround the larger metro areas recorded net leakages as their shoppers were drawn to the larger concentrations of stores in the nearby urban areas.

Travel and Tourism

Travel and tourism are vital parts of the North Carolina Economy. The state's varied and beautiful natural environment, from the mountains to the beaches, attracts vacationers in droves. This attraction is augmented by the state's strategic location within the eastern United States. Both assets are promoted vigorously by the N.C. Department of Commerce. As a result, over 49 million people visited North Carolina in 2004, a level of activity that ranked the state eighth nationally, behind only more populous California, Florida, Texas, Pennsylvania, New York, Illinois, and Ohio.   According to Department of Commerce estimates, these visitors to the state spent   $13.2 billion in the state in 2004, enough to support about 182,950 jobs. These expenditures have increased in every year over the past decade despite the recent recession. For more information on Travel and Tourism, visit the North Carolina Department of Commerce's website (http://nccommerce.com/tourism/econ/).

Travelers include both vacationers and those on business trips. The latter group largely accounts for the fact that the highest levels of total expenditures were in the state's largest metro areas (Figure 5). They were led by Mecklenburg County's $2.6 billion in 2003, and Wake's $1.1 billion, the only counties to record more than one billion dollars.   Other metro area leaders were Guilford, Forsyth, Durham, Buncombe, and New Hanover, each with $300 million or more.   The one exception to this metro area lead in total visitor expenditures was Dare County, site of the popular Outer Banks. It recorded almost $598 million, ranking it fourth among all North Carolina counties. Five other eastern counties (Brunswick, Carteret, Cumberland,   Moore, and Swain) each exceeded the $200 million total.

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The impact on local economies can perhaps be better measured by per capita expenditures (Figure 6), or the amount of expenditure for every resident.   The statewide average was $1,502 for every person living in North Carolina in 2003. At the county level, this calculation really emphasizes Dare's lead, where it reached a phenomenal $18,050 per resident, followed by $16,492 for Swain County.   No other county reached as high as $5,000 per resident. Some did reach $3,500 and they too were also recreational/retirement areas, including Avery, Carteret, Currituck, Hyde, Moore, and Watauga Counties. Mecklenburg was the only metro county to almost reach this higher level of per capita expenditures ($3,414), no doubt because of its role as the state's leading financial and trade center. Brunswick Counties also came close, at $3,341. By contrast , 17 counties fell below the $500 per capita level, almost all of them rural areas in eastern North Carolina or on the Piedmont.

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Many visitors are drawn to the state's top 25 attractions (Table 2). Many of these attractions represent the state's varied natural environment, ranging from the Cape Hatteras National Seashore to the Great Smoky Mountains. Others are historic sites, such as the Wright Brothers' National Memorial or the Guilford Courthouse National Military Park. Another group is comprised of recreational or shopping areas, including Concord Mall and Carowinds Theme Park. However, the number of visitors to these top 25 attractions declined from over 54 million in 2001 to just over 50 million in 2003, probably a reflection of the recent, national economic recession.

Tourism activity remained high in 2003. For example, the NC State University Office of Park and Tourism Research and Outreach reported that the number of visitors to the top 25 attractions reached 50.4 million in 2003.and visits to state parks totaled 11.2 million. The Blue Ridge Parkway remained the state's top attraction in 2003 accounting for over one-quarter of the reported total number of visits to the state's top 25 attractions.

While travel-related expenditures are important to the economies of a number of communities, the fact is that most of the jobs supported by them pay elatively low-wages. For example, in 2003, the average worker in North Carolina was paid $33,540. However, the payrolls supported by travel and tourism expenditures averaged only $19,688 per employee, less than 59% of the statewide average for all employees. In addition, many of these travel related jobs are only seasonal, particularly in and around beach areas.

In major recreational/retirement areas there is a substantial gap between the income levels of residents and the wage levels of employees who work in the local economy. This is illustrated in Table 3 for three representative counties, Dare, Henderson and Moore. As the table shows, all three had per capita visitors expenditures that were well above the state mean of $1,502 in 2003 and per capita personal incomes in 2002 were also higher than the state average ($27,785). On the other hand, the average annual wages for all employees in 2003 in all three were significantly lower than the statewide mean of $33,540.

These disparities indicate that many of the residents of such areas bring in higher incomes that were earned elsewhere, not locally. These higher income residents, in turn, support businesses such as restaurants, drug stores, lawn care and other services that typically pay low wages. In short, high incomes in recreational/retirement communities do not translate into higher wages for the local labor force. Furthermore, high levels of expenditures by tourists do not necessarily lead to higher incomes for an area’s residents. For example, in Swain County, which includes a large part of the Great Smoky Mountains National Park, as noted per capita visitors expenditures were second only to Dare at $16,492 in 2003 but per capita incomes of its residents were just $19,662 in 2002, barely 70% of the statewide average. The apparent difference between Swain and the counties in Table 3 is that the latter have both affluent retirees and tourists whereas Swain has only tourists and few wealthy retirees in its population.