State's strong banks make N.C. economy a safe haven.

• Position: Interview with Harry Davis, North Carolina Bankers Association's economist - Interview

Harry Davis, a finance professor at Appalachian state University, is the North Carolina Bankers Association's economist. Davis, who earned a doctorate in finance from the University of Georgia, talks about where bank performance and the state's economy are heading this year.

BNC: Is there going to be a slowdown?

Davis: Most everybody at the start of the year thought the national economy would grow around 2.25%. They have now all raised their forecasts to around 2.75%. North Carolina is a percent-and-a-half above the national rate. In January, I was the most optimistic of any economist I could find, saying the national economy would grow around 2.75%. I stick with that, which would put the growth rate for the state around 4%. That's quite amazing this far into a recovery.

Partly, you credit the strength of banking. What does First Union's announcing it will lay off 7% of its work force mean?

Every bank is attempting to cut operating expenses. They are just like any other bank. There are growing pains involved in mergers and acquisitions. In some cases you end up with too many workers. So you're going to spin some of them off.

Why are trends in bank branching causing employment to shrink?

There is a movement toward smaller branches, in locations such as grocery stores. A little less brick and mortar. In the grocery store in Boone, they not only open accounts, they make loans - both functions of a bank. There are more places, by far, where you can bank than there were five years ago. But that doesn't mean there are more traditional branches. There are more ATM machines, very small offices in a grocery store or a Kmart. If you can shut a large branch that has 15 people and do the same function with four of those people in two locations, you've just eliminated some workers and got two branches instead of one. Banking is also becoming very electronic. If you go into the First Union here in Boone, the first thing you see is a wall of telephones. Not a wall of people.

Is the state economy on autopilot?

It has been the last four years. This is the second-longest economic recovery in the post-World War II period. In the 1980s, we had the third-longest. We've essentially been in recovery for 18 years, with an 18-month recession in 1990-1991. That's unheard of. And the economy is continuing to grow at a very rapid pace.

So does the economic growth have to end?

The reason recoveries end is, you finally develop...