TOPSAIL ISLAND, N.C. -- The local economy on this sun-drenched, 26-mile slice of sand in the southeastern corner of the state is booming as newcomers move in to retire or carry on their careers in a relaxed style.

The surging growth is part of a business upturn in the Wilmington, N.C., region and North Carolina in general.

The state unemployment rate has dropped to 3.7% the lowest in years and well below the national average of 6.1%.

Despite recent interest rate hikes by the Federal Reserve Bank, bankers and economist say this region should remain an economic island unto itself.

"It's just unbelievable," said Dawn Vukelic, branch manager of the NationsBank Corp. in nearby Surf City. "We're going through huge growth, and it's hard to keep up with."

She reports that commercial deposits are up a whopping 234% from a year ago, while real estate loans are up 250%. Local bankers agree that the Fed's latest move to cool the national economy is likely to have little impact in the area.

Indeed, a recent front-page article said labor shortages in the state are forcing employers to set up job-sharing programs, extend overtime, and recruit workers from as far away as West Virginia and New York. Wages for entry-level jobs at fast-food outlets and elsewhere are being pushed higher, and temporary workers are now getting $6 an hour, up from $5.50 a year ago.

Wilmington, a port city of 65,000, is finding new life since the completion of Interstate 40 a few years ago provided a direct link to businesses in the fast-growing Raleigh-Durham region.

The city boasts the third-largest film-making industry in the country, after Los Angeles and New York, pouring $360 million into the community last year, according to Connie Majure, executive director of the Greater Wilmington Chamber of Commerce.

Other large employers include General Electric, Du Pont, and Corning Inc.

Robert Dunn, director of the Wilmington Industrial Development Commission, says businesses in the region are not experiencing labor shortages yet because so many people are pouring in.

The population of New Hanover County, which includes Wilmington, has jumped to 135,000 from 120,000 in 1990.

Still, it is plain that the region's economy is sizzling. Woodie Hall and Claude Farrell, two economists at the University of North Carolina at Wilmington, estimate that growth in the first three months of the year surged 18% - well above any kind of sustainable pace.

Residents on Topsail Island say their once-sleepy retreat is seeing an influx of newcomers from Ohio, Pennsylvania, and other northern states.

Many have reached retirement age or got tired of the rat race and the weather.

In some cases, they include middle-aged couples who travel a lot or find they can keep working out of their homes with personal computers and fax machines.

But bankers say the growth of the region has loan demand popping. NationsBank's Ms. Vukelic says customers are snatching up loans at 9% even though rates are up sharply since the Fed began raising them in February.

In the last year, some half dozen new retail establishments have sprouted up on the island, including a Domino's pizza shop, a Subway sandwich outlet, and a family medical practice.

Up and down the island, sandy lots have houses under construction.

Mr. Davies is a reporter in the Washington bureau of The Bond Buyer, a sister publication of American Banker.

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