With the election just 40 days away -- and early voting already underway -- both the McCain and Obama campaigns are now tightening up their list of target states. Each side is focusing campaign appearances and advertising dollars only on a handful of battleground states where their teams of analysts have concluded they have a reasonable shot of winning.

And that list, to the surprise of many pundits, seems to include North Carolina.

We reported last week on Obama and McCain's major ad buys in NC. That coincided with a series of campaigns stops by Joe Biden, Michelle Obama and Sen. Obama himself.

Now, both Sen. Obama and Biden are planning a major event this Saturday in Greensboro, NC.

Clearly they see something that scores of pundits, who have consistently de-emphasized North Carolina, have not. What's going on here?
Here are a couple factors that I think are making North Carolina the surprise state of 2008:
The Economy: The economy is a big issue in North Carolina -- and due to the Wall Street meltdown and foreclosure crisis, it's getting bigger. NC has seen a recent spike in mass layoffs, losing over 45,000 jobs in the last month and driving the unemployment rate up to almost 7%, the highest since the recession battered the state in 2002.
And as the most recent Public Policy Polling survey -- which found McCain and Obama tied in NC -- noted:
There isn't much doubt about what's driving the level of competitiveness...The number of voters listing the economy as their biggest issue...has now jumped to 58 percent. Barack Obama has a 24 point lead with those voters.
The Barr Factor: Libertarian presidential candidate Bob Barr, the former Congressman from Georgia, will be on the ballot in NC (despite the state's enormously restrictive ballot access laws). But most of the polls that showed double-digit leads for McCain in North Carolina didn't include Barr.
Since August, any poll that has included Barr has shown McCain with no more than a six point advantage, or even put Obama in the lead. The last two polls -- from PPP (Democratic) and Civitas Institute (Repulican) -- include Barr, and they show McCain and Obama exactly tied.
Neither of these factors necessarily mean that Obama will end up taking North Carolina. But the fact that the Tarheel State is turning into a fierce battleground, with both sides investing precious time, energy and resources, is historic alone. And the result might be closer than any of us thought.
There are other factors at work in North Carolina. Stay tuned for part two of this post tomorrow.