The firm's Northern Ireland economic outlook predicts 1.7% growth in 2015; less than other forecasters estimate.
It says that job creation has almost returned to pre-recession levels.
However, the report says overall economic performance continues to lag behind other UK regions.
It adds that the Northern Ireland economy "remains heavily reliant on consumer expenditure".
Reflecting on the recent budget, the report concludes that Northern Ireland's share of Â£30bn of planned additional austerity will "impact severely" on public spending in the period to 2018/19.
It also warns that the current inability to agree on the full implementation of the Stormont House Agreement is "not conducive to investment and business confidence".
PwC's chief economist in Northern Ireland, Dr Esmond Birnie, said: "Measured by new job creation and falling unemployment alone, Northern Ireland is demonstrating strong recovery; however a number of other factors are of concern.
"While the region's unemployment fell by 19.8% in 2014, that fall was only about half that of the UK average, where the jobless total declined by 32.5%.
"NI's economic inactivity rate is 27.8% and remains the highest of the 12 UK regions.
"In the past year the growth in the number of economically inactive was actually greater than the total decline in unemployment."
Northern Ireland continues to experience a modest economic revival but is not showing much recovery in wages or living standards, according to consultancy PwC.