Economy: Georgia On My Mind
The 2011 Georgia forecast calls for the inflation-adjusted GDP to increase by 2.3 percent, a significant improvement over the 1 percent increase estimated for 2010.
The annual percentage gain in the state’s GDP this year will essentially match that of the nation; this will be the first time in seven years that Georgia will not underperform the nation in terms of the year-over-year percentage point change in GDP. The main reason Georgia’s economic performance has failed to match the nation’s is that the state has been suffering from its heavy dependence on real estate development and homebuilding as well as closely allied industries such as building materials manufacturing.
The financial crisis did more damage to Georgia’s financial sector than to the nation’s. By mid-2010, statewide employment in financial activities was 15.5 percent below its cyclical peak level compared to a drop of only 9.3 percent for the U.S. Because the imbalances in Georgia’s property markets have substantially – although not completely – corrected, Georgia’s economy will match the rate of U.S. GDP growth in 2011, although it will not outperform the U.S. economy until 2012.
Georgia’s nonagricultural employment will rise by 0.9 percent in 2011. The unemployment rate for the year as a whole will average 9.8 percent, or about 0.5 percent lower than the 10.3 percent rate estimated for 2010.
Job growth will be much better balanced in 2011 than in 2010, but it will still be quite weak. That’s partially because lengthening workweeks and productivity gains will allow many businesses to postpone hiring more personnel until the state’s economic recovery is well entrenched. In 2010, job growth occurred in staffing and temp agencies, healthcare, federal government and defense. In 2011, transportation and logistics firms, education, retailers, wholesalers, hospitality and the arts/entertainment industries will be adding to their staffs.
Manufacturing industries will be on the upswing. Heavy job losses will continue in construction, and financial industries will post moderate job losses. The public sector’s losses will be concentrated in state government and local government. The overall pace of job creation will not accelerate too much until 2012.
Despite continuing job losses in construction, financial activities and government, Georgia’s nominal personal income will expand by 3.7 percent in 2011, two full percentage points faster growth than estimated for 2010. Personal income growth will accelerate due to the broader-based upturn in the labor market, more hiring in more industries and fewer mass layoffs.
Much of the job growth will occur in areas of the state where prevailing salary levels are relatively high – metropolitan areas rather than rural areas. The average weekly hours worked per job should increase, but increases in compensation per hour will not provide much support to personal income growth.
Many of the positive forces underlying the forecast for the continuing recoveries of both the Georgia and U.S. economies are the same.
Housing activity will be on the increase – albeit from a very depressed base – and home price depreciation will no longer be a headwind. Job losses in manufacturing will give way to job growth. Spending for equipment and software will continue to increase at a relatively rapid rate.
The global economy will continue to expand at a moderate pace, boosting prospects for Georgia’s logistics-centered economy and especially its deepwater ports. The dollar will be weak enough to boost prospects for export-oriented businesses. Consumer price inflation will increase, but not enough to threaten economic growth in 2011-2012. Oil prices will be flat to slightly higher, but will remain volatile.
There will be a few very powerful negative forces. The recession in nonresidential construction will continue, but the nastiest declines have already taken place. Still-tight credit standards plus lingering uncertainty in the financial markets will restrain growth in business spending as well as sales of consumer items typically bought on credit.
Nonetheless, the tumult in the markets should continue to diminish, and credit will become more widely available to credit-worthy borrowers. The effective federal fiscal stimulus will wind down significantly, especially in the second half of 2011.