Economy: On The Upswing
In Columbus, housing construction is on the upswing and the financial activities and hospitality sectors are growing again.
The economic situation in Columbus has changed for the better. The U.S. and state economies are expanding at a faster pace, providing a stronger tailwind to the Columbus area in 2014.
Last year, I was deeply concerned about how the sequester and other cuts to the federal budget would impact Department of Defense spending in Columbus. The good news is that the Bipartisan Budget Act provides some unexpected relief from the federal spending se-quester. Another plus for Columbus is that the recovery has broadened to include the financial activities and information industries.
The 2013 employment data for Columbus shows that the recovery is well established but job growth was slow. Only 600 jobs were added in 2013, or a 0.5 percent gain. Most new jobs were in just three sectors: financial activities, professional and business services, and leisure and hospitality. Almost all of the job losses were with the federal government.
For 2014, I expect the Columbus MSA to add about 1,400 jobs. That 1.2 percent gain is much better than 0.5 percent, although not as good as the 2.2 percent job growth I expect for Georgia or the 1.7 percent growth for the U.S. So it continues the pattern of Columbus underperforming during the recovery, although the region didn’t get hit as hard by the Great Recession as other parts of the state.
The economic outlook reflects a balance of forces. On the plus side, the financial activities industry is growing again, which is great for Columbus because this region derives a much larger than normal share of economic activity from insurance and financial firms. Another plus is the improving performance of the hospitality industry. That’s because, like financial activities, its regional economy depends more heavily on the leisure and hospitality industry than the nation as a whole.
A third plus: Several projects announced in 2013 will help grow the region’s economy in 2014: Blue Cross Blue Shield of Georgia will add 400 jobs; Korean automotive manufacturer KOPLA will open a plant in Harris County by 2018, creating 150 direct jobs; Koch Foods is expanding its poultry processing facility in Harris County, adding 750 jobs; and the Pratt & Whitney F100 engine overhaul facility will add about 45 jobs as it moves engine overhaul work here from a facility in Texas. And, Twinkies are back, with an initial 200 employees at the Hostess Brands Columbus facility.
On the minus side, big cuts in federal government spending are still needed – and Columbus is very dependent on federal spending, especially defense spending.
In the residential real estate market, the free-fall in new single-family home construction began in 2006. The peak-to-trough decline for single-family home construction was about 55 percent in Columbus. As steep as that plunge was, the plunge was much steeper for the state, which reported a nearly 90 percent peak-to-trough drop.
However, the housing recovery is gaining traction in Columbus. Last year, the number of single-family home permits issued in Columbus was up by 20 percent. I expect a similar percentage gain in 2014 and home prices to rise by about 5 percent, which is the same as I expect for the nation, but below the 8 percent gain for Georgia. Slower job growth and less ground to make up – home price decline in Columbus was about half of what it was statewide – are two reasons why home prices will rise more slowly.
One way to move Columbus onto a higher growth trajectory is to focus on retiree recruitment. My analysis of state-to-state migration data shows that the Columbus area is already a retiree magnet, so the region needs to do more of what it’s already good at. However, the appeal varies by county. Harris and Muscogee counties both do well attracting retirees from across Georgia or from other states. Chattahoochee County, on the other hand, does not.
So what’s the bottom line for the Columbus area in 2014? The immediate prospects are fine, but I have the same basic concern that I had last year: I suspect that our federal lawmakers will continue to focus on cutting discretionary spending instead of cutting popular entitlement programs. Still, organic growth stemming from the expansion of existing businesses and new business formation will account for most of the 1,400 new jobs that will be created in 2014.