Who’s Slowing Job Growth?

Atlanta’s jobs will grow by only 1.8 percent next year, fifth best in the state for a city that is typically number one or two. Four metropolitan areas will grow faster: Columbus (3 percent) Brunswick (2.9 percent), Savannah (2.5 percent) and Valdosta (2 percent). What will be holding Atlanta back in 2006? Does it have something to do with recent headlines?

On Sept. 14, Delta Air Lines filed for bankruptcy; on Nov. 13, Koch Industries announced it would buy Georgia-Pacific; and on Nov. 18, Cisco Systems announced it would buy Scientific Atlanta. Then on Nov. 21, General Motors announced that it would close the Doraville Assembly Plant in 2008; on Dec. 2 and again on the 8th, The Wall Street Journal reported that Ford might soon announce the closing of its Hapeville Assembly Plant – in late January that prediction came to pass. On Dec. 10, BellSouth announced that 1,500 management positions would be eliminated to make the company more competitive.

That’s a lot of potentially bad news in a short period of time. Although these are different companies, they are all large, established firms, with deep roots in Georgia. They are business icons. These are exactly the types of companies that have been holding back Atlanta’s job growth for the last three years.

So one takeaway from this string of headlines is the confirmation that the largest and most venerable companies continue to constrain Atlanta’s job growth. I say that particularly with respect to Delta Air Lines, GM, Ford and BellSouth. I’ll get to Georgia-Pacific and Scientific Atlanta in a moment.

I don’t see anything on the economic horizon that’s big enough to overcome the sluggishness of several of our larger employers. I see nothing that can propel Atlanta or Georgia back to the top of the national economic growth rankings. Our go-go growth days are behind us – for the time being. Our growth rates will probably tend to track those of the nation as a whole, for the foreseeable future.

The loss of the Hapeville Ford Plant is not included in our jobs forecast. Neither is the scenario in which Delta simply disappears, going out of business like Eastern Airlines. We are assuming that Delta emerges from bankruptcy as a company that is still headquartered in Atlanta. And even though the salary structure and headcount will be markedly lower, the company will be more efficient and will have better long-term growth prospects. So, although there will be some short-term pain, with as many as 4,000 additional direct job losses at Delta’s operations in Atlanta, we believe Delta’s bankruptcy doesn’t lower the growth trajectory for the Atlanta region or the state.

Indeed, it hasn’t been to Atlanta’s advantage to have its largest private employer be an inefficient company teetering on the edge of bankruptcy. Delta’s troubles have been hurting the economy for several years. Its bankruptcy is actually a step forward for Georgia.

Although the Georgia-Pacific and Scientific Atlanta announcements will likely have some negative impact on Atlanta’s job market, it isn’t because those organizations are struggling financially or competitively. Both are successful companies that were purchased because of their strengths, not because they needed restructuring. This greatly reduces the potential for job losses beyond overlapping headquarters positions that undoubtedly will be eliminated.

Of course, we will soon have two fewer corporate headquarters to put on Georgia’s resume. But, in any mature economy, headquarters come and go, ebb and flow. It’s the rhythm of capitalism.

Georgia is recognized around the globe as a major commercial center. It no longer needs to count Fortune 500 headquarters to prove its worth. But for those who like to count, the loss of GP leaves us with 16.

In the case of both Georgia-Pacific and Scientific Atlanta, we have to hope the new management teams will be as good as the old teams. That’s the major risk that I see in these two buyouts. But that’s a long-term issue rather than one that will impact Atlanta’s job growth in 2006.

To the many people in the state who mourn the passing of Georgia-Pacific and Scientific Atlanta, think of it this way: Georgia nurtured and built two successful companies, and success attracts buyers. We wouldn’t want the system to work any other way.

P. George Benson is dean of the Terry College of Business at the University of Georgia. He holds the Simon S. Selig, Jr. Chair for Economic Growth and can be contacted at gbenson@terry.uga.edu.

Categories: Economic Development Features, Features