The Georgia Outlook

The 2008 forecast calls for Georgia’s inflation-adjusted GSP to increase by 2.4 percent, only slightly lower than the 2.6 percent advance estimated for 2007. Although the percentage gain will be down from last year, it will be higher than the 2 percent growth expected for the nation. Meanwhile, Georgia’s employers will add 43,700 jobs.

The state’s strong economic sectors include life sciences, healthcare, defense, transportation and logistics, exporters, professional and business services and hospitality. Commercial construction looks to remain strong for one more year, but the number of new projects announced will drop sharply. The main weak spots will be housing and manufacturing, with financial services and information industries also losing jobs.

Many of the positive forces underlying the forecast for Georgia and the U.S. are the same. Businesses will continue to hire and make capital investments. The global economy will expand, and its growth will outpace domestic economic growth. The dollar will weaken, boosting prospects for Georgia’s export-oriented businesses.

The federal fiscal stimulus will be significantly larger, and will be tilted toward defense, which should benefit Georgia’s military bases and defense contractors.

Nonresidential construction will reach its cyclical peak and the housing and manufacturing recessions will deepen. However, because home price bubbles did not develop in any of Georgia’s MSAs, existing home prices will be relatively steady in Georgia. Tight credit standards and considerable uncertainty in the financial markets will restrain lending and therefore dampen sales of consumer items typically bought on credit.

As the U.S. business cycle becomes less conducive to economic growth, Georgia’s above average population growth will become a more important driver of the state’s overall economy. The state’s population will grow by 1.9 percent in 2008, more than double the 0.9 percent gain expected for the nation. The main impetus will be in-migration from other states. Newcomers will span the age spectrum to include an influx of relatively well-heeled retirees seeking affordable amenities as well as young, single, college-educated people. Such diversity ensures an adequate supply of talented young workers as well as a consumer base less exposed to the ups and downs of the business cycle.

As U.S. companies slog through the second straight year of below-trend GDP growth, businesses will become increasingly cost-conscious. Fortunately, the cost of doing business in Georgia is relatively low. In 2008, as businesses’ priorities shift towards lowering costs, Georgia will be well positioned to compete nationally for corporate headquarters, high technology industries, expansions and relocations.

Chinese companies’ growing desire to make direct investments in the United States is proving beneficial; since mid-2006, three such companies have announced a major investment in Georgia. In-sourcing from places better known for outsourcing is affecting Georgia: India-based Wipro Technologies will open its new software development center in Atlanta, creating 200 jobs in its first year and 500 jobs within three years.

Many of the large relocation and expansion projects announced by the Georgia Department of Economic Development over the last few years will continue to provide a tailwind to Georgia’s economic growth. These include Dick’s Sporting Goods new distribution center in East Point as well as the decision by Quintiles to transform its presence in Cobb County into a headquarters for its worldwide laboratory operations, which will add 400 new high-level jobs by 2011. Enhanced Recovery Corporation is expanding in Waycross, and Engineered Fabrics is boosting its defense manufacturing facilities in Polk County.

Air Tran will add 2,500 jobs by 2011; the Kia Motors automobile assembly plant will open in 2009 or 2010, adding 2,500 jobs. Gulfstream’s expansion in Savannah will add 1,000 jobs by 2013; and T-Mobile will create 750 jobs at a customer service center in Augusta. Additionally, Georgia will get a major economic boost – approximately 4,300 jobs – from military base closings and realignments recently finalized.

Another big plus for Georgia is its deepwater ports, which will thrive by tapping directly into the fast-paced economic growth that is taking place overseas, by diversifying the services that call on Georgia’s ports, and by taking market shares from other U.S. ports.