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The Georgia Forecast
At a Glance - "Georgia's economy will grow
a little faster in 2006 than it did in 2005," according
to Dean P. George Benson of UGA's Terry College of Business.
Gross state product will increase by 3.2 percent, improving
upon the 3.0 percent increase expected for 2005. The better
news, Benson said, is that the pace of Georgia's job growth
will nearly double, from 0.7 percent in 2005 to 1.3 percent
in 2006. That's in sharp contrast to the slightly slower
employment growth forecast for the U.S. economy in 2006.
"But even with this expected slowdown, U.S. job growth
-- at 1.5 percent -- will again exceed Georgia's,"
he said. The holdup to better growth in Georgia the past
four years has been the structure of its economy. Georgia's
job market is more clustered than other states around
information technology, air transportation and vulnerable
manufacturing industries (e.g., textiles). "All three
clusters were ground zero in the 2001 recession,"
Benson said. "Other states had economies with different
dominant clusters, and so the recession was shallower
and they escaped it more quickly than Georgia." But
the positives pushing Georgia's economy in 2006 still
outweigh the negatives, Benson said, identifying five
trends bolstering higher growth next year: (1) above-average
population growth, (2) strong gains as an exporting state
because of the ports in Savannah and Brunswick, (3) substantially
higher corporate profits and the reinvestment of those
profits, (4) more tourist destinations and convention
business, and (5) a turnaround, at long last, in Georgia's
I.T. industry.
Atlanta's Go-Go Growth Gone for Now -
The 28 counties that comprise metropolitan Atlanta will
experience 1.8 percent job growth -- or about 41,000 new
jobs -- next year. In spite of a recent string of bankruptcy
and buyout headlines involving some of the state's iconic
companies (Delta Air Lines, Georgia-Pacific and Scientific-Atlanta),
the city's prospects are buoyed by strong in-migration
and resurgent civic leadership. "We don't see anything
on the economic horizon, however, that is big enough to
overcome the sluggishness of several of our larger employers,"
Benson said. "Our go-go growth days are behind us.
That doesn't mean that the Atlanta economy won't grow,
but it does mean that the city's growth rate will probably
tend to track the nation's for the foreseeable future."
The Supercenter Spiral in Retail - Georgia's
retailers have eliminated more than 26,000 jobs since
2000 -- nearly 6 percent of total retail employment. That
kind of job loss in retail is unprecedented in Georgia
and also seems contradictory to the robust growth in consumer
spending during the same period. Benson offered his explanation:
Retailers are rolling out "supercenter" store
formats that combine the traditional grocery store and
discount department store under one roof, which require
fewer employees than two stores operated separately. And
they've proven to be immensely popular with consumers.
"The success of supercenters in Georgia helps to
explain the loss of at least 15,000 grocery store jobs,"
Benson said. "You can expect WalMart -- and others,
such as Target -- to put even more emphasis on developing
supercenters. As a result, we do not expect to see any
net job creation in the retail sector in 2006."
Employment - Since the job market
bottomed out in June 2003 -- costing Georgia 164,000 lost
jobs -- the state has been slower to return to pre-recessionary
employment levels than the nation. "By last January,
the U.S. had fully replaced the jobs it lost in the recession,"
Benson said. "As of September, Georgia had recouped
only about two out of every three lost jobs. It will take
Georgia until at least late 2006 to recover all of its
lost jobs. That puts our full recovery nearly two years
behind the nation's recovery."
The slower pace of job creation in Georgia, combined with
the state's above-average population growth, has led to
a higher unemployment rate in Georgia (5.5 percent) than
the nation (5.0 percent) ever since May. "That is
very unfamiliar territory for Georgia," Benson said.
"It hasn't happened since August 1989 -- 16 years
ago."
Statewide, nonfarm employment will increase by about 53,000
jobs in 2006 (1.3 percent). But Georgia's unemployment
rate, which is forecast to be 5.1 percent next year, will
remain stubbornly above the predicted U.S. jobless rate
of 4.9 percent.
Turnaround in Information
Technology - Georgia's I.T. employment shrunk
by 8.3 percent in 2002, 6.4 percent in 2003, 4.0 percent
in 2004, and is expected to decline by 0.6 percent in
2005. In the process, Georgia lost about one out of five
tech sector jobs. The good news? "2006 will be the
turnaround year," Benson said. "The downsizing
is essentially complete." But after so many painful
cuts and ongoing competitive pressures, technology companies
will be very slow to step up the pace of hiring. "It
could take the rest of the decade to recover the 31,000
information jobs lost since 2000," he said. "Still,
we'll be moving in the right direction for the first time
since the dot-com bubble burst."
Delta
Air Lines and General Motors - Both Delta's bankruptcy
filing and the announced closing of GM's Doraville assembly
plant were widely anticipated and already factored into
the Selig Center's forecast. Benson said Delta's bankruptcy
is actually a step forward for Atlanta and Georgia. "It
has not been to Atlanta's advantage to have its largest
private employer be an inefficient company that is teetering
on the edge of bankruptcy," he said. Even if Atlanta
has to absorb as many as 4,000 job losses from the airline's
restructuring, Benson said, "we believe that Delta's
bankruptcy does not lower the growth trajectory for the
Atlanta region."
Home Sales and
Construction - Atlanta's economic growth depends
heavily on residential construction, and homebuilding
is about to downshift. Rising mortgage rates, high prices
for building materials and less appreciation in housing
prices will take their toll on the Atlanta real estate
market. On the bright side, there are no signs of a builder-driven
oversupply of housing that would lead to an unbalanced
buyer's market in Atlanta.
Hurricane
Impact - In Katrina's immediate wake, high energy
prices and uncertainties about fuel supplies rattled consumers
and businesses. Looking to 2006, energy prices are "a
safe bet" to remain relatively high and consumer
confidence is unlikely to recover to pre-Katrina levels.
As a result, spending and hiring will be less vigorous
than what would have been the case.
Further into next year, the rippling economic consequences
of Katrina and Rita will be replaced by more positive
outcomes for Georgia. Emigration and business relocations
from hurricane-stricken areas will continue to boost the
state's economy. Atlanta will pick up a number of national
conventions and trade shows originally scheduled for New
Orleans. And Georgia's ports will take up some of the
slack in shipping until the Port of New Orleans reopens
'by the Selig Center for Economic Growth at UGA's Terry
College of Business'
www.metroatlantachamber.com
Atlanta
Economic Outlook Report 2006.pdf |
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