Unemployment hikes deliver cloudy forecast
UGA business school paints ‘dire’ picture for state’s economy through 2010.
Joblessness expected to worsen, but start of recovery not far off.
By Michael E. Kanell
The Atlanta Journal-Constitution
Thursday, December 04, 2008
Recession will batter the Georgia economy well into next year, while unemployment will keep rising into
2010, according to an annual forecast issued Wednesday by the University of Georgia’s Terry College of
Business.
The state’s trajectory will track that of the nation, with the recession that started late last year lasting about
18 months, said Robert Sumichrast, the college’s dean.
“Georgia’s economic situation is dire,” he told about 1,000 attendees of an economic outlook luncheon at the
Georgia World Congress Center.
The nation entered recession in December of last year, according to a report Monday by the National
Bureau of Economic Research. So far this year, U.S. payrolls have shed about 1.2 million jobs. New weekly
claims for jobless benefits rose above 400,000 —- considered recession terrain —- in mid-summer. They
have climbed above 500,000 each of the past three weeks.
This week’s report on jobless claims is due today. And on Friday, the federal government plan to issue a
much-anticipated report on November unemployment —- numbers that many economists expect to be
dismal. And state officials will update Georgia’s jobless claims number next week.
At the 2007 luncheon, Sumichrast said the state was skirting close to recession and that the risk was
“imminent.” After that, gas prices soared, the housing market slide accelerated and the drought dragged on.
“Each of the three economic triggers that I spoke about last year got pulled,” he said.
Then in early autumn, the credit markets seized up.
The result has been job losses in nearly every sector. And while the state’s economy might eke out 1
percent growth for this year, it will decline sharply next year, Sumichrast said. “I believe the first quarter and
second quarter of 2009 will be dreadful.”
The official jobless rate will average 8.4 percent next year and crest at 9 percent in 2010, Sumichrast said.
Georgia’s official jobless rate is currently 7 percent, up from 4.4 percent in the fall of 2007. The state has
shed about 61,000 jobs in the past 12 months.
Also speaking at the luncheon were Georgia Gov. Sonny Perdue and Forbes magazine Chairman Steve
Forbes.
Perdue said he fears that federal spending aimed at spurring the economy will add dramatically to national
debt, but he wants the incoming administration “to look at our country’s long-term needs.”
A year ago at the same event, the governor agreed that “it’s not all roses and sunshine,” but gave a general
thumbs-up to the state’s economic condition.
“Georgia’s economy continues to expand at a healthy clip,” he said then.
Wednesday he said that the state this year faces serious financial challenges.
“It’s no secret that state revenues are down. That probably may not fully reflect the damage from the latest
economic turmoil.”
Forbes twice ran for president while calling for a “flat tax” and privatization of Social Security.
He said Wednesday that the crisis was mostly caused by mistakes made by the Federal Reserve and the
Securities and Exchange Commission.
Curing the economy requires a few select changes in accounting rules that would free up bank balance
sheets and regulations that would restrain “short sellers” on Wall Street who push down stock prices.
Federal policy should also push up the value of the U.S. dollar.
“We could pull out of this by spring —- yes, that soon,” Forbes said. “We are in for a tough few months, but it
should only be a few months.”
Georgia historically has often been somewhat insulated from national recessions. Not this time.
“It will be the longest downturn since the Great Depression,” Sumichrast said.
Yet the turnaround is not far off, Sumichrast argued: Credit markets are thawing, the housing market must
be near a bottom, oil prices have plunged and inflation has abated.
Meanwhile, the Federal Reserve has slashed short-term interest rates, the government has poured money
into the financial markets and the incoming administration is expected to spend huge amounts of money on
infrastructure projects.
“The cycle of wealth destruction will end soon,” Sumichrast said. “The combination of positive forces and a
reduction in headwinds will revive consumer spending in 2009.”
For those with cash or access to capital, there is opportunity in thinking ahead, he said. “As counter-intuitive
as it sounds, this is a good time to start or expand a business.”
GEORGIA SNAPSHOT
(percent change from previous year)
...........................2007 ....2008 ....2009
Gross state product........2.8%......+1%....-1.4%
Nonfarm employment........+1.4%....-0.5%....-2.5%
Personal income...........+6.5%....+3.8%....+1.7%
Total housing permits....-29.8% ..-54.1% ..-16.7%
Source: Selig Center for Economic Growth, UGA
UNEMPLOYMENT
........GA ....U.S.
2008....6.0....5.9
2009....8.4....8.1
Note: yearly averages
EMPLOYMENT FORECAST BY METRO AREA
(percent change from previous year)
.................2008 ....2009
Albany..........-0.9%......-3%
Athens............+1%....-1.5%
Atlanta ........-0.5%....-2.9%
Augusta..........0.3%....-0.9%
Columbus........-0.4%....-0.7%
Dalton..........-2.5%....-3.9%
Gainesville ....+0.7%....-1.5%
Macon ..........-0.4%....-2.7%
Savannah........-0.2%....-1.3%
Valdosta........-0.5%....-2.8%
Warner Robins ..-0.2%....-0.7%
Source: Selig Center for Economic Growth, UGA