“The economy is mired in an eddy,” said Govind Hariharan, chair of Kennesaw State University’s Department of Economics, Finance & Quantitative Analysis. “Two years after the official end of the recession, economic growth has not been sufficient to spur significant job creation or reduce uncertainty about the direction of the U.S. economy.”
University of Georgia Economic Forecasting Director Jeff Humphreys said during Monday’s Georgia Competitiveness Initiative Atlanta Region Summit at the Georgia Tech Conference Center in downtown Atlanta that Georgia was hit much harder than the nation during the recession in terms of job loss because of the state’s heavy dependence on residential development, home building, building materials and manufacturing.
Georgia lost about 8.4 percent, or about 350,000, of the state’s jobs during the recession, compared to the nation’s 6.3 percent loss, Humphreys said. Two out of five manufacturing jobs Georgia once had are now gone, as the housing market contracted about 90 percent during the recession, he said.
And while Atlanta was once the center for information technology, 30 percent of jobs in the information sector were also lost due to the recession, Humphreys said.
Georgia was already underperforming in terms of jobs before the recession, which raises the question of whether Georgia has lost its competitive edge for attracting new companies that also create new jobs, Humphreys said.
“I don’t think so,” he said. “Restructuring our economy should enhance our competitiveness going forward. … We are probably more competitive now than any other time in the past because we are restructuring. Going into the Great Recession, too much of Georgia’s development and growth was based on development and growth. There was not enough focus on innovation, educating our own people, developing in-state capital markets or importing emerging industries.”
Humphreys projected a 1 percent job growth — about 40,000 jobs — over the next year.
“But that only replaces one out of eight jobs that were lost, so I believe it will be 2016 before we are complete in job growth,” Humphreys said.
“Technically the recession was over in July of 2009,” said Don Sabbarese, director of KSU’s Econometric Center. “However, the limited GDP growth has not been sufficient to create enough economic growth to substantially increase job creation. Our economy needs to grow 4 percent on average and create a monthly average of 240,000-plus jobs a month to lower the unemployment rate to 8 percent.”
Humphreys projected a 2.3 percent growth in gross domestic product by the end of this year, and 2.8 percent next year, which he said is roughly in line with the nation. Humphreys added that 2012 will be the first time in eight years Georgia hasn’t underperformed the nation in GDP, and the state is poised to outperform the nation in 2013 and beyond.
“Unfortunately, much of the uncertainty and conditions that act as headwinds against economic growth will still be in place in 2012. That said, GDP growth rate in 2012 should average close to 2.8 percent. The good news is that we’re moving in the right direction,” Sabbarese said.
Luc Noiset, director of the KSU Center for International Business, said the U.S. also has to think about the international implications of its debt.
“Inflation is a concern because that is one way to at least partly resolve the long-term debt that the government has,” Noiset said. “It can inflate its way out of those debts. If lenders believe that the U.S. government will take that route because its politicians cannot resolve their differences over the deficit problems, then the U.S. long-term borrowing rates will rise and uncertainty over interest rates and return on investments will curtail business activity in the U.S.”
Humphreys said Georgia business and government leaders will need to shift their focus to biotechnology and life sciences industries to grow the economy and create jobs in the state, which he projected would add more growth to the state’s economy over the next few decades than information technology did over the last few decades.
“We also need to grow our in-state capital markets and provide financial services,” Humphreys said. “We import a lot of the talent we need, so we have to do a better job of educating our own people. We need to be more competitive with discretionary deal-closing incentives, especially for those companies with good potential for long-term growth. And we have to be super aggressive. Georgia is poised to see average to slightly above-average growth if we don’t do a lot. But that doesn’t satisfy us. We are unlikely to beat the nation’s margin unless we become competitive in terms of deal-closing incentives. We’re not right now.”
All four of the economists agreed that the second half of 2011 will likely look much like the first half of 2011, and 2012 will not look much different either, though they remain hopeful.