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November 20, 2012ATLANTA, Ga. – The looming "fiscal cliff" has already ensured 2013 will show little economic recovery, which makes it all the more important that the president and Congress come to an agreement that will encourage capital markets. That was the message Nov. 14 from Rajeev Dhawan, director of Georgia State University's Economic Forecasting Center.
Speaking at the GSU quarterly economic forecast, Dhawan said that domestic uncertainty that marks the expiration of tax cuts including the payroll tax break has been much more damaging to the national economy than the economic slowdown in Europe and China.
"The damage from the fiscal cliff is done and playing out now," Dhawan said. "The issue is can we contain it?"
Dhawan says there is the chance Congress will strike a deal before the deadline. But if no agreement is made and the tax cuts expire, he fully expects them to be restored when the new Congress is seated. But that will not be in time to help the recovery in 2013.
To fail to do so would trigger another recession, he said.
Dhawan said he fully expects Congress to act in time to prevent that new recession, but it has already ensured that corporate America, which is watching from the sidelines, will not react until the third quarter of the year at the earliest.
"President Obama and the current Congress have been unable to reach an agreement, instead focusing on the election as a top priority," Dhawan said.
"There is no investment activity now that will produce jobs in 2013," he said.
But if Congress and the president can show progress in coming to terms with its debt, then it bodes well for a much better 2014 with a GDP of a healthy 3 percent growth.
With China's economy slowing down and Europe's economy still in turmoil, the United States is still the best place to invest. But exports will be slowing down. China can't jumpstart its economy with a whirlwind of capital projects like it did in 2008, Dhawan said. The cost of labor is up and China can't afford food price inflation and home price bubbles that accompanied its last push. So heavy machinery exports from the U.S. will drop off.
Likewise, German exports will be down because its biggest export partner is the rest of Europe, and those economies are in the doldrums.
Dhawan said he is looking for an economy igniter, and there is not one on the global horizon. Therefore, the U.S. must look internally.
Atlanta's outlook is improving. The employment base grew by 29,700 jobs in calendar year 2011, and should top 39,200 jobs in 2012 with 7,800 of them premium jobs with high salaries.
Unemployment that hovered around 10 percent in 2011 will be 8.9 percent in 2012 and should ease to 8.6 percent in 2013. As growth picks up in 2014, Atlanta should be on the south side of 8 percent unemployment.
Atlanta's housing permits are up an encouraging 56.4 percent with 12,191 units. Much of this is fueled by a resurgent multi-family boost (up 96.7 percent over last year).
Forsyth County issued 481 single-family and 24 multi-family permits in the third quarter, an increase of 65 percent from a year ago. Forsyth also led the metro area with the lowest foreclosure rate in September – one in every 588 housing units. And this rate is trending down.