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GSU economic forecast: Ga. economy 'optimistic,' national recovery only tepid

State ends 2013 on high note as unemployment falls

Rajeev Dhawan, director of the GSU Economic Forecasting Center, gives his 2014 first quarter forecast. (click for larger version)
March 05, 2014
ATLANTA – Georgia State University's economic forecaster Rajeev Dhawan likes many of the leading economic indicators swimming in calmer seas, but he is not predicting the U.S. economy will be charting any deeper waters in 2014.

In other words, 2014 will not be the "big break-out year" signaling a return to the good old days of 2003, '04, '05 and '06, much less the glory years of the 1990s. While positive data shows a 30 percent growth in the stock market, continued improvement in auto sales and a falling unemployment rate, it is more than tempered by the sluggish 2013 growth in capital investment – only 2.6 percent.

Digging into the causes of sluggishness in capital investment, Dhawan cites stalled manufacturing in China.

"China has induced a slowdown in emerging markets and suppliers in developed countries. The ding to corporate confidence is caused by less than robust sales. For the 30 companies in the Dow Jones Index that I track, revenue growth has become weaker and weaker over the past two years," Dhawan said.

Another ongoing concern of Dhawan's is the quality of job growth, which he says is a contributing factor to weak income growth.

"In 2013, the economy created jobs at a pace of 194,000 per month. On paper, this performance seems great," he said. "But one third of the jobs created were in retail trade and hospitality, sectors that consist mostly of low-paying jobs.

"These are not the sort of jobs that will produce income growth," Dhawan said.

Job growth will fall to 147,000 jobs a month in 2014, he predicts. A continuation of weak investment, a global economic malaise and stock market volatility will be the cause of lackluster job growth.

While 2014 will not be the "break-out year" one would like to see, Dhawan says the trend is slowly rising. In 2015, Dhawan expects new job growth to spurt to 186,000 jobs per month (2.3 million for the year) and 205,000 jobs per month (2.4 million for the year) in 2016.

More good news is that an anticipated jump in housing starts will trend upward from 1.032 in 2014 and rise to 1.228 million in 2015 and still further to 1.301 million units in 2016.

Tensions in the Middle East have abated to a simmer, but are bringing some stability to oil prices. Dhawan said that oil will hover above the $97 per barrel mark in 2014, but oil prices will actually fall to $93 per barrel despite more robust growth in 2015 as more domestic oil comes on line.

JC 03-06-14

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