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GSU quarterly economic forecast: Sunshine peeking out for Georgia's economy


Job growth trending upward with premium jobs mostly coming to Atlanta area


June 03, 2014
ATLANTA – Despite deficit job growth in the first two months of 2014, Georgia State University Economic Forecasting Center Director Rajeev Dhawan forecasts healthy growth, 65,000 new jobs for the year and more than a quarter-million new jobs by the end of 2016.

"I am gingerly betting on growth for Georgia," Dhawan said.

At least he didn't say "guardedly optimistic."

Unemployment in Atlanta has shrunk from a 2011 high of 9.8 percent to a forecast 6.6 percent in 2014 and falling to 5.4 percent by 2016. Atlanta should see 46,800 new jobs this year; 10,800 of them (23.3 percent) should be classified as premium jobs ($60,000-plus annually).

This comes despite Georgia showing a jobs deficit of 9,000 that did include the state's "Snowpocalypse." The state rebounded with 15,000 new jobs in March.

By the end of 2016, Dhawan says 175,900 of those jobs will be in metro Atlanta. Furthermore, 40,900 of the premium jobs generated by the upsurge in the economy (76 percent of the total) will land in the metro area as well.

Many of these premium jobs will land in Atlanta's northern arc of Cobb, North Fulton, Forsyth and Gwinnett counties.

Georgia showed total taxes and revenue for March to be $1.32 billion. That is a 12.3 percent rise from March of last year. Overall, Georgia has had 15 straight quarters of positive growth.

Housing in the core county cluster of Cobb, DeKalb, Fulton and Gwinnett garnered a total of 4,432 housing permits, up 20 percent from first quarter a year ago. Multifamily permits were 2,734, up 38.4 percent from last year at this time.

Fulton led the cluster with 2,435 permits in the first quarter, a whopping increase of 140.6 percent over first quarter 2013. Multifamily is the main driver of permits, accounting for 1,899 of the permits.

Foreclosures also dropped dramatically in the first quarter with Fulton one out of every 1,225 homes; Gwinnett 1/1,019; Cobb 1/1,447; and DeKalb 1/881.

In this core cluster, total permits should drop 3.9 percent, Dhawan said. But they should return to positive growth in 2015 (0.9 percent) with single-family permits up 7 percent.

The Cherokee-Forsyth-Pickens cluster issued 946 permits in the first quarter, up almost 10 percent from last year. Practically all of those issued are single-family permits. Forsyth is the unquestioned leader in that growth as it remains one of the stars of the recovery. That is tempered by Forsyth's foreclosure rate rising to one out of every 1,892.

National economic outlook not the Fab '90s

By HATCHER HURD

hatcher@northfulton.com

ATLANTA – While home prices grew in double digits, Wall Street is apparently running on all cylinders and new-vehicle sales are at the 16 million mark, Georgia State University Economic Forecasting Center Director Rajeev Dhawan said the national economy is not the same as the Fabulous '90s.

"It's like your child who graduated college has now moved out of the basement. It feels really good, but that doesn't mean they won't be back," Dhawan said.

The big difference between now and the glory days of the 1990s are the low interest rates and a disinflationary environment, Dhawan said. The Federal Reserve is assuring markets that its bond-buying days are ending, but interest rates won't necessarily rise.

New Fed Chairwoman Janet Yellen is keeping mum on when that may happen, and rightly so, Dhawan said.

He points to the "terrible real GDP growth number of only 0.1 percent in the first quarter of 2014." The "winter of discontent" with its numerous snowstorms hurt retail sales and vehicle sales as people literally stayed home. So sales have fluctuated wildly, dipping then recovering as weather improved.

But that does not satisfy Dhawan in explaining why first quarter exports were down 7.6 percent or why spending on business equipment fall 5.5 percent. Dhawan considers higher business equipment spending to be a precursor of an uptick in the economy.

Exports are down also. Dhawan attributes that more to the ill health of our trading partners. Russia has most of Europe on edge over the Ukraine question. Germany is squarely in the middle. It relies heavily on Russian natural gas, especially since it has decided to shuck nuclear power in light of Japan's plight with tsunami-struck reactors.

China has found it must play more by market rules than communist manifesto when it comes to managing its economy. Since 2011, China has been trying to slow its growth down to curb inflation and runaway home prices.

Dhawan said China has checked only its inflation; meanwhile, it is having trouble jumpstarting the economy again. The Big Red Panda has also finally had to come to grips with its rampant pollution. Shutting down offending polluters, especially steel plants, has stalled economic activity and thus curtailed imports such as mining products from Australia and mining equipment from the U.S.

China's slowdown spills over to China exporters such as Brazil, Singapore, Korea and others who are also experiencing economic slowdowns.

When Germany and China catch cold, everybody sneezes.

But the big culprit in stirring the economy in the U.S. is the lackluster housing market. That is where the Fab '90s parts way with the bearish 2000-teens.

"Yes we had double-digit home price increases last year, but don't expect a repeat this year," Dhawan said.

The price hike fueled by homebuyers and institutional investors – who pay cash – kept prices up. This year, the rise and fall of mortgage rates that spurred investors to buy in the troughs of the mortgage market won't be there, Dhawan says.

Why? Russian President Vladimir Putin's antics in the Crimea are sending investors everywhere into the safety of the bond market. So despite the Fed's tapering policy, bonds are still low.

Add to that, the Millennials for a variety of reasons do not want the anchor of a mortgage around their necks. Some do not see home-ownership as the great investment their parents and grandparents saw. Others want the freedom that "liquidity" offers as they flit from career to career.

In addition, new homebuyers are not buying all new furniture and appliances. They bring their old stuff along. Thus, new home sales are not the ripple through the economy they used to be, fueling ancillary supplier industries such as furniture, appliance and carpet manufacturers.

Ultimately, Dhawan says annual growth will be a weak 2.2 percent this year. And this will be after a strong 3.7 percent growth in the second quarter – which he says is "simple arithmetic" based on factors already in play.

However, 2015 will be the beginning of the true rebound. After a slow start in first quarter 2015, it should surge to a 2.5 percent growth, which in turn will fuel a 2016 that will flirt with 3.0 percent growth.

Executive Editor, Appen Media.
Ga. Jobs Growth Outlook

GEORGIA ATLANTA

Employment Premium % of Total Employment Premium % of Total

2014 65,000 14,800 22.7% 46,800 10,800 23.1%

2015 89,200 18,400 20.6% 61,300 14,300 23.3%

2016 100,100 20,700 20.7% 67,800 15,800 23.3%

TOTAL 254,000 53,900 21.2% 175,900 40,900 23.2%

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