Georgia economy to suffer until 2011, analyst says

This will be a year of large-scale job losses in Georgia, with hopes for recovery shoved back into 2011, according to Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.

While the huge federal stimulus package will help some, the overall picture has grown bleaker in the past several months, Dhawan told about 370 people Wednesday at the center’s quarterly conference.

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DAVID TULIS/dtulis@ajc.com

Rajeev Dhawan

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“After the last recession, we made up what we lost in about three years,” Dhawan said. “This time, it is going to be a while.”

Dhawan’s forecast is more pessimistic than his November prediction and also gloomier than most mainstream economists. He projects that the national economy will shrink this year and into next before starting a tepid expansion.

Meanwhile, joblessness will climb, he said. “But don’t look at the unemployment rate — look at the number of jobs created and lost.”

Unfortunately, both metrics look miserable.

About 143,000 Georgia jobs will vanish this year, Dhawan said. By 2011, the state will have struggled through three years of job losses — shedding roughly 250,000 jobs.

Georgia has about 3.9 million jobs, nearly 60 percent in metro Atlanta.

Before modest growth starts in 2011, unemployment in Georgia will break into double-digits, cresting at 10.3 percent, he predicted. The United States will hit a similar level of unemployment, while losing more than 4.5 million jobs before recession’s end, Dhawan said.

In Georgia a year ago, only manufacturing was shedding jobs. By fall, recession’s contagion had spread to every sector except healthcare and education.

The flood of layoffs have come with corporate profits under assault: a plunge in consumer confidence, crashing sales at home and dropping demand from overseas — compounded by the crisis in credit markets.

“That is why they are throwing in the towel,” Dhawan said.

Every sector except healthcare is bleeding jobs — and there is reason to worry there, too, he said. “They are cutting back on elective procedures. Nobody is in the mood to open a new hospital. Where’s the money coming from to open a new trauma center?”

In some previous downturns, the economic impact was cushioned in Georgia. Not this time.

Consumer spending had dragged the economy out of the 2001 recession and fueled the six-year expansion. But now American households are burdened with debt, cordoned off from easy credit, anxious about home values and worried about their jobs.

“That consumption growth is gone and it is not coming back,” Dhawan said.

A turnaround depends on revival of a financial system that should be handing out loans to companies and consumers alike. Dhawan said. “We need to clean up the banking mess. If we don’t, there’ll be no game anymore.”

There is also hope for the federal government’s massive spending package. But those efforts at stimulus depend on four factors, he said: a pool of unused workers and other resources, consumers’ propensity to spend, investors’ willingness to loan money by buying government bonds and the choice of the right projects to pour money into.

The massive package will help, but it will move up recovery only by a few months, Dhawan said.

An update on the state’s jobs picture is due from Georgia officials Thursday. A national report will also highlight how many workers filed for unemployment benefits last week.

While those numbers are likely to be bad, Dhawan said they will have to get a lot worse before you should toss around the ‘D’ word.

During the late 1980s, greater Los Angeles — with a population comparable to the state of Georgia — lost 600,000 jobs in two years.

That was a depression, Dhawan said. “It has been twenty years, and they are not back to where they were. Don’t use that word lightly.”