Report: Georgia should add jobs in 2011

By Michael E. Kanell

The Atlanta Journal-Constitution

Georgia's run of job losses -- now in its third year -- will finally end with the return of modest employment growth next year, according to Georgia State University's Economic Forecasting Center.

But the state's economic recovery will remain tepid, in part because of a banking system riddled with bad debts left over from the housing boom, said Rajeev Dhawan, director of the center. Tight credit will combine with soft demand to hold back hiring, he said.

“It all works through availability of credit,” he said. “That is very important for small businesses and for entrepreneurs. They are the ones who suffer for lack of credit.”

Dhawan, delivering his report at the center's quarterly conference on Wednesday, predicted Georgia will see a net loss of 35,600 jobs in 2010 -- far less than the 173,900 of 2009. The state will add 43,200 jobs in 2011 and 66,700 jobs in 2012 -- a significant chunk of them lower-paying jobs, according to the center's forecast.

Still, positive hiring will end the worst labor hemorrhage since the Great Depression. By the time the losses end, the state will have shed about 342,000 jobs, or nearly 8.3 percent of all payrolls, since 2007. At the predicted rate of resumed growth, it will take until 2015 to replace those losses.

The jobless rate will continue to hover around 10 percent this year and next, then dip only to about 9.7 percent in 2012, Dhawan predicted.

Besides the credit squeeze, the problem is also one of weak consumption: Saddled with debt, battered by job cuts and threatened by a shaky housing market, consumers have retrenched on spending. Many companies simply do not see growing demand for their goods and services.

For instance, the airline business offers signals of both consumer and corporate behavior, Dhawan said.

“Fuel consumption is still falling, which tells me that the normal economy has not come back.”

Dhawan discounted the stock market’s recent gains and dismissed surveys showing a rise in the confidence of chief executives. “Those correlations are null and void when you are in the era of credit constraint.”

William Strauss, senior economist at the Federal Reserve Bank of Chicago and a guest speaker at the conference, said government response to the recession – especially via the federal stimulus package – has added to an already bloated budget deficit, leaving the financial cost to taxpayers of the future.

But the choice was deliberate, he said. “The question is, what would have happened if government had not done what it did? What if GDP had fallen 10 percent? What kind of legacy would that leave?”

The stimulus thus far has bolstered the economy, though its impact has been relatively narrow, said Ken Simonson, chief executive of the Associated General Contractors of America.

The "multiplier effect" of money spent directly in highway and other infrastructure projects is significant, he told the several hundred conference attendees. Each $1 billion actually spent in the economic stimulus supports 28,500 jobs – more than one-third of them in construction and suppliers, he said.

“But half the jobs are totally invisible, coming when workers and suppliers spend their paychecks,” he said.