Forecast: Expect more pain in ‘09, recovery in 2010

Holiday lights may be going up, but the economic gloom will only deepen in coming months, predicted Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.

Georgia and metro Atlanta are linked to a national economy that will struggle through the next year before making only a modest recovery late in 2010, he said, speaking Wednesday at the center’s quarterly conference.

“This is not a recession that is going to be deep, but it is going to be long,” he said. “Job losses will intensify.”

Real estate, which was crucial to Atlanta’s expansion, has been badly battered. The fall in sales hurt homeowners and brokers, while the chill in new building has eliminated thousands of jobs.

Among signs that more damage will be done was a Census Bureau report Wednesday that showed residential construction slowing once again.

It was the slowest monthly reading since the agency started collecting data in 1959, according to economist Celia Chen of Economy.com.

Meanwhile, a signal of plans for future construction was flashing red: The Architecture Billings Index plunged Wednesday to its lowest level since the survey began in 1995.

Weakness has spread from consumers and companies to governments and agencies that cannot get financing, said Kermit Baker, the chief economist for the American Institute of Architects, which compiles the index.

There are already three unemployed Americans for each job opening, according to the Economic Policy Institute. About 189,000 people have exhausted unemployment benefits without finding jobs, and more than 1 million more will get their final unemployment check between now and New Year’s, EPI reported Wednesday.

Georgia is unfortunately caught in the national current.

By the end of 2008, the state will have lost 75,100 jobs —- more than one-third of them “premium” jobs that pay more than $47,000 a year, Dhawan said.

From the start of the job cuts to the end of 2009, Georgia payrolls will bleed a stunning 170,000 jobs —- 4 percent of the total, he said. Most sectors have been hemorrhaging jobs.

Among the hardest hit are jobs near the core of the economy’s troubles: the real estate slump and the financial crisis. Moreover, the global slowdown is undercutting manufacturing, while falling tax revenues are forcing government cuts.

Government reports show some retail positions being added, but the pullback in consumer spending makes the data somewhat suspect.

The only growing category is that of education and health services, Dhawan said. “We are running on just one single cylinder.”

Metro Atlanta, which accounts for about two-thirds of the state’s jobs, will likewise account for the majority of this year’s job losses, he said: about 45,600.

It will lose 42,100 jobs next year before adding a modest number —- 17,200 positions —- in 2010, he said.

Paralleling recessions of 1990-91 and 2001, the current downturn will be followed by an expansion that does not bring job growth, Dhawan said.

In his conference a year ago, Dhawan predicted that the economy would skirt recession. He was hardly alone: Few of the nation’s mainstream forecasters were predicting a significant downturn.

But then in late spring, gas prices leaped to record heights. A few months later, the real estate meltdown set off a series of financial crises that led to massive government intervention in the financial system and a dizzying slide in the stock market.

The storm in the financial markets threatened to shutter lending from bank to bank and, ultimately, from bank to consumer.

Unchecked, the effects could be disastrous, Dhawan said. “Less credit means less investment, which means less income tomorrow. Everything starts with the grease that makes the economy work: credit.”

From here, the economic trajectory also depends on how much of a tailwind it gets from the expected government stimulus next year, said Chris Dardaman, chief executive of Brightworth, an Atlanta-based wealth management firm.

“And that will take a quarter or two to kick in,” he said. “We expect unemployment will continue to rise for awhile and peak out between 7 [percent] and 8 percent next year.”

Georgia’s unemployment rate was 6.5 percent in September. The state’s rate for October is to be announced today by the state Labor Department.

GEORGIA JOBS

April-Sept.gains and losses:

Total: ………………[down] 44,400

Retail ………………[up]….2,100

Construction …………[down] 12,200

Financial…………….[down]..2,600

Professional, business

…………services….[down]..9,600

Education and health ….[up]….5,000

Leisure and hospitality..[down]….500

Government …………..[down]..5,700

Manufacturing…………[down] 14,500

Source: Economic Forecasting Center, Georgia State University