As bad as the recession has been for metro Atlanta, the biggest effect may be that the damage done will dampen growth for years to come.
After a nearly two-year flood of job losses — with no turnaround expected until late 2010 — the area’s woes now threaten to fundamentally alter the critical ingredients of Atlanta’s go-go growth of years past: plentiful jobs and a red-hot housing market.
Coming out of recession, it will take years to soak up the swollen pool of unsold homes and land jobs for the swelling group of unemployed. There’s also the danger that Atlanta’s glow has dimmed and the region can no longer lure as many new residents and businesses from outside.
Of course, Atlanta has hit downturns before. But none quite like this.
Driven by easy money after the 2001 recession, an already robust housing market soared into the stratosphere, creating tens of thousands of jobs and pulling along the region’s economy. By the time the building stopped, metro Atlanta had a lot more homes for sale than buyers.
And then the foreclosures started.
“The key word is credit,” said economist Adrian Cronje, chief investment officer at Atlanta-based Balentine, a regional wealth management firm.
“Atlanta has been a poster child for over-leveraging,” he said. “We are in a hole. We have suffered more than most other areas.”
The damage will last beyond the recession, Cronje added. “We need to work off the excesses of the cycle.”
Collapse of the financial system behind the easy mortgage money shook Atlanta’s economy, sending the unemployment rate into double digits by last summer.
The region has lost more than 200,000 jobs since 2007. Georgia State forecaster Rajeev Dhawan, in his quarterly forecast, warned last week that job losses will continue through next year, although at a milder rate.
By the time job growth returns in 2011, he said, metro Atlanta’s payrolls will have shrunk a stunning 9.3 percent.
Dhawan projects only through 2011, when he predicts metro Atlanta will add 46,800 jobs. Total employment at that point would still be below the pre-recession peak. If the region started adding 80,000 jobs a year after 2011, jobs would still not surpass their 2007 level until 2015.
For decades, Atlanta was among the best-looking economies in the country, drawing — and depending upon — a constant flow of people from elsewhere. They came, often from places colder in climate and more sluggish in growth, expecting job opportunities and affordable homes.
They usually found them.
Through the past two decades, the region averaged population growth of more than 120,000 a year, according to the Atlanta Regional Commission. In the decade leading up to the 2001 recession, the area averaged 85,712 new jobs each year.
In-migration fueled more economic growth as new residents bought homes and used local services, which in turn drew more waves of new businesses and residents. Companies found an ample, eager workforce. Builders found continually expanding demand for new homes.
From that strength, however, came much of the pain of the past two years. When the housing bubble burst, jobs were lost not only in construction and real estate, but also among decorators, home supply retailers, painters, attorneys and bankers.
The dramatic slowdown happened just as the area needed to fill thousands of empty homes built during the boom.
“That is why housing is so problematic,” said economist Jeff Wenger of the University of Georgia. “The overhang is so large. I think we will have a very long slow climb out of this.”
Of course, Atlanta is not the only former boomtown feeling such pain. Indeed, while the region’s housing market remains in a deep funk, the state’s unemployment rate has leveled off just above 10 percent. In October, for the first time in two years, it was no higher than the national average. Both were 10.2 percent.
Still, without a major rebound in housing, it remains unclear where the region’s new growth will come from.
“It is really staggering how many kinds of jobs are connected to the real estate boom and how many won’t come back to their previous levels for quite some time — if ever,” said former Federal Reserve economist Dorsey Farr, now a principal in Atlanta-based French Wolf & Farr, an investment advisory firm. “It is difficult to see how we would not emerge from this with growth more muted than what we had grown used to.”
Yet, pessimism can be a failure of imagination, Farr said.
“Whenever we go through a downturn, you have a tendency to look at the past driver of growth and say, ‘That’s over and done with, and now we are doomed.’”
Even the painfully high jobless rate and the slide in home sales and prices can be seen as positives, playing to the notion that Georgia is a cheaper place to do business, said economist William J. Smith of the University of West Georgia.
“The effect is a lowering of the cost of living and doing business in Atlanta. This would help to counterbalance some of the declines.”
The Atlanta Regional Commission is also relatively upbeat. It predicts population growth of 97,950 a year for the next decade, with jobs growing 60,446 a year.
That is about 20 percent slower population growth and 29 percent slower job growth than in the decade before the 2001 recession, but such figures would still be the envy of many metro areas.
Atlanta’s airport, universities and corporate base are powerful economic engines, said Mike Alexander, ARC’s research division chief.
“In every way you can measure what a ‘hub’ means, Atlanta leads. The fundamentals are all there.”
Economist Cronje argues both the optimistic and pessimistic views hold some truth.
“Both of those things can be true,” he said. “It is not that Atlanta won’t grow. We’ll resume a growth path, but growth is likely to be a lot lower than in the previous two decades.”
Sarah Beth Gehl, deputy director of the Georgia Budget and Policy Institute, said state leaders, both in business and government, should address other issues that could help fuel growth during a slow recovery.
“We have to focus on quality of life issues right now, like education, transportation and public safety. We have to create a climate for growth in Georgia,” she said.
Finding money, of course, is a challenge. Unlike the federal government, state and local governments must balance their budgets. Any programs that add to cost could be paid for with cuts to others or higher taxes. Either could further hamper the economy.
The tough times should force debate on big questions, Gehl said.
“I think this recession has the potential to change the future of Georgia.”
On the job
Jobs in metro Atlanta, annual average
2005 – 2.336 million
2006 – 2.402 million
2007 – 2.453 million
(peak was December: 2.477)
2008 – 2.426 million
2009 – 2.293 million
*2010 – 2.216 million
*2011 – 2.235 million
*2012 – 2.315 million
*2013 – 2.395 million
*2014 – 2.475 million
*2015 – 2.555 million
*Projection, assumes annual growth of 80,000 jobs after 2011
Source: Bureau of Labor Statistics, Georgia State Economic Forecasting Center
