Fortune 500 company Norfolk Southern officially announced at a press conference December 12 that they will be moving their headquarters to Atlanta. They will be building in Atlanta’s Midtown community. Georgia Governor-Elect Brian Kemp (from left), Atlanta Mayor Keisha Lance Bottoms, Norfolk Southern CEO Jim Squires, Georgia Governor Nathan Deal and Commissioner of the Georgia Department of Economic Development Pat Wilson (right) stand for a photo following the press conference in the Georgia State Capitol building in Atlanta. (ALYSSA POINTER/ALYSSA.POINTER@AJC.COM)
Photo: Alyssa Pointer
Photo: Alyssa Pointer

Atlanta business upbeat about 2019 despite whiffs of trouble

After nine years of steady and sometimes strong growth, much of the smart money says the expansion will continue at least through the next year with both the region and nation seeing creation of more jobs, higher home prices and an improving climate for business.

“Our view is that 2019 is going to look a lot like 2018 for metro Atlanta,” said Kevin Kelly, managing partner of the 1,700-person Atlanta office of PwC, a global consulting company.

The economy is a massive, complex entity. The gross domestic product of the United States is more than $20 trillion a year. Just metro Atlanta accounts for an estimated $300 billion, so experts are always searching for shortcuts, indicators that hint at where things are going.

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Reading the tea leaves is tricky, said Robert Willis Jr., chief investment officer at Willis Investment Counsel in Gainesville. “We have been operating for quite a few years with tailwinds. And they are mostly not turning into headwinds yet, but maybe they are becoming cross-currents.”

The region has benefitted from being a hub in both trading of goods and the movement of capital, becoming the de facto capital of the southeast. Though it lost out in the bidding for one of Amazon’s huge regional centers, it has continued to lure many companies, both tech-oriented centers like Blackrock and old economy companies like Norfolk Southern.

That is born out by demand, said Nick Bunker, an economist with employment website Indeed.

The three fastest-growing jobs in the area are truck driver, web developer and custodian, he said.

And as the unemployment rate has fallen, Atlanta is a good place for companies to find – or import – talent, said Alex Bombeck, managing director and president of Atlanta-based North Highland, a global consulting company.

There’s a shortage of skilled talent, Bombeck said. “Companies in Silicon Valley and in the Northwest – they often cannot find all the skills they need and they can’t import them from lower-cost places because people can’t afford to move there. But they can afford to come to Atlanta.”

A different tune

Yet there is a background chorus singing a different tune: The longer the good times last, the more experts think that trouble is coming. Some of that worry is just a matter of the historical odds, since no American expansion has lasted longer than a decade without slipping – or plunging – into recession.

The question is when, and even for the glass-half-full types, there are disturbing signs.

  • Stock market volatility. The stock market is often seen as a portent of the near-economic future. After years of climbing vigorously, the market has slipped into stomach-churning, roller-coaster mode and its recent drops have taken it below its levels of last December.
  • Trade wars. Tension between China and the United States has see-sawed. And each time that the pressure mounts, so does the stock market skittishness, as well as the concern of many companies that the conflict will make their business more costly.
  • Interest rates. In the bond market, where many interest rates are set, recent weeks have seen investors push some short-term rates higher than some longer-term rates – the opposite of what is normal. In the past, that change – a yield curve inversion – has often come in the months before a recession. Meanwhile, the Federal Reserve has, during the past year, raised the benchmark rate, which makes borrowing more expensive for both consumers and companies.
  • Geopolitics. Then there are the geopolitical rumblings in the Middle East, with Russia and also with China.

Metro Atlanta added about 60,800 jobs in the past 12 months while the unemployment rate had fallen to 3.4 percent.

Meanwhile, the median price of a home in metro Atlanta has risen 7.3 percent to $245,000, according to a report from the Atlanta Realtors Association.

The rise in prices is a gain for homeowners – a boost for confidence even for those who are not selling their homes now, said David Zanaty, Atlanta-based eastern regional general manager for Opendoor, which makes offers online to owners. “It’s the wealth effect. That is mitigating the impact of rising interest rates.”

But the dynamic applies for stocks too – and it can have an affect either going up or going down, he said.

When the market go down, it can chill consumer spending, he said. “I might feel less rich because I’ve seen my retirement fund cut in half, even if my cash flow has not changed. It is rooted in human behavior. It drives the metrics even before the supply-demand dynamics suggest that they should change.”

The stock market’s recent fluctuations are a worry, he said. “That affects the marginal choices people make. Maybe I won’t buy that car right now. Maybe I don’t want to buy a new house.”

Atlanta’s housing prices have climbed faster than wages, a rise that has triggered concerns about affordability for first-time buyers – a potential dampener on growth. Yet the region’s costs are modest by comparison to Silicon Valley, Seattle or New York.

Housing was the leading edge of Atlanta’s growth in the early years of the 21st Century for decades, then became the anchor dragging the economy down in the crash leading up to the recession starting in late 2007. This time, the prognosis for housing is good, said Brian Dally, chief executive of Groundfloor, an Atlanta-based company that provides loans to developers and home-flippers.

For starters, Atlanta’s housing market is not overheated or overbuilt, the way it was by 2007, he said. “There are markets where there is significant price appreciation. Atlanta is not one of them. We don’t see any indicators of a coming housing crash.”

Inevitably, a downturn will come, but it is not imminent, Dally argued. “We are in extra innings. But how deep we go into extra innings, you can argue. The economy might flatten out for a while. You could see prices going sideways, but fundamentally, we don’t see signs of a dislocation coming.”

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