Parched Georgians are looking to the sky for signs of rain. Sadly, it is the U.S. economy, rather than the sky, that threatens stormy weather. In barren economic times, is there a ray of light leading the way?
Given the continued moribund housing and job markets, it may seem hard to believe, but the economy has been in recovery mode for two full years since the trough of the “great recession.” Total economic output has reached an all-time high. The nation has nearly two million more people on payrolls compared to 15 months ago. The stock market nearly doubled since its low in early March 2009. Even the declines in the stock market the past few weeks pale in comparison to its upsurge the prior two years.
Given this economic and job growth, why does the economy still seem so stormy?
The main reason is that after a long and deep recession, a durable acceleration of the recent recovery is needed to create enough jobs both to keep up with growth in the working-age population and to create new opportunities for the millions of workers who lost their jobs during the severe 2008-2009 downturn. Even the recent job gains must be viewed in the context of a loss of over 8 million jobs during the drastic downturn.
Where can the acceleration come from? Are there encouraging trends?
Certainly, construction has not been an engine of job growth since 2006, nor is it likely to be for at least a few more years. Other sources of demand for U.S. production, including household consumption and government spending, have not been and are unlikely to be drivers of economic acceleration. The pattern we see in Atlanta and in Georgia, whereby constrained budgets have led to painful layoffs of government workers, is indicative of the nation.
Yes, the federal government has been running a gargantuan deficit, but the mandate to balance budgets here at the state and local level implies that the job growth must come from the private sector. The good news is that the private sector is steadily, if unspectacularly, adding jobs at the national level. The bad news is that metro Atlanta, long a national leader in job creation, now lags the nation.
Georgia seems on the cusp of a revival, as we are once again attracting new businesses to the state, but it is premature to proclaim a strong upward turn.
Can we identify a silver lining in the cloudy economic picture? Yes, and it stems from the renewed ability of U.S. producers to compete globally. In fact, U.S. products are selling so well in foreign markets that record export levels have been achieved in recent months, due to two main reasons.
First, many large economies abroad are growing. For example, the growth in China, India and Latin America is helping a middle-class emerge. Big emerging markets contain new consumers who often covet U.S. goods. Second, U.S. goods have become relatively cheap in much of the world, a consequence of the decline of the dollar’s foreign exchange value.
Exports of U.S. goods and services exceeded $175 billion in April. From a worldwide recession low in April 2009, U.S. exports have surged by more than 40 percent in these two succeeding years. Goods exports alone, comprising manufactures and commodities, have leapt 53 percent in the same time period, as service industries tend to be less volatile (doctor visits and haircuts are not so easy to put off just because economic times are tough). Clearly, exports are a prime engine of economic recovery and growth in our nation.
What of Georgia?
Georgia is in the vanguard of U.S. export growth. Georgia exports grew 22 percent in 2010, achieving a record high. These exports range from Gulfstream jets to forest products, chicken, kaolin, carpets and contact lenses. By making the right investments, Georgia is looking to sustain its potential as a future export powerhouse, with enhancements such as the upcoming new international terminal at Hartsfield-Jackson airport to the major expansion of the port of Savannah.
A prime benefit of the boom in exports is that it is helping solidify a manufacturing core in the nation and state. Manufacturing exports have been a significant reason that U.S. manufacturing jobs have grown by nearly one quarter million during 2010-2011; this is the first noteworthy growth since 1998.
At the state level, such production gains are crucial; the U.S. Department of Commerce reports that the single largest contributor to real GDP growth in Georgia last year was durable goods manufacturing.
In conclusion, since U.S. employment in manufacturing peaked in 1979, worry has abounded about the “deindustrialization of America.” Clearly the U.S. is and will continue to be a mainly service-based economy, but among the otherwise cloudy skies on the economic horizon, exports are a shining ray of hope.
Jeff Rosensweig is an associate professor of international business and finance at Emory University.
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