The current expansion may be the third-oldest on record so far, but that doesn’t mean it will die of old age.
In fact, experts cheerfully say, when it goes, it’s going to be murder.
That is, a recovery must be croaked by something, whether the culprit is a spike in energy prices, a climbing interest rate, a huge overhang of debt, a credit freeze. And, at least for the moment, there doesn't seem to be a killer on the horizon: for the economy of metro Atlanta, 2018 looks to be a year of solid, if unspectacular growth.
“Atlanta is going to be one of the stronger performing large markets,” said economist Mekael Teshome of PNC Financial Services. “Growth will be slower than what it has been in 2017 and 2016.”
The pace may have slowed some, but the region has seemingly made up the ground lost during the recession – and then some.
The region – along with nation – slipped into recession exactly a decade ago. The downturn was brutal: One in every 10 jobs vanished. The turnaround, which started in mid-2009, was sluggish for several years. But now, metro Atlanta had added back all the jobs lost and 290,200 more, while the unemployment rate has slid from double digits to 4.1 percent.
The last expansion died at the hands of a financial crisis, and economic research says that makes for a different kind of cycle, Teshome said. “The research says it takes an economy 10 years to recover from a financial crisis. And the economy now has only just returned to its potential growth rate.”
He predicts metro Atlanta will add about 52,000 in the coming year.
It’s not just the number of jobs, argues Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. “Don’t be bamboozled by the number of jobs. Look at the quality of the jobs, what people are paying.”
Like a barbell, Atlanta’s job growth has been heavy at either end – producing large numbers of good-paying corporate jobs and low-paying positions in hospitality or logistics.
Dhawan, who also predicts solid, if slowing growth, thinks the unemployment rate is deceptive. The number signals near-full employment, but there is more potential for expansion and more talent that could be enticed to participate.
“There is still a lot of the labor force sitting on the sidelines, discouraged,” he said. “It may come back in.”
Housing is critical
The ballyhooed and controversial tax package painfully being birthed in Congress may be good for economic growth, but don’t count on it spurring a rush of hiring, he said. “Will tax cuts do it? I don’t think so.”
What they will do is improve portfolios, said Scott Craig, president of Atlanta-based BT Wealth Management.
“There is a positive feedback loop right now in the global economy between growth and sentiment. Atlanta’s economy, based on our clients and our business, seems to be doing great. But we could be hitting the last few innings of the expansion.”
Still, he said the likely killer would be a decision by the Federal Reserve to jack up interest rates. And that is something the Fed typically does to quell inflation – which just hasn’t been a problem.
Years of low interest rates have been good for investors, Craig said. “If inflation ticks up and the Fed feels it has to raise rates faster than people are expecting, you could see that threaten to take some steam out of the markets.”
Other factors might serve as modest headwinds, said Michael Gove, professor of economics and director of the Center for Economic Education at the University of North Georgia.
The current anti-immigration atmosphere and skepticism about trade could both [trim] sources of economic stimulus, he said.
He also said all growth is not equal – the most efficient growth puts money into the hands of people who will spend it right away, he said. “Is the growth we have really spread across the economy? If there is extra growth coming, will it disproportionately benefit high income folks?”
One critical piece of the Atlanta economy is housing, a source of income, wealth and jobs – and because it has been historically affordable — an argument for people and companies to move here. That attraction has been good for the economy.
And while home construction is nowhere near the frenetic pace of a decade ago, but it should tick up slightly next year, according to Dhawan of the Economic Forecasting Center.
Demand for Atlanta-area housing may get fuel from the expected passage of a new tax structure, said Nela Richardson, chief economist for Redfin, a national real estate brokerage.
Current versions of the tax bill would eliminate the deductions for state and local taxes – a potentially painful change in states with high property taxes. That pain could redound to Atlanta’s benefit.
People interested in moving from high-tax states like New York, California, and Illinois often look at Atlanta, she said. “If migration patterns we’ve seen this year continue, expect to see Atlanta near the top of the list of destinations for people who will be looking to leave high-tax states in 2018.”
Longest economic expansions
Start, length:
Feb., 1961 – 120 months
March, 1991 – 106 months
June, 2009 – 102 months (through November)
Nov., 1992 – 92 months
June, 1938 – 80 months
Source: National Bureau of Economic Research
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