- Wayfair, 1,000 jobs in Savannah
The Georgia economy has been expanding for roughly nine years, adding hundreds of thousands of jobs while the unemployment rate has dropped from double digits to 3.6 percent.
However, an epidemic of business delinquencies or a crisis that sends energy prices soaring could trip up the economy, Ayers said. And a trade war with China would make many retail goods more costly while chilling sales of some American exports. That would ripple through the Georgia economy, from the docks in Savannah to the warehouses of metro Atlanta.
“Our forecast assumes that a full-blown trade war is averted,” said Ayers.
He also cited interest rates as another “head wind” for the economy, since higher rates make it more costly for both consumers and companies to borrow. Higher rates slow the economy, make housing and autos more expensive and sometimes leads to recession.
Preceding Ayers to the podium on Thursday was a member of the Federal Open Market Committee, the elite group that determines those basic rates. The committee has been lifting rates gradually for more than a year.
But rates should not change much more, said Raphael Bostic, president and chief executive of the Federal Reserve Bank of Atlanta. "I think monetary policy ought to be trying a more neutral position."
That would mean neither juicing growth with low rates – which could kindle inflation – or chilling expansion with high rates. The challenge, though, is figuring out exactly where neutrality lies, said Bostic, a voting member of the FOMC.
Some experts say the low unemployment rate points to a need to raise rates so wages don't rise too quickly. But others argue that the low unemployment rate is partly because many people had stopped looking for work — so there's no need to increase rates.
“It is very difficult in real time to determine when the economy is overheating,” Bostic said.
Given the mixed message, the Fed should be careful, he said. “I do think we are in shouting distance of neutral, and neutral is where we want to be.”
The FOMC meets later this month to decide whether another rate hike is warranted.
Tailwinds helping the Georgia economy:
- Economic development projects
- Higher defense spending
- Population growth
Headwinds holding economy back:
- Tariffs and trade tensions
- Higher interest rates
- Labor markets without enough workers
Source: Terry College of Business, University of Georgia