State’s economic outlook brightens a bit

The rest of 2014 should bring solid, if unspectacular, job growth to Georgia, with help coming from housing, manufacturing and technology, economists say.

Growth may be slightly slower than in 2013, but prospects for this year have brightened a bit in recent months with a Congressional compromise – however temporary – on the federal budget, said Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University.

Moreover, a surge of technology jobs means a higher proportion of new positions will pay well, said Dhawan, who issued the center’s quarterly outlook on Wednesday.

The state will add about 85,100 jobs, two-thirds of them in metro Atlanta, he predicted. That’s up a bit from his previous forecast.

Georgia’s unemployment rate – currently 7.4 percent – will keep slipping, averaging 6.7 percent this year and 6 percent in two years, Dhawan said.

Dorsey Farr, former Federal Reserve economist and now a principal in the investment firm of French Wolf & Farr, said he also sees the economy headed in the right direction, though at a frustratingly slow pace.

“It keeps things moving, but it is not strong enough to get excited about.”

A couple years of modest and relatively steady growth has trimmed the state’s unemployment rate from double digit levels following the Great Recession. But part of the reason for the decline is that thousands of people have left the job market and are no longer counted as unemployed.

The state still has more than 200,000 fewer jobs than it did going into the recession seven years ago. The pace of a recovery has not been so slow since at least the 1930s.

At the current pace of job growth, it will be mid-2016 before Georgia again reaches pre-recession levels.

Farr said he has not seen any reason to modify his outlook in recent months. But he said there’s a tendency to hope at this time of year.

“At the end of the calendar year, there’s a natural burst of optimism,” he said. “But every one of those episodes is followed by a time of weakness.”

In contrast, Dhawan’s new prediction for job growth is about 10 percent higher than his forecast made in November. “Now, business can’t use the excuse that ‘I face uncertainty on the government side,’” he said.

Nearly every sector will grow this year, Dhawan said. Last year it was strong in manufacturing, leisure and hospitality, and construction.

However, even if the federal budget truce holds, other dangers to both national and regional growth linger, he said:

— Corporate America may stay skittish on investing in new equipment and personnel.

Those investments don’t pay off right away in jobs, but they are necessary for hiring to take off, Dhawan said. “It has been weak in 2012 and 2013. I can’t give you 125,000 jobs for Georgia (in a year) until you give me better investment from the corporate sector.”

— China’s economy may finally stall, as some indicators seem to warn. Any slowdown in Asian exports could badly damage trade-dependent Savannah, as well as the international and logistical sectors in Atlanta.

— The Federal Reserve could botch its handling of interest rates, tanking the stock market or chilling the housing market.

Rising stock prices bolster both corporate confidence and household spending, as many Americans are investors via their retirement plans. Many months of healthy gains in stock prices have boosted consumer spending, Dhawan said: “You bought because you felt richer last year.”

But most Americans’ biggest investment is the home. And when Atlanta’s housing market collapsed, it took down not only tens of thousands of jobs, but consumer finances too.

Now, housing is rebounding.

Home permits will not jump in 2014, but prices will keep moving up – slowly at first and then accelerating through the next several years, Dhawan said. “Home prices will rise 61 percent over the next five years.”

The number of construction and other real estate jobs is also growing again, but a dramatic expansion of the sector is years away, Dhawan said. “First, people get jobs. Then you build the houses for them.”

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