Georgia will not return to pre-recession employment levels until 2020, partly because the state has lost its competitive edge, according to a University of Georgia economic forecast released Tuesday.
The state’s growth engines of the past -- housing and in-migration of workers and retirees -- are likely to remain stalled for many years, the forecast said.
State political and business leaders should focus on luring established companies and encouraging new ones that have promise, argued Robert Sumichrast, dean of UGA’s Terry College of Business, at the school’s annual outlook presentation at the Georgia World Congress Center.
Georgia employment peaked in February 2008 at 4,157,500. Since then, the state has lost 357,400 jobs, according to the Bureau of Labor Statistics. That includes about 25,000 jobs this year, Sumichrast said.
The UGA forecast projects the addition of 18,000 jobs next year -- not enough to lower the state’s jobless rate, currently 10.2 percent. The rate will average just over above 10 percent next year, even without another downturn, according to the forecast.
The Georgia economy will expand by a modest 1.5 percent in 2012 -- assuming it is not tripped up by an outside event like the European debt crisis, Sumichrast said.
“You should be concerned about that,” he said. “Any time the rate of growth drops below 2 percent, the economy is susceptible to a setback.”
Chances of a recession next year are 45 percent, estimated Jeff Humphreys, director of Terry’s Selig Center for Economic Growth.
For more than four decades, Georgia’s economic growth dramatically outpaced that of the nation as a whole. The state’s job base expanded 32 percent during the 1990s, compared to 20 percent nationally.
“Georgia has had quite a reversal of fortune,” Sumichrast said.
Since then, Georgia’s performance has lagged the nation’s -- largely because the sectors shedding jobs represented a larger-than-average share of Georgia paychecks, Sumichrast said.
Technology took a hit with the burst of that industry bubble in 2000. The housing collapse in 2007 took down tens of thousands of positions in real estate, construction and finance. Those sectors may have suffered their worst damage, but they will keep shrinking in 2012, according to Sumichrast.
Now, the worst hemorrhaging is in state and local government, he said -- and that will continue.
“There is a lot of restructuring left for the government sector,” Sumichrast said.
The state can no longer expect heavy in-migration of retirees as in the past, he said. Nor can the Georgia economy depend only on luring large numbers of companies from elsewhere -- although the state should have a larger fund to help close deals.
Instead, Georgia needs to recalibrate its development strategies to build more small companies, he argued.
That includes more support for research, as well as an effort to build more “homegrown venture capital” to support new companies, Sumichrast said.
Nationally, the outlook is likewise for modest improvement in 2012, according to Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta.
Growth will be “moderate,” inflation “acceptable” and “unemployment will come down slowly,” he said.
“But this story line involves considerable vulnerability to disruptions,” Lockhart added.
At both the national and state level, an economy growing sluggishly can be derailed, he said.
Rapid cuts in government spending could come before the economy is on sure footing, but “the most prominent source of risk is Europe,” he said.
The most likely “channel” for damage would be through the financial sector, which could freeze lending and trash consumer and business confidence. he said.
“I think it can be argued that in recent weeks the European sovereign debt crisis has entered a new phase and as a result the financial markets are jittery.”
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Credit: Jason Getz / Jason.Getz@ajc.com