Dueling Forecasts for 2015
Category ……..Terry College, UGA……..Economic Forecasting Center, GSU
Georgia economic growth ………….. 3.2 percent …….. 2.6 percent
Georgia job growth, pace ………….. 2.3 percent ………. 1.9 percent
Georgia job growth, number ……… 96,200 …………………. 71,000
Metro Atlanta, jobs ………… ………..69,000 ……………………52,200
US growth, pace …………. ………….. 1.8 percent ……………..1.7 percent
Sources: Terry College of Business, Economic Forecasting Center
Georgia's economy will grow faster than the nation's during 2015, according to the annual forecast from the University of Georgia business school.
The state’s job base will expand by 2.3 percent – about 96,200 positions – with more than 70 percent of them in metro Atlanta, said Benjamin Ayers, dean of the Terry College of Business. He delivered the forecast Friday in a talk to more than 650 people at the Marriott Marquis in Atlanta.
“Georgia will out-perform other states,” he said. “We expect a slight acceleration in 2015.”
The upbeat forecast comes despite the state’s continued poor showing in the jobless rate, which has been among the nation’s highest for several months. Ayers said job growth will shave a full point of the rate in 2015. It is currently 7.7 percent for the state.
Economic growth will be led by solid improvement in construction and manufacturing, according to the Terry forecast.
Some help will come in the form of new residents, since the pace of in-migration has been picking up, Ayers said: Georgia’s population also will grow faster than the nation’s as a whole. Moreover, the dramatic fall in gas prices is a boon to a state with no oil production that uses vast amounts of fuel in various forms of transportation.
“The drop in oil prices should boost Georgia’s economy more than it will boost national economic growth,” Ayers said.
As a result, the state's growth next year will be faster than usual for the first time since the devastating 2007-09 recession, he said. "This will be a positive change from what Georgia has experienced in recent years."
The Terry forecast is somewhat more optimistic than the recent projection by the Economic Forecasting Center at Georgia State University. That prediction, released in early November, called for the state to add 71,000 jobs next year, including 52,200 in metro Atlanta.
Terry put the probability of another recession at just 25 percent, but suggested there are several ways in which the state’s economy could be vulnerable:
— Pentagon cuts. Federal spending in general accounts for less of Georgia’s economy than the national average, but the state’s share of military spending is twice the average, Ayers said. “Georgia’s military-base communities are extremely dependent on federal dollars.”
— Rate hikes. The Federal Reserve has kept short-term interest rates near zero since the worst of the recession, but they have tentatively signaled a willingness to start raising those rates sometime next year.
That could create more “economic drag” in Georgia than elsewhere – and it’s a worse problem if it makes lenders more cautious, Ayers said. “That is because Georgians carry relatively more debt and have relatively less savings than the national average. So it’s a problem if credit is restrained.”
What happens with interest rates, of course, will shape some critical economic components, starting with real estate.
Housing was an outsize part of Atlanta and Georgia growth and when the bubble burst, Georgians were hurt more badly than residents of most other states. The state’s home price values are still well below their pre-recession peaks – and in many areas, there has been virtually no recovery.
But on average, home values should increase 6 percent next year, according to the Terry forecast.
A strong rebound in prices is important to the state’s entrepreneurs, who often fund new ventures by trading home equity for cash, Ayers said: Many thousands of Georgians lost homes to foreclosure, and many thousands of others still have their homes, but have little or no equity to trade.
Rising home values also contribute to the so-called “wealth effect” that makes people more likely to spend when they perceive the values of houses, stocks and other assets to be increasing.
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