Georgia’s unemployment rate remained low in November and many employers are still scrambling for employers, the pace of growth has decelerated — evidence that a year of interest-rate hikes has thrown some sand in the economic gears.
Layoffs are still relatively low, but the state added just 1,000 jobs during the month, the weakest expansion in more than a year, according to a report Thursday from the Georgia Department of Labor.
In the year since the Federal Reserve started hiking short-term rates in an effort to tamp down inflation by slowing growth, the state has added 182,200 jobs. But higher rates make it costlier to borrow money and that raises the stakes for investment of all kinds, including hiring.
“In the last ten years, it has been really easy to borrow cheap capital,” said Christopher D. Fagan, a partner at Atlanta-based accounting and advisory firm Moore Colson. “You only needed a rate of return to be above 2 or 3% and you were making a profit. Now, you need something more than 7 or 8%.”
Businesses are becoming increasingly hesitant about taking risks, he said. “There’s a lot of uncertainty as to what 2023 holds.”
Among the signs that the economy is reaching an inflection point:
— Weaker-than-usual job growth. Pre-pandemic, Georgia averaged job growth of 2,660 in November. And in the decade before the pandemic, November averaged 7,900 jobs.
— A drop in the labor force, which includes everyone with a job and anyone who is actively searching for work. Fewer people looking for work and more older workers retiring can be a sign that hiring has slowed and companies are expanding less aggressively.
Last month, the Georgia labor force shrank by 6,789, according to the Department of Labor.
— An increase in the unemployment rate. The jobless rate last month edged up from 2.8% in September to 2.9% in October and in November to 3.0%. That is still historically low, but the 156,049 people classified as unemployment doesn’t include people who have stopped looking for work.
The Federal Reserve has more than quadrupled its short-term rate since last winter. And while inflation has decreased, it hasn’t come down as much as the Fed wants, which means the Fed will keep lifting rates, said Warren Wachsberger, chief executive of AECOM Capital, an investor and developer of real estate, which is currently funding several deals in Atlanta.
“The Fed was probably a little late getting started,” he said. “As a result, they are probably going to overshoot and the economy will probably feel more pain.”
A number of tech-centric companies like Twitter, Lyft and Meta have announced layoffs. Locally, Amazon is closing its 219-worker Kennesaw warehouse.
Yet many tech workers are in demand and can find other work.
Moreover, companies continue to announce expansions in Georgia. Earlier this week, KISS USA, a cosmetics company, announced plans to hire for 395 positions at a new, $121 million facility in Bryan County. And earlier in the month, Stuckey’s announced plants to add 60 jobs in a $5 million Jefferson County expansion.
Most consumers and companies are in better financial health now than before many previous downturns, Wachsberger said. “My personal view is that any recession will be relatively shallow because of the underlying fundamentals.”
While inflation has chewed at household finances, many workers — especially at the lower-end of the spectrum — have seen wages and benefits grow fast enough to soften the impact of higher prices.
According to a survey by staffing company Robert Half, 46% of Atlanta workers are currently looking or plan to look for a new job early next year.
Money is the main reason for most of them, according to the survey.
Spencer Schlampp, owner of landscaping and pool companies in Dallas, says he sees that first-hand in hiring entry-level workers.
“Guys who were starting at $11 an hour are now getting $14 or $15 to start,” he said. “I am now giving full healthcare benefits and a 401(k).”
Keeping them is even harder, he said. “I’ve had them leave for 50 cents more an hour. I’ve had them leave for $1-an-hour less, but the place was going to pay them in cash, so without taxes it was more.”
The average wage has been growing at 6.4%, and job switchers are averaging a 7.6% boost, according to the Atlanta Fed’s wage tracker.
The Fed believes those wage gains are a key driver of more inflation and sees a slowing economy or recession as the way to shut down that cycle. Economists disagree, some noting that inflation — especially on rents, homes and fuel — has started to come down without a parallel fall in wages.
However, this week the Fed signaled a determination to keep raising rates.
After many months of job switching and pay hikes, that campaign hasn’t yet tilted the labor market balance against workers, but it seems increasingly likely that a shift is coming.
About one-third of companies say they will lay off a significant number of employees in the coming year, and 70% said they will likely have a hiring freeze, according to a ResumeBuilder.com survey of 1,000 firms.
Georgia monthly growth, November weakest in more than a year
Georgia’s November job growth
Average Georgia job growth, November
Sources: Bureau of Labor Statistics, Georgia Department of Labor
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