Leading state economist sees slow growth, high unemployment through 2013

Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business, has been one of the most sobering — and most accurate — guides to the Georgia economy in recent years.

While all sorts of pie-in-the-sky, “we’re-immune-from-national-trends”, “I’m-sure-we’ll-be-alright” platitudes have come from people who should know better, Dhawan has calmly and clearly outlined the state of the state economy. Georgians have discounted his predictions to their own detriment.

Dhawan has just issued his quarterly Forecast of the Nation. Here are the report’s highlights concerning the nation as a whole:

  • After growing by 2.9% in 2010, real GDP growth will be 2.2% in 2011, rising to a 2.5% in 2012 and 2.8% in 2013.
  • For 2011, the CPI inflation rate will average 2.9%. In 2012, the inflation rate will be 2.4%, decreasing to 2.0% in 2013. Meanwhile, the core CPI inflation rate will average 1.5% in 2011; will rise to 2.1% in 2012, and will be 2.0% in 2013.
  • Private fixed investment will grow 6.6% in 2011, expanding by 7.0% in 2012 and 7.5% in 2013.
  • In 2011, the job creation rate will hover around 150,000 jobs per month or 1.8 million jobs for the year. In 2012 growth will slow to 144,000 jobs per month and again in 2013 to 125,000 per month. The unemployment rate will average 8.9% in 2011, 8.6% in 2012 and 8.1% in 2013.

In other words: a recovery so slow that unemployment will remain elevated for several years, with inflation well below the Fed’s target rate.

Dhawan is especially concerned about “three stages in which high oil prices impact the economy. In the first stage consumers spend less on discretionary items; in the second, businesses raise prices, resulting in a drop in demand; and in the third stage, the Fed raises interest rates to curb inflation.”

Here are the highlights for the state forecast and the one for the Atlanta metro area:

  • Georgia’s employment growth will remain weak in calendar year 2011 with the addition of 33,200 jobs (9,200 premium jobs). The recovery will be significant for 2012, when Georgia’s economy will add 76,600 jobs (17,900 premium jobs). In 2013, it will add 85,200 jobs (17,800 premium jobs).
  • Georgia’s unemployment rate will be 9.8% in 2011, 9.1% in 2012 and 8.4% in 2013.
  • Atlanta’s employment will increase 21,600 jobs (including 6,600 premium jobs) in 2011. In 2012, expect 52,100 job gains (with 14,000 premium jobs) for the calendar year and in 2013 the employment base will grow further in with an increase of 58,300 jobs (14,100 premium jobs).
  • Atlanta’s housing permits will grow by a modest 18.2% in 2011, with both single and multifamily permits posting increases of 16.7% and 26.6%, respectively. Permit activity will increase again by 25.8% in 2012; that year, single family permit activity will increase by 24.4%, and multifamily permit activity will post a significant 32.7% growth rate. Permit activity will grow again in 2013, posting an overall increase of 37.4%. However, permit levels will be only about 15,000, still below 2008 levels.

Those might seem like dark predictions, but I think they’re realistic ones. And Dhawan has a great track record.

I sure hope state and local policymakers pay attention to him.