As Georgia legislators prepare for the 2012 session, let’s hope they ignore distractions like the proposed bills that would place a heavier burden on the state’s laid-off workers.
Lawmakers should be spending their time looking at ways to improve the state’s grim economic outlook, as outlined a couple of days ago by the Selig Center for Economic Growth at the Terry College of Business at the University of Georgia. A few highlights (or lowlights) from the report summary (all these bullet points are direct quotes):
- While the United States has been on the plus side of job creation since 2009, Georgia has only managed to slow its rate of job loss. “In 2009, we lost about a quarter-million jobs,” [Dean Robert Sumichrast] said. “That decreased to 50,000 in 2010, and we estimate that Georgia will lose another 25,000 jobs in 2011.”
- With the economy continuing to grow slowly next year, the risk of recession becomes larger than it was this past year. The Selig Center places the odds of recession at 45 percent in 2012.
- “We estimate that Georgia’s economy will expand by only 1.5 percent in 2012, adjusted for inflation,” Sumichrast said. “That will be a little less than the 1.8 percent growth rate we predict for the U.S economy.” The anemic rate of economic growth reflects the expectation of tighter federal fiscal policy, less spending by many state and local governments, depressed home prices and disciplined spending by consumers.
- The financial crisis and the bursting of the housing bubble were a shock to the state’s economic engine, and it caused the steady influx of people and businesses migrating to Georgia to stop abruptly.
- Using the Selig Center’s baseline forecast, Georgia would replace the 360,000 jobs that were lost during the recession by 2020 — more than eight years from today. That’s also four years later than the United States is expected to recover its lost jobs. “Our employment will continue to grow at half the U.S. rate until 2012, when construction and financial services begin to recover.”
- Sumichrast said he believes Georgia has lost the competitive edge it once held. Too much of the state’s economic growth came to depend on a never-ending cycle of in-migration and real estate development, he said, and after more than four decades that cycle has mostly run its course. “The population growth driver stopped working during the Great Recession, and we should not make major investments to reinvigorate it,” he said.
If anything, these predictions might be too rosy — at least in the short term. For example, according to the October data from the Georgia Department of Labor, the state is about 32,000 jobs behind last year, so we’ll need a relatively strong final two months to hit that 25,000 mark.
Also, oddly, Sumichrast says that property assets had been “fully re-priced” as of mid-2011. On the same day that this document was released, the Case Shiller data for September showed Atlanta with a record decline in home values.
I’ve disagreed with Sumichrast’s read on the housing market before. In January of 2008, he told the Savannah Area Chamber of Commerce’s annual Economic Outlook Luncheon that we’d see only “slight declines” in home values. I cited that in a column predicting a 25-30% decline. (I got that one right.)
The Selig Center report details a variety of ways to improve this grim forecast, which are divided into three general areas: economic development incentives, supporting research and development, and increasing homegrown venture capital.
Sumichrast again: “Going forward, Georgia is unlikely to substantially outperform the nation unless we change our economic development strategy.”