Small Business Growth Offsets Potential Trade Skirmish Losses in Georgia

As President Donald Trump talks tough on trade, any actions he takes with China and Mexico will directly affect the Georgia economy, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business.

“We expect President Trump’s trade skirmishes to bite into Georgia’s transportation, trade, manufacturing and hospitality sectors,” Dhawan wrote in his quarterly “Forecast of Georgia and Atlanta,” released Feb. 22. “Georgia’s large corporations with international ties will also feel the heat.”

However, other promised policies expected from the Trump administration will benefit small business growth, which will lift the state’s economy, Dhawan said.

“Going forward,” he said, “small business growth will remain buoyed in the wake of some of Trump’s administrative initiatives. This will trickle down and buoy employment growth in construction, financial activities and wholesale, into retail trade and hospitality sectors.”

The corporate sector was a strong source of job growth at the end of 2016, especially in the metro Atlanta area. However, Dhawan expects this job growth to moderate in 2017.

“Policies of the new Trump administration with regard to trade could have impacts,” he said. “A trade skirmish with Mexico (Georgia’s No. 2 trading partner) has already started. Germany (No. 5) is getting drawn into it, and China (No. 3) is next on the docket. Thus, globally connected large corporations in Atlanta, headquartered mostly in the Midtown to Sandy Springs quadrant, may not benefit as much as the small business sector, which draws exclusively on the domestic consumer market.”

Despite poor corporate news, the construction sector has benefitted from the building of new stadiums, hotels and office buildings in the metro area. This will begin to shift as major projects are completed in 2017. The hospitality sector will benefit from the completion of these hotels, but also will be negatively affected by the strengthening dollar from the president’s trade talks.

The manufacturing sector, which has the biggest impact outside the metro Atlanta area, also stands to suffer losses, Dhawan said. He cited three reasons for the decline in manufacturing jobs.

“First, overall investment was anemic,” he said. “Second, our strong dollar made U.S. goods relatively expensive and, third, demand is weaker due to the combination of a stalled Chinese economy and economic weakness in Europe. Going forward, trade skirmishes could have major impacts in Savannah, Gainesville, Dalton and Columbus.”

There is some good news on the local front. As home prices rose, government jobs increased with property tax collections.

Also, as Dhawan pointed out, “If the Trump administration comes through with its promise to ramp up infrastructure spending, it will boost job growth at state and local levels going forward.”

At this point, Dhawan expects the new president’s talk on trade to have a negative impact on major corporations in the metro area, but he expects small businesses to benefit from the domestic commitment from the Trump administration.

“Expect our small businesses to continue to do fairly well as consumers continue to demand their goods and services,” Dhawan said.

Highlights from the Economic Forecasting Center’s Report for Georgia and Atlanta

  • Georgia employment will gain 77,600 jobs (13,800 premium jobs) in calendar year 2017, 69,800 jobs (12,700 premium) in 2018 and 62,200 (11,900 premium) in 2019.
  • Nominal personal income will rise 4.7 percent in 2017, 5.4 percent in 2018 and 5.5 percent in 2019.
  • Atlanta will add 52,200 jobs (10,100 premium jobs) in calendar year 2017, 49,300 jobs (9,600 premium) in 2018 and 43,600 jobs (9,200 premium) in 2019.
  • Atlanta permitting activity in 2017 will decrease 5.4 percent, grow marginally by 0.4 percent in 2018 and increase 2.7 percent in 2019.