Strong Domestic Demand Mollifies Trade Skirmish Sting in Georgia

Rajeev Dhawan

ATLANTA-March benchmarking revisions upgraded Georgia’s employment gains from 102,100 job additions to 120,600 in calendar year 2016. Thus, employment in 2016 grew by 2.8%, a maintenance of the job growth pace since 2014, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business.

“Employment in domestically demand driven sectors was revised strongly upwards, while employment in globally connected sectors was also revised up, but to a lesser extent,” Dhawan wrote in his quarterly “Forecast of Georgia and Atlanta” released Thursday, May 18, 2017.

“This will have implications for future purchasing power, as jobs in domestically demand driven sectors such as hospitality, education, construction and government are typically lower paying, while globally influenced sectors such as large corporations and manufacturing are higher paying,” he said.

“Manufacturing employment creation has decelerated over the past few years, likely due to the strong U.S. dollar. Furthermore, Georgia’s exports also are falling,” said Dhawan.

“An increase in corporate jobs due to the large contingent of headquarters has generated demand for housing, especially in that Midtown and core area, which has resulted in a surge of multifamily permitting in particular,” Dhawan wrote. “Construction activity also was boosted by the hospitality sector.”

Thirteen hotel projects are currently in the pipeline, bringing the number of rooms in the city over 97,000 by 2020. Atlanta’s occupancy rate of 73 percent in 2016 was one of the highest levels in recent history.

Georgia’s corporate job additions are expected to continue to grow, albeit at a slightly slower rate.

“Even within the corporate sector, the lowest wage earners saw stronger growth than those in technical or management positions,” Dhawan wrote in his forecast.

According to Dhawan, the real issue is what the purchasing power of the jobs created will turn out to be.

“We can see from Georgia’s personal income growth that it has been on a moderating trend since the start of 2015,” the forecaster said.

Going forward, however, as President Trump is expected to undertake tough measures on trade deficits with our trading partners, Georgia’s job growth, especially in high-paying, but globally-connected, sectors, will moderate, according to Dhawan.

“Eventually, this will affect spending on big-ticket items like homes and vehicles, as the ensuing trade skirmishes raise long-term interest rates,” he said.

Looking beyond Atlanta, a decrease in tonnage movement at the port of Savannah led to a downward revision for the metropolitan statistical area (MSA). Athens, Albany, Gainesville and Macon also had jobs numbers revised downward. The Columbus MSA was revised downward near zero.

The Dalton and Warner Robins MSAs bucked the trend of downward revisions and were revised upward to growth of 1.4 percent and 2.6 percent, respectively.

Dhawan pointed out that MSAs outside metro Atlanta will be more immune to Trump’s trade actions than Atlanta with its globally-connected economy.

“However, Trump’s other administrative initiatives will provide a boost to small business activity and buoy overall growth. But employment will still moderate due to the negative effects of trade skirmishes,” Dhawan said.

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

  • Georgia employment will gain 88,800 jobs (18,400 premium jobs) in calendar year 2017, 73,300 jobs (15,600 premium) in 2018 and 68,200 (14,300 premium) in 2019.
  • Nominal personal income will increase 4.9 percent in 2017, 5.3 percent in 2018 and 5.4 percent in 2019.
  • Atlanta will add 64,500 jobs (13,800 premium jobs) in calendar year 2017, 53,600 jobs (11,900 premium) in 2018 and 49,100 jobs (10,400 premium) in 2019.
  • Atlanta permitting activity in 2017 will decrease 1.1 percent, fall another 2.5 percent in 2018, but then rebound and increase 3.2 percent in 2019.