The prediction of above average growth for both the state and area economies in 2014 was music to the ears of the 600-plus businesspeople gathered Wednesday at the Marriott Riverfront Savannah for the Savannah Chamber’s annual economic outlook luncheon.
“Georgia has consistently trailed the rest of the country in recovering from the Great Recession,” said Charles Knapp, president emeritus of the University of Georgia and interim dean of the university’s Terry College of Business.
“This year, we’ll see the tables turn.
“In 2014, we expect Georgia’s real gross domestic product to grow by 3.3 percent, exceeding the 2.5 percent GDP growth projected nationwide. We expect 2.2 percent job growth in Georgia this year, compared to 1.7 percent in the U.S.,” Knapp said, adding that the state’s unemployment rate will drop from 8.3 percent in 2013 to 7 percent.
While Georgia’s unemployment rate will still trail the nation — which is expected to finish the year at 6.6 percent — the state is beginning to close the gap, Knapp said.
He credited the positive predictions to three main factors — the housing recovery, strategic shifts in the state’s economic development strategy and more supportive demographics.
Housing and real estate development will be a powerful tailwind for Georgia in 2014, Knapp said, with the number of single-family home starts for new construction increasing 34 percent and existing single-family home prices rising by 8 percent.
Another important factor already accelerating growth is key economic development legislation, passed in 2012, that made Georgia more competitive in 2013.
“It appears these new incentives are game-changers,” he said, pointing to such announcements as Baxter International (1,500 biotech jobs), GM’s IT Innovation Center (1,000 high-tech jobs) and Engineered Floors manufacturing and distribution center (2,000-plus jobs).
The third factor behind Georgia’s improving economic performance, Knapp said, is demographics.
“For decades, Georgia depended on high levels of in-migration for growth, but that model stopped working during the Great Recession and was slow to restart in recovery,” he said.
“Due to job growth and the housing recovery, in-migration will begin to rebound strongly.”
A possible deterrent to growth is the potential for federal spending cuts, especially in the area of defense spending, Knapp said.
A more significant headwind for both Georgia and the nation, he said, is the possibility actions by the federal government could cause a rise in interest rates.
“In summary, Georgia will outperform the nation in 2014,” Knapp said. But he cautioned that, in order to continue outperforming other states, Georgia needs to improve its K-12 education.
While Georgia’s economy is clearly on the mend, the Savannah area continues to lead the way, with its diverse economy providing a buffer to sharp downturns and powering growth, according to Armstrong Atlantic State University economist Michael Toma.
“The Savannah MSA has a number of cylinders in its economic engine — the ports, manufacturing, tourism, health and education,” he said. “So, if one cylinder is underperforming, the others will pick up the slack.”
Right now, the area is hitting on all cylinders, Toma said.
“For 2014, strength in business services, tourism and manufacturing, along with increasing strength in port operations and the housing market should set the stage for above-average employment and economic growth,” he said
“We are getting close to our pre-recession level of employment and should probably hit that number in early 2015,” Toma said.
“But employment numbers don’t tell the whole story, so we look at other factors as well. Tourism is up, as is port activity. Consumer confidence is on the rise.”
Looking at small business, which Toma said plays an important role in the economic vibrancy of an area, growth is noted in retail sales, real estate firms and professional business employment firms, while the construction sector and small health care businesses have suffered.
“I think we’re going to see more recovery in the housing and construction markets this year, which will contribute to an increase in construction jobs,” he said, adding that unemployment should trend down to about or just below 7 percent by the end of 2014.
“Basically, as far as the economy goes, we’re getting back to our old norm,” Toma said. “But I would also argue that, fundamentally, our economy is stronger than it was five or even 10 years ago.
“We have weaned ourselves from our heavy reliance on construction, we have a much sounder and stronger manufacturing base and our service sector is growing as well.”
“Look for 2014 to be an above-average year.”
SAVANNAH’S PROJECTIONS FOR 2014
• Employment growth: l.5-2 percent
• Unemployment rate: 7 percent
• Population growth: 2 percent