Bolstered by growth in consumer confidence, tourism and overall employment, the Savannah metro area economy continued to surge through the first half of 2014, Armstrong State University economist Michael Toma said last week.
The area’s strengthening economy also got a boost in the second quarter from strong port activity and retail sales, according to Toma, director of Armstrong’s Center for Regional Analysis.
Toma’s quarterly Coastal Empire Economic Monitor, released today, tracks 13 economic indicators in the Savannah MSA — Chatham, Bryan and Effingham counties — to provide a continuously updated snapshot of the health of the area economy.
The report’s coincident index measures the current heartbeat of the region, while its leading economic index offers a short-term forecast for the next six to nine months.
“Our regional economy experienced a long period of modest growth after the recession bottomed out,” Toma said. “But, over the past nine months, that growth has accelerated substantially, with consistency as important a factor in the overall picture as the numbers.”
Seasonally adjusted employment in the three-county metro area increased to 164,400 during the quarter and is outpacing the pre-recession high by 1,800 jobs, with growth in the private sector continuing to outpace public sector jobs.
Among the most encouraging items was the growth in business and professional services employment, which has remained strong for the past 18 months, Toma said.
“This category, which includes supply services, maintenance, temporary workers, others who support general business, is a good barometer of the general economic health of an area,” he said. “It was the first to lose jobs when the recession hit, and it’s usually one of the last to come back.”
But it’s the tourism and hospitality industry that has “very nearly hit a grand slam” in the first half of this year, Toma said, as the sector continues to demonstrate exceptional strength.
“Compared to the first half of 2013, hotel room sales were up 16 percent, boardings at the airport were up almost 20 percent, auto rental sales taxes were up 23 percent and alcoholic beverage sales taxes jumped 9 percent,” he said.
With 24,000 workers, the sector remains one of the top employers in the region, with Toma, calling the loss of a few hundred jobs in the second quarter after a recent rapid expansion “nothing more than statistical noise.”
Forecasting index up
The leading economic index, which had accelerated at what Toma called “a blistering pace” in the previous two quarters, grew at a more sustainable level in this quarter, he said.
“There was some moderation in indicators characterizing the regional housing market, but labor market activity and general consumer expectations increased substantially during the quarter,” he said.
The seasonally adjusted number of new residential homes permitted for construction increased 6 percent, from 335 to 356.
“This represents a reasonable rebound from a first quarter dip that was most likely caused by a regulatory change,” Toma said.
In the labor market, seasonally adjusted initial claims for unemployment insurance fell about 2 percent to 874 claims per month during the quarter. The continuing trend of fewer unemployment claims, coupled with employment growth, further reduced the seasonally adjusted unemployment rate to about 6.5 percent.
All in all, the Savannah area economy is growing in a healthy and sustainable way and should continue to do so throughout early 2015, Toma said.
U.S. economy rebounds
On the national level, the U.S. economy bounced back strongly in the second quarter, growing at an annualized pace of 4 percent after shrinking more than 2 percent in the first quarter of 2014.
“The second quarter GDP was strong across the board,” Toma said. “Consumer spending was up, along with residential and non-residential construction spending. Business investment in capital goods was up 7 percent, while exports grew 9.5 percent.”
Consensus forecasts call for the U.S. economy to grow about 3 percent in the rest of 2014.
On the down side, he said, improving economic conditions are likely to trigger adjustments in federal monetary policy sooner than expected.
“The Fed bond-buying program, currently at $25 billion a month, is expected to end in October,” Toma said, adding that recent comments from Federal Reserve Chairwoman Janet Yellin hint at a rise in interest rates, possibly in the first half of 2015.
And, while it might not feel like it, growing interest rates can be a positive, Toma said.
“After all, that the Fed is signaling it might move in that direction is, in itself, a sign of improved economic conditions.”
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