News Releases

The Georgia Forecast

At a Glance — "The slowdown in 2001 will look and feel very differently from the slower economic growth we experienced in 1999 and 2000. For the first time in nine years, many of us are going to feel the effects of the slowing economy," said P. George Benson, dean of UGA's Terry College of Business. "It took two years for Georgia's gross state product to fall by one percentage point — down to a growth rate of 5.8 percent in 2000. But over the next 12 months, we expect the growth rate to drop another 1.8 percentage points to 4.0 percent. How are we going to feel the brakes being applied? Raises and bonuses will get smaller. Many companies will see their sales inching forward rather than surging ahead. Budgetary pressures will intensify in both the public and private sectors, which will be a problem for restaurants and hotels that have grown accustomed to relatively lavish corporate spending."

The Selig Center forecast identified several strengths that will help Georgia's economy avoid recession next year. Here are some of the reasons cited:

• After running a deficit of new workers to fill available jobs, balance returns to the state's labor market in 2001. Georgia's labor force will grow at least as fast as the number of jobs, meaning wage pressure will ease while the unemployment rate remains stable.
• Georgia's diverse industrial base leans toward high-performing consumer goods and services.
• Burgeoning high-tech job growth, especially in telecommunications and biotechnology.
• An established venture capital market and steady flow of domestic and foreign investment.
• A well-maintained transportation and telecommunications infrastructure.
• Atlanta is perceived as a cost-effective destination for meetings/conventions.

The forecast also identified several signs that will lead to fading economic growth in 2001:

• Georgia's homebuilding industry will go into recession. The number of new houses built will drop by more than 10 percent.
• Bankruptcies in the extremely crowded retail sector will increase.
• The triple whammy of sprawling growth in metro Atlanta: traffic congestion, air quality problems and inadequate water treatment systems.
• A low-ranking K-12 education system and a lack of parental commitment to education.
• Sparse cash incentives for companies looking to relocate, compared with other states' offers.

Gross State Product — GSP will increase 4.0 percent in 2001, after adjusting for inflation. That's a decline from 5.8 percent growth in 2000 and would be the smallest percentage increase since 1991. Georgia still should exceed the nation's growth rate in gross domestic product, which is forecast to be 2.8 percent in 2001, according to the Terry College's Selig Center.

Income — Following a similar path, personal income in Georgia will expand by 6.0 percent this year, which is one percentage point higher than the projected U.S. growth rate of 5.0 percent, before adjusting for inflation. But state income growth will fall from 2000's estimated increase of 7.2 percent and the peak growth rate of 8.6 percent in 1998.

Employment — Job growth in Georgia is expected to slip for the third consecutive year. Non-farm employment is on pace to grow 1.9 percent this year, following growth of 2.8 percent this past year and 4.0 percent in 1999. This year's 1.9 percent growth rate would translate into about 75,000 new jobs statewide. The projection for U.S. job growth this year is 1.0 percent. The jobless rate in Georgia will hold steady at 3.6 percent in 2001. Nationwide, unemployment will climb from 4.1 percent last year to 4.7 percent in 2001.

Population — Georgia's annual rate of population growth will be about double that of the nation and will continue to grow faster than any state outside of the Rocky Mountain region. The state now has about 8.1 million residents. Still, Georgia's population growth rate will drop from 2.0 percent last year to 1.8 percent in 2001 (peak growth occurred in 1994 at 2.2 percent). Four counties around Atlanta and one rural county now rank among the nation's 10 fastest growing counties in population (Forsyth, 2nd; Henry, 5th; Paulding, 7th; Echols, 9th; and Walton, 10th).

Minority Buying Power — Only 10 economies in the world are larger than the buying power controlled by black consumers in the United States ($572 billion). Hispanic-American buying power, at $452 billion, nearly equals Australia's GDP, which is the 14th largest in the world. Because of size alone, minority markets — including Georgia's — are commanding more attention from marketers.

Biotechnology — Calling 2000 a breakthrough year for biotechnology in the state, the Selig Center has identified 76 biotech firms in Georgia, employing more than 8,000 workers. Business Facilities magazine ranked Georgia's biotech industry as the fifth fastest growing in the nation. "The next frontier in gene research lies at the crossroads of genetics, mathematical modeling, statistics and computer science. It's called bioinformatics, and it is likely to have explosive growth. Georgia, and especially Atlanta, with its national and international reputation as a high-tech and computer industry hub, is well-positioned to attract and grow bioinformatics businesses," Benson said.

Around the State —

• Atlanta will lead the state in employment growth in 2001, as it did last year, though the rate of growth is slipping. Job growth will increase 2.5 percent this year, down from 1999's rate of 5.2 percent and 2000's rate of 3.7 percent. Telecommunications and transportation underpin metro Atlanta's growth. But the region's slowing growth reflects the national downturn, along with an overburdened infrastructure and overbuilt real estate market.
• Augusta is emerging as a center for telecommunication services and will depend on its skilled, but underutilized, labor force to attract new business. Its location on I-20 makes the city a prime site for regional distribution and manufacturing. Employment growth will increase 1.6 percent this year, after showing a growth rate of 2.3 percent in 2000.
• Macon is the "natural pressure release valve for Atlanta," Benson said. As such, the city will benefit from Atlanta's overflowing growth. Access to the Atlanta airport and its centralized location within the state make it a fitting location for production and distribution facilities. Accordingly, the Macon area is forecast to see 1.8 percent job growth this year.
• Savannah, with its unique ambiance and historical legacy, is poised to become a premier destination for national conventions, trade shows and meetings. More than 1,000 additional hotel rooms and new non-stop flights from major Midwestern cities to the Savannah airport will boost the convention business, leading the metro area's employment to increase by 1.4 percent in 2001, or about 2,000 jobs.

The National Forecast

At a Glance — The Selig Center forecasts a "guardedly optimistic outlook" for the U.S. economy in 2001 and beyond, with inflation-adjusted gross domestic product expanding 2.8 percent this year. Although the pace of growth will slow substantially from the robust 5.1 percent rate estimated for last year, the forecast calls for sustained growth that will extend the record for uninterrupted economic growth in the United States past the 10-year mark this spring.

The Selig Center identified four major contributors to U.S. economic growth in 2001: First, consumers will do their part to sustain growth. Consumer spending will be fueled by net gains in hiring, more hours worked and higher compensation per hour. Second, growth in capital spending will continue, driven primarily by business spending for equipment and software, which will increase 7.6 percent. Third, U.S. exports will expand by 9.0 percent, thanks to strong foreign growth and depreciation of the dollar. Finally, government spending will increase by 2.0 percent.

Odds of Recession — The Selig Center places the odds of recession in 2001 at 45 percent. Sagging consumer confidence will put retailers and consumer businesses on the forefront of the economic slowdown, according to the forecast. Additionally, declining stock prices have reversed the wealth effect and are leading investors to move more income to savings and to cut spending. Another risk is global energy markets, which are tight as a drum. A relatively minor disruption in energy supplies could send oil and gas prices skyrocketing past current levels and take another bite out of consumer spending and corporate profits.

Employment — The rate of civilian employment growth will slow to 1.0 percent, or about 1.4 million new jobs nationwide in 2001, down from 2.1 percent job growth in 2000. The U.S. unemployment rate in 2001 will increase marginally to 4.7 percent, up from 4.1 percent this past year. Employment in the nation's services industries will grow the most. Construction and manufacturing will sustain below-average job growth.

Interest Rates — The Selig Center forecast assumes that the Federal Reserve will continue to cut interest rates in 2001. The federal funds rate was lowered to 6.0 percent from 6.5 percent earlier this month. The forecast anticipates rate cuts down to 5.0 percent by the end of 2001.

Inflation — The consumer price index bottomed out in 1998 at 1.6 percent, and rose to 2.2 percent in 1999 and 3.4 percent in 2000, partly due to higher energy prices. If oil prices behave as expected, the CPI will settle at 2.5 percent this year, according to the Selig Center.

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