Georgia’s post-COVID economic expansion is expected to slow but continue, with GDP increasing by 1.1% in 2024, according to economic forecasters at the University of Georgia Selig Center for Economic Growth. While smaller than the 3% growth rate Georgia saw in 2023, the state will continue to outpace the national GDP growth rate, which forecasters project to be .8% in 2024.
“Georgia is well positioned to weather an economic slowdown and our economy will outperform the U.S. economy,” Terry College of Business Dean Ben Ayers told the crowd gathered at Atlanta’s Georgia Aquarium for the kickoff of the 2024 Georgia Economic Outlook series. “The build-out of many large projects in the economic development pipeline and favorable demographics are the main reasons why Georgia will fare better than the nation.”
The Georgia Economic Outlook is hosted annually by the UGA Selig Center for Economic Growth, a public outreach unit housed in the Terry College of Business. For 41 years, Selig forecasters produced an economic forecast report for the state and its metropolitan statistical areas.
The probability that Georgia will slip into recession is 33%, Ayers said, compared to around 50% for the U.S. The number of jobs will rise by 0.7% in 2024, which is slower compared to the 2.3% gain estimated for Georgia in 2023 but higher than the national job growth rate of 0.3%.
“Threading the Needle”
In 2022, most economists predicted the Federal Reserve Bank’s efforts to cut COVID-era inflation by raising interest rates would trigger a recession by the end of 2023. But the Fed has been able to thread the needle, lowering inflation without stifling consumer spending.
Consumer spending and household balance sheets remained strong during 2023, fueling economic expansion in Georgia and the nation.
Consumers still have about $1.8 trillion of the $2.6 trillion in excess savings accumulated during the pandemic. This financial cushion means consumer spending is unlikely to decline in 2024.
Additionally, businesses, for a large part, avoided layoffs despite the fear of a coming recession or tightening credit. The strong labor market and lack of job losses helped to maintain consumer spending and stave off recession.
“Despite aggressive rate hikes and relatively higher risk of recession, employers have continued to hire. How do we account for this resilience, and what does it imply for 2024? In the wake of the pandemic, employers struggled to reload their workforces,” Ayers said. “These hiring difficulties and widespread recognition that the labor market will be tight over the next decade have caused many employers to keep hiring even as interest rates soared, and sales slowed.”
Even as growth slows during 2024, economists predict Georgia’s unemployment rate will only hit 4% compared to the 3.4% average in 2023. Four-percent unemployment will help tamp down the wage inflation partly responsible for the overall inflation rate.
Inflation should dip to 2.5% in the second half of 2024.
“We expect no additional interest rate hikes by the Federal Reserve, but inflation-adjusted interest rates will rise as inflation declines,” Ayers said. “This ‘passive’ tightening and other stresses in the financial system will slow growth, but the economy will not bust.
“Despite slower GDP growth, we expect the labor market to remain strong enough to stave off an actual recession, but the economy will be vulnerable to something else going wrong.”
Continued conflict in the Middle East and Ukraine, potential stock market disruptions, further labor unrest or government shutdown are risks threatening the growth of Georgia’s economy but probably wouldn’t be enough to trigger a recession.
“In terms of economic severity, the main risks are federal reserve missteps, a financial crisis, and an energy price spike,” Ayers said. “Each of these risks alone could trigger a recession.”
Economists don’t foresee the Federal Reserve raising interest rates further. But it may sell off some of its mortgage-backed securities and treasury bonds supply too quickly, driving market interest rates too high and triggering a recession.
Another high-risk factor is the banking sector health, especially concerning commercial real estate mortgages. A decline in commercial real estate values — tied to the post-COVID restructuring of American offices — could lead commercial mortgages to default and leave some banks insolvent.
“Our baseline forecast predicts some bank failures, but not a tidal wave of bank failures — which would trigger a mild recession, or much worse,” Ayers said.
Another downside risk is a potentially large energy price shock due to broadening international conflict in the Middle East or Eastern Europe.
Despite these risks, economists are confident Georgia’s growth will continue in the coming year, be it more slowly than this year.
“On closing, our forecast calls for an economic slowdown, but not a recession,” Ayers concluded. “Our forecast depends on the resilient labor market and the strong financial positions of households to sustain the post-pandemic economic expansion.”
For more information about the 2024 Georgia Economic Outlook or a detailed economic forecast for specific Georgia MSAs, visit terry.uga.edu/selig or attend an upcoming 2024 Georgia Economic Outlook luncheon. UGA economists will deliver Georgia Economic Outlook programs in Athens, Albany, Augusta, Columbus, Jekyll Island, Macon and Savannah throughout January and February.