Georgia in 2010: A Lagging Recovery

Wed, Jul 20 2011, 09:08 GMT
by Wells Fargo Research Team | Wells Fargo

Georgia’s economic recovery has had a hard time gaining momentum. The most recent real GDP data show Georgia’s economy lagging behind even the sluggish U.S. economic growth endured over the past couple of years. Georgia’s real GDP grew 1.4 percent in 2010, which along with Florida ranks as the second-slowest growing state in the Southeast. By comparison, the U.S. economy grew 2.6 percent in 2010, on a comparable GDP-by-state basis. The composition of growth shows Georgia remains stuck in the same agonizing predicament that has plagued the state for the past few years. Housing remains mired in a slump of epic proportions, while hiring is severely lacking and fewer businesses and new residents are relocating to the state. Growth in Georgia’s construction industry contracted 4.5 percent in 2010, marking the sixth consecutive yearly drop and bringing the cumulative decline in construction activity to 33.6 percent.

Georgia’s economy did see modest gains elsewhere outside of construction. Output picked up across a number of key sectors, including mining, manufacturing, retail trade, the IT sector, transportation and warehousing and healthcare. Manufacturing and international trade have been two notable bright spots. Kia’s assembly plant in West Point has provided a huge boost, bringing thousands of new jobs to the western part of the state. Trade through Georgia’s ports also remains exceptionally strong, helping drive gains in Savannah and Brunswick, as well as in Atlanta’s huge transportation and warehousing sector. Georgia’s tourism and convention business bounced back a bit in 2010, helping perk up sales tax receipts following a precipitous drop during the prior year. Total sales tax revenue rose 2.9 percent in 2010, which is a tiny step in the right direction following 2009’s monstrous 16.7 percent plunge in sales tax receipts. While the recently released GDP data are relatively dated, trends have not changed all that much in 2011. The latest employment and income numbers remain disappointing and housing remains in the doldrums.

Employment conditions largely mirror the performance of Georgia’s real GDP. Total nonfarm payrolls in the Peach State fell 1.3 percent in 2010—here, again, Georgia’s construction industry contributed to much of the weakness. Construction employment fell 10.4 percent in 2010. Since peaking in 2007, Georgia’s construction payrolls have fallen a cumulative 38.3 percent, producing a net loss of 86,300 jobs. Declines in residential and commercial construction activity are responsible for the drop, and employment is also down sharply in supporting industries, such as real estate and leasing services, which fell 3.2 percent in 2010 and is down 19.7 percent from its peak back in February 2007, wiping out nearly 13,000 jobs. Government cutbacks also took a toll on job growth this past year. Local governments eliminated 9,900 jobs, while the state government cut 5,600 positions. The layoffs follow smaller declines from the prior year, which saw local government employment decline by 4,400 jobs and state payrolls lose 1,000 positions. Federal government payrolls grew modestly in both years, although temporary Census hiring makes the most recent numbers a bit harder to interpret.

Despite continued job losses in industries tied to the massive housing bust and continued cutbacks in state and local government payrolls, Georgia managed to eke out modest job gains in 2010. Professional and business services and education and healthcare saw hiring increase, with employment rising 1.8 percent and 2.0 percent, respectively, in these industries. Most of the gain in professional and business services has been in administrative and support positions, which increased 4.8 percent in 2010, producing a net gain of 11,500 jobs. Employment is up less at corporate and regional headquarters and continued to fall in professional and technical services.

The latter category includes architectural, engineering and related services, which continues to be dragged down by the real estate slump. Employment in this sector fell 3.4 percent last year and has tumbled 16.5 percent over the past three years.

Georgia’s education and healthcare sectors continue to steadily boost employment. Education payrolls rose 2.6 percent. Persistently high unemployment has led to a jump in enrollment at private colleges, universities and professional schools, which are the types of schools reflected in this category. Healthcare providers added 7,200 positions across Georgia in 2010, with most of the growth in ambulatory healthcare services, a category that includes doctors’ offices and outpatient facilities. In addition, employment increased sharply at social assistance organizations, which includes nursing homes, daycare centers and mental health facilities.

Published On Wed, Jul 20 2011, 09:14 GMT Previous entries

Wells Fargo Research Team

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