January 26, 2010

Economy will see a sustained recovery

Brian D. Anderson Sr., president and CEO of the Dalton-Whitfield Chamber of Commerce

As mentioned in my column last week, we received the economic forecast for the national economy, our Georgia economy and our local economy. Dean Robert Sumichrast of the Terry College of Business at the University of Georgia spoke at Tuesday’s “Wake Up Whitfield.” The headline, according to Dean Sumichrast, is “our economy will experience a sustained recovery in 2010.”

A sustained recovery was as positive as he could put it. And although a sustained recovery is not a bed of roses or means that everything is back to normal, it is better than “we are still heading for a cliff.” After experiencing the “Great Recession,” as many are calling it, what is normal? Some have even coined a new term called the new normal. Regardless of what we call the economic period that we are in, it seems the worst is behind us. Although deep recessions are usually followed by explosive growth, this recession will be followed by very slow growth.

Dr. Sumichrast cautioned that although we will see positive economic indicators throughout 2010 with significant improvement in 2011, this recovery will not feel like recovery for a long time. Job losses and high unemployment will continue to weigh down consumer confidence and the overall economic climate throughout 2010. Georgia’s employment will decline from 3.9 million jobs in 2000 to 3.8 million in 2010. All of the jobs created over the last decade plus some will be lost by the middle of 2010.

Job losses and unemployment are a national issue, a Georgia issue, and a local community issue. Unemployment in Georgia will top out around 11 percent by mid-summer. Nationally we have lost 5 percent of all jobs in the Great Recession. Dalton will have lost more than 16 percent. Due to the issues surrounding the housing crisis, we have been hit much harder in Georgia and Dalton than the rest of the country. All the issues that have contributed to our economic plight have also hurt Georgia’s banks much more adversely than any other state. By August 2009, the Dalton MSA (metropolitan statistical area) had the highest unemployment rate in Georgia at 12.8 percent with a loss of more than 6,000 jobs.

There are positives coming out of the Great Recession. People are saving more, with saving rates increasing from 1 percent in 2006 to more than 4 percent in 2009. As jobs do begin to come back in the second quarter of 2010, spending will increase. And as consumer spending increases, it will ignite business spending that will fuel the sustained recovery.

Imports and exports will begin to accelerate, with exports outpacing imports nationally. Georgia will benefit more than most because of the positive impact of imports on our state economy. Because of our ports and the infrastructure associated with imports, Georgia will be positively impacted by the imbalance of imports vs. exports.

And because Georgia is still very pro-business, enjoys a low to moderate tax rate, and is an attractive place for business to invest, we will see better than average investment coming into Georgia as businesses expand and relocate. The Great Recession has only heightened Georgia’s attractiveness for business investment. The Georgia Department of Economic Development had 327 projects come to Georgia in 2009. That is a significant increase over 2008. The department is forecasting positive trends for investment in 2010. And many of the recent big announcements (Kia, NCR and IVC) are just beginning to come online or will do so in 2010.

Although foreclosures have been devastating in Georgia and locally, the trends seem to be improving. Dr. Sumichrast and his team do not forecast a second wave of foreclosures. In fact, as people go back to work or begin to get overtime due to businesses not hiring in the short-term, foreclosure exposure should diminish.

The positive news in the housing arena is that existing home pricing has stabilized. Home prices should see growth in 2010. Housing will accelerate Georgia’s economy for the first time since 2005. Although Georgia saw a decrease of 12 percent in home prices, prices in the Dalton MSA only experienced a decrease of 6 percent. Homes in Georgia may actually be undervalued currently.

The residential sector will begin to see growth in 2010. The growth will be double-digit but against very low numbers from 2009. The non-residential sector will be devastatingly dismal. It will more than likely erase the gains from the residential sector.

As Dr. Sumichrast said during his presentation, now is the time to invest, to look for a job or a better job, to start a business, or to look for other economic opportunities. The sustained recovery will not be glamorous or fun but improving nonetheless. Given the actions and posture of our local elected officials, we have the tools necessary to be successful. Our city of Dalton leaders have cut spending and lowered taxes. Whitfield County’s leaders have maintained very low taxes while investing in a new commerce park. Our other municipalities offer good service delivery at minimal costs with minimal if any property taxes.

I am grateful to Dr. Sumichrast and the entire Terry College of Business who have put together a first class economic forecast. His presentation Tuesday enabled a large turnout for the chamber’s first Wake Up Whitfield event for 2010 to be a huge success. Working together, we will continue to be successful in 2010.