The Columbus area is expected to grow by 1,400 jobs this year — virtually all in the private sector — as the city rides the “tailwind” created by the improving Georgia and U.S. economies.
That, and the stark realization that the local economy hinges on an evolving federal budget scenario, were major points made Tuesday by University of Georgia economist Jeff Humphreys at an economic outlook luncheon in Columbus.
“Because of your very high dependence on federal government spending, there’s no escaping the fact that as goes the federal budget, so goes the Columbus economy,” said Humphreys, also director of the Selig Center for Economic Growth at UGA’s Terry College of Business.
He and interim business school dean Charles Knapp, a former president of the university, laid out their best data-generated prognostications for the Columbus, state and U.S. economies. They were served up to a large gathering of business and community leaders at the Columbus Convention and Trade Center.
Humphreys said this is the 24th year he has delivered his outlook for Columbus, and he noted off the bat that the overall “economic situation has improved considerably” since his more somber forecast last year, one in which he worried that mandatory federal budget cuts, called sequester, could take a big bite out of the local economy.
“The good news, looking forward, is the bipartisan budget act does provide relief from the sequester,” he said. “But that relief — although it’s good news for 2014 and probably 2015 — is probably just temporary because we still really need to adjust federal spending.”
Humphreys said the recovery by Columbus so far from the Great Recession has gotten a boost from the private sector, particularly in the financial and information sectors. The 1,400 jobs expected to be created locally this year compares to a net gain of 600 in 2013.
“The employment base for Columbus shows the recovery is very well established. It’s in no danger, really, of defaulting. But it also shows that the recovery is very slow,” he said, noting jobs in the financial sector, professional and business services, and leisure and hospitality — also known as tourism — were the primary drivers last year. The federal government was the only sector to see a decline, he said.
Humphreys and Knapp each said the housing markets in Columbus and Georgia as a whole will gain traction in 2014.
Locally, single-family home construction starts will rise 20 percent this year, the same as a year ago, Humphreys said, while home prices will climb 5 percent locally, compared to 8-percent price growth in Georgia.
“The slower increases in home prices here (in Columbus) reflect two things — slower job growth, plus you just did not get hit as hard by the Great Recession as the rest of the nation, and the housing market held up better here, thus less ground to make up.”
Knapp, who led off the event, said Georgia’s economic steam should top that of the nation this year, reversing the trend moving out of the recession. The state’s gross domestic product — or output of produced goods — will increase 3.3 percent this year, while the U.S. GDP will pick up by 2.5 percent. Job growth in the state will be 2.2 percent this year, he said, versus 1.7 percent for the U.S.
Knapp and the Selig Center staff peg the risk of a another recession in 2014 at 20 percent, down from 40 percent a year ago. Potential threats are familiar — federal budget cuts and monetary policy, oil price shocks and global financial disruptions, particularly in Europe.
“Job losses will continue in the government sector, which is the only major economic sector we expect to lose jobs in 2014,” said Knapp, also pointing out the rebound of the state’s manufacturing sector remains in a very slow mode.
“The factory jobs that we lost in Georgia and, in fact, in the whole country, are not coming back very quickly,” he said. “Georgia will gain 5,000 new factory jobs in 2014, and at that pace it will take us over 30 years to replace the manufacturing jobs that we’ve lost” since the recession.
The business school dean stressed Georgia must move beyond its “historic dependence” on migration of new residents and businesses to the state for economic growth.
Instead, he said, a vigorous focus on educating Georgians, from pre-kindergarten to future high-tech employees, is needed. The state must promote innovation, he said, while using economic incentives to lure technology firms and grow existing companies.
On the housing front, Knapp said Georgia should experience a 34-percent increase in new-home starts this year, compared to 25 percent for the U.S., while mortgage rates should remain a “bargain” from a historical perspective.
“Lower-priced homes will appreciate fastest. That’s partly because the lower tier has the most ground to make up, and remains the furthest from full price recovery,” he said, noting investors will likely be active in pursuit of rental properties. “The price appreciation for upper-tier homes will depend mostly on the trade-up market, which is still not functioning regularly.”
The UGA forecasters stressed there is one area of the economy ripe for the taking, so to speak, and that is what Knapp called “an unprecedented opportunity” to attract retirees from other states. They, in turn, would spend money on housing, food, medical care and other necessities. Those relocating from other states are looking for communities with “quality of life” amenities and financial incentives to stretch their retirement dollars, he said.
“The retiring Baby Boomers create a strong demographic trend that is locked in for approximately the next 15 years,” Knapp said. “New census projections show that from 2015 to 2030, the U.S. population over 65 will grow by 53 percent, compared to only 3 percent for the population between 18 and 64.”
The economic outlook luncheon presented by the University of Georgia is part of a statewide caravan that began in December in Atlanta before fanning out to the state’s major cities.
Knapp was introduced Tuesday by Aflac Chairman and Chief Executive Officer Dan Amos. Knapp is a member of the Columbus-based supplemental health and life insurer’s board of directors.
Amos, a University of Georgia graduate, is heading the “Building Terry” campaign to raise $90 million for new Terry College of Business facilities and faculty/program support at the Athens school.
METRO AREA JOB GROWTH
Here are the projected employment totals for 2014 and increases/decreases from 2013 for Georgia’s metro areas:
Albany — 61,300, up 100 jobs
Athens — 90,500, up 1,500
Atlanta — 2,464,000, up 57,700
Augusta — 219,300, up 3,300
Brunswick — 41,100, up 500
Columbus — 121,400, up 1,400
Dalton — 64,900, up 1,800
Gainesville — 76,200, up 1,000
Hinesville — 19,600, down 100
Macon — 99,700, up 800
Rome — 39,000, up 200
Savannah — 161,100, up 2,500
Valdosta — 55,000, up 800
Warner Robins — 59,200, no change
* Source: University of Georgia’s Selig Center for Economic Growth