Savannah Chamber

16 The Georgia Outlook for 2019 Jeffrey M. Humphreys, Director Terry College of Business University of Georgia Absent a full-blown trade war, the 2019 outlook for Georgia's economy is good. Georgia's economy will continue to expand. The pace of GDP will slow, but new jobs will be plentiful. Well-balanced job growth, with gains in both goods producing and service providing industries, bodes well for people working in almost all occupations. The tight labor markets will cause the pace of job growth to slow and the pace of personal income growth to accelerate. The state's economy is extremely diverse. Georgia will benefit from multiple, reliable sources of economic growth. Among Georgia's industries, construction will see the fastest job growth. Among Georgia's metropolitan areas, Augusta and Gainesville will see the fastest job growth. Georgia's politics are business-friendly. Atlanta is the logistics, distribution and cultural center of the Southeast. The state's population will grow strongly due to the in-migration of educated workers as well as retirees. Net migration will be a powerful economic driver. Existing home prices in many areas of the state will rise to all-time record highs, but home prices in some areas are still well below their pre-Great Recession levels. For the sixth-straight year, Georgia's economy will grow faster than the nation's economy. Because Georgia's economy is linked strongly to the national economy, the risk of a recession beginning sometime in the first half of 2019 is low, but it is higher in the second half of the year. The primary risks likely to trigger a new recession are external to Georgia; a trade war, financial panics and/or massive shifts in asset prices (e.g., equities and/or bonds), as well as a possible inversion of the yield curve. A full-blown trade war could shock both the U.S. and Georgia's economy into a recession as soon as the second half of 2019. Georgia is the nation's eleventh largest export state and the seventh largest import state. Georgia therefore is vulnerable to a step back from globalization. A trade war would be especially damaging to Georgia's large transportation and distribution industry, manufacturing, and agriculture. In addition, knock-on effects of a trade war would damage nearly every industry as well as state and local governments. A possible inversion of the yield curve suggests a heightened risk of recession, but not before 2020. Tighter immigration rules and even stricter enforcement of existing immigration laws will not precipitate a recession but would slow Georgia's growth due to greater scarcity of workers, less innovation, and less foreign investment. Extreme economic policy uncertainty, or extreme policy miscommunication at the federal level, also could put many decisions by businesses and households on hold, delaying some decisions to expand, hire, or spend for big-ticket items. Policy mistakes or miscommunications also could prove quite disruptive to the financial markets, triggering a major stock market correction and/or a financial panic. The 2019 forecast calls for Georgia's inflation-adjusted GDP to increase by 3.0 percent, which is smaller than the 3.5 percent growth estimated for 2018. Georgia's 2019 GDP growth rate will be 0.5 percentage points higher than the 2.5 percent rate estimated for U.S. GDP, however. The positive differentials reflect (1) many projects in Georgia's economic development pipeline, (2) more leverage from the housing recovery, (3) more supportive demographic forces, (4) faster expansion of Georgia's manufacturing industries, (5) more competitive economic development incentives, (6) greater emphasis on customized workforce-training, (7) better prospects for Georgia military bases. The state's nominal personal income will grow by 4.9 percent in 2019, which is slightly lower than the 5.4 percent gain estimated for 2018. Nonetheless, it exceeds the 4.5 percent gain expected for U.S. personal income. Georgia's nonfarm employment will rise by 1.5 percent in 2019, which exceeds the 1.3 percent gain estimated for the U.S. It is smaller, however, than the 1.7 percent job gain Georgia posted for 2018. As always, there will be some headwinds: the strong U.S. dollar will make it difficult for Georgia's exporters. Trade tensions are high. Tariffs and other barriers to international trade raise costs and disrupt established supply chains. The Federal Reserve will hike interest rates and reduce the size of its balance sheet, which will increase borrowing

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