Savannah Chamber

44 The Savannah Metro Business forecasting index is designed to anticipate regional economic activity during the upcoming nine- month period. Through the third quarter of 2018, the forecasting index is up 4% as compared to the 2017 annual average. The forecasting index primarily is developed from indicators characterizing the regional housing and labor markets, but includes forecasting elements characterizing broader regional and national economic factors. The 2018 improvement in the index was mostly driven by the effects of the national (U.S. leading economic index) and southeastern (consumer expectations in south Atlantic states) components of the forecasting barometer. Regional housing market components have generally been a minor contributor to growth, while the labor market indicator of initial claims for unemployment insurance continued to trend favorably. Regionally, the labor market continues to demonstrate strength in terms of unemployment, but several underlying variables characterizing the intensity of usage of the workforce waned in 2018. Notable first, however, is that the number of initial claims for unemployment insurance (UI) remained well below the level typically experienced during the pre-recession period from 2000 to 2007. The number of initial filings for UI averaged 505 per month (-5%) in 2018 as compared to 534 (hurricane-adjusted) per month in 2017. This is about 30% below the pre-recession monthly norm and compares to 2,000 new UI claims per month when the Great Recession was at its worst. With respect to the intensity of workforce usage, the length of the workweek in the private sector declined 2% in 2018 to 33.2 hours, while the average hourly wage declined 6% to $22.14 per hour. Residential construction improved modestly in 2018, and will be buoyed by multifamily unit (apartments) structures in 2019. Through October 2018, the number of permits issued for single family homes is on track to be about 3% above the number issued in 2018. This is moderate and sustainable growth for permits and is consistent with the trend dating back to 2016. As indicated above, the bedrock foundation components of the regional economy are currently performing well (the coincident index), with the exception of non-agricultural employment that has leveled off. The regional forecasting index is sending the signal of growth for 2019, but expectations should be tempered by more modest growth signals coming from the regional housing market and labor market. In 2019, employment in the Savannah metro area is expected to increase approximately 1% to 1.5%. This is below the long-term trend rate (+1.7%), and represents a modest increase from 2018. Expectations for employment growth in 2019 remain modest and will depend on the opening of announced development projects planned for 2019. The annual unemployment rate for 2018 was 3.6% for the region and a similar rate is expected for 2019. Maintained tightness in the labor market should create upward pressure on wages in 2019 to offset recent movement in the other direction. Turning to population growth, the region's long-run attractiveness as a place to live, work, and retire remains unaffected by short- run business cycles. Tourist demographics describe a very desirable pool of would-be in-migrants. The typical Savannah tourist (14 million annual visitors) is well-educated and has above-average income. Regional job creation and continued improvement in the housing markets that feed Savannah's in-migration will continue to influence population growth in the short-run. Population growth in 2019 is expected to be normal, easing somewhat with the moderation in employment growth. For 2019, population growth is expected to be approximately 1.5%, considered a typical pace of growth in recent years. In conclusion, the Savannah Business Index indicates the regional economy has been growing for nine years, creating 30,000 new jobs along the way – mostly in the private sector. The regional forecasting index is sending the message of modest growth for 2019. Expected drivers in 2019 will be port activity, real estate development, and tourism. On the goods-producing side of the economy, manufacturing will continue to expand on trend, and construction is expected to add more jobs in 2019. The Savannah metro economy will expand in 2019, albeit at a slower pace than in recent years. Economic Foundations The remainder of the forecast considers expected activity in the six major underlying economic foundations of the Savannah MSA economy. Recall that these drivers are (in no particular order) manufacturing, the port, tourism, health care, the military, and real estate development. Manufacturing Manufacturers in the Savannah MSA added 500 workers (+3%) during 2018, matching the growth of the previous year. A review of recent announcements from headlining companies in the sector point toward continued growth in 2019. The manufacturing workforce was 17,700 strong at the end of 2018, and is expected to add another 200 to 400 workers in 2019. Gulfstream Aerospace employs about 11,000 workers in Savannah for production, maintenance, engineering, and research and development. Looking forward, there is ample backlog for the fleet of six technologically superior aircraft to keep the company very busy throughout 2019. Gulfstream delivered the first ten of its G500 models in late 2018. Overall, the G500 has set almost

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