Savannah Chamber

18 1 The Georgia Outlook for 2020 Jeffrey M. Humphreys, Director Terry College of Business University of Georgia The 2020 baseline forecast for Georgia's economy calls for the late-stage economic expansion to continue, but growth in state GDP, personal income, and employment will decelerate sharply. The main risk to growth is the trade war. The probability of a 2020 recession is 40 percent. The trade war has already damaged Georgia's large manufacturing and agricultural industries. It has reduced growth of logistics, transportation and distribution. The trade war lowers animal spirits among business leaders and consumers. Knock-on effects of the trade war hurt nearly every major industry. Lesser risks to Georgia's economic expansion include a major stock market correction, leveraged lending, a war between Iran and Saudi Arabia, economic/political crises in Europe, an oil price shock, and a mistake by the Federal Reserve. Waning support from the 2018 federal tax cuts, an inventory correction, and student loan debt will not trigger a recession, but will slow economic growth in 2020. A number of positive forces will help sustain Georgia's economic expansion through 2020, including: (1) the build-out of many projects in Georgia's economic development pipeline; (2) competitive state-level economic development incentives that help refill the economic development pipeline; (3) more leverage from a rebound in housing; (4) good prospects for Georgia's military bases; and (5) demographic forces that are supportive of growth. Georgia's population will grow strongly due to the in-migration of educated workers as well as retirees. Net migration will be a powerful, dependable economic driver. Existing home prices in many areas of the state will rise to all-time record highs, supporting growth of consumer spending as well as small business formation and expansion. The 2020 forecast calls for Georgia's inflation-adjusted GDP to increase by 1.3 percent, which is one half the 2.6 percent growth estimated for 2019. Georgia's 2020 GDP growth rate will be 0.2 percentage points lower than the 1.5 percent rate estimated for U.S. GDP. The negative differential reflects the fact that Georgia is the nation's eleventh largest export state and the seventh largest import state. In addition, agriculture, agribusiness, transportation, and logistics are major industries. Georgia therefore is more directly exposed to the trade war and the recent retreat from globalization than is the nation as a whole. The state's nominal personal income will grow by 3.5 percent in 2020, which is lower than the 3.9 percent gain estimated for 2019. Georgia's non-farm employment will rise by only 0.7 percent in 2020, which is about the same as the 0.8 percent gain estimated for the U.S. It is smaller, however, than the 1.7 percent job gain estimated for Georgia for 2019. Georgia's unemployment rate for 2020 will average 3.9 percent, or about 0.3 percentage points higher than the 3.6 percent rate estimated for 2019. The unemployment rate will rise because the labor force will grow faster than the number of jobs available. In addition, the unemployment rate is already at a very low level. Due primarily to the trade war the pattern of job growth across Georgia's major industries will shift in 2019. The fastest job growth will occur in education and health services, followed by professional and business services, and leisure and hospitality. Slow but positive job growth will occur in financial activities, transportation and utilities, government, and construction. Manufacturing, retail, and information will lose jobs. Prospects for Service Producing Industries in 2020 The 2020 forecast indicates that with the exception of information, Georgia's major categories of service-related businesses will expand, but much more slowly than in recent years. Growth will reflect the upturn in housing markets, growing demand for health care, education, and high technology services, as well as a long list of projects already in the economic development pipeline. Fintech, transactions processing, data processing, cyber security, and development of software and mobile apps will support Georgia's economic growth. IT and financial services companies that announced major projects in 2015-2019, include Invesco, OS National, SalesForce, Facebook, BurningCastle LLC, InComm, Pandora, OneTrust, Accenture,

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