Savannah Chamber

12 6 from creeping up from 3.7 percent in 2019 to 3.8 percent in 2020. The unemployment rate therefore will remain below the full employment unemployment rate of 4.0 percent. Increases in the unemployment rate and less confidence in the economic situation will vent some of the pressures on wages. Compensation therefore will not increase as much as one might expect given the low unemployment rate. The aging of the population, low levels of unionization, and the higher concentration of firms are additional factors that will limit workers bargaining power. With the unemployment rate rising slightly and looking to push even higher in 2021, the balance of power between sellers and buyers of labor will be more balanced than it was in 2018-19 when workers definitely had the upper hand. It will still be very difficult to hire workers that have very specialized training or educational requirements, however. In 2021, as the labor market backs away from full employment, wage growth will decelerate. Slow productivity growth will also prevent wages from rising very much. In 2020, wages and benefits will rise by about two percent. Health insurance costs will be the primary force behind benefit cost increases. Unit labor costs will rise about one percent. One implication of the slow growth of unit labor costs is that inflation should be well contained, which provides the Federal Reserve the latitude to lower short-term policy interest rates and expand the size of its balance sheet. Although net hiring will expand, several factors will sharply limit the gains. First, the trade war and policy uncertainty will postpone decisions to hire. Second, lower levels of business confidence will limit hiring. Third, below average GDP growth limits the need to hire. Fourth, skill gaps and higher unit labor costs will cause employers to invest more in laborsaving equipment and processes. Fifth, the outsourcing of U.S. jobs to developing countries will continue to spread from blue-collar occupations in manufacturing to white-collar occupations in high tech and service industries. Finally, some of the new jobs that businesses will need to create will not match the skill sets of the unemployed. Fortunately, structural unemployment stemming from labor force immobility will diminish as housing markets improve. However, structural unemployment due to the skills mismatch is unlikely to diminish and probably will worsen – a legacy of cuts in spending by many state and local governments for K-12 as well as postsecondary education. In the coming year, construction companies will see the fastest rate of job growth. Education and health services will see the second fastest rate of job growth. Professional and business services firms will see the third fastest rate of job growth. Leisure, and hospitality, transportation and utilities, and government will see limited, but positive employment growth. Manufacturing, retailing, and information are the major sectors expected to shed jobs. Natural resources and mining also will see job losses, but these industries do not employ many workers. Regionally, the West and the South will post faster job growth than the Northeast and Midwest. Housing Home sales and homebuilding will be important drivers of U.S. GDP growth in 2020. That is largely due to low mortgage rates and cyclical factors, but the demographic trends also will provide more support to the nation's homebuilding industry. In 2020, the number of single-family home starts for new construction will increase by about five percent. The increase would be stronger if not for recession fears. Existing single-family home prices stabilized in 2012 and rose substantially in 2013-19. Existing home prices will continue to rise, but at a much more moderate rate – about 2 percent in 2020. New limits on the federal tax deductibility of state and local taxes and mortgage interest will restrain – or reverse – home price increases in areas with expensive housing markets. In 2020 , the remaining pockets of home price depreciation will be spotty, reflected local imbalances rather than overall macroeconomic conditions. In most markets, home price appreciation therefore will continue to bolster the psyche of the consumer, households' net worth, and homeowners' ability to spend. As the record of home price appreciation lengthens, potential homebuyers who have been waiting on the sidelines are opting to become homeowners. Rising rents strongly reinforce this trend. Many investors pulled the trigger on home purchases in late 2011 or in 2012, but people who buy homes to live in them did so in increasing numbers in 2013-19. In 2020, the share of homes sold to people who live in them will rise and the share sold to investors will decline. Going forward, the performance of the housing market will depend on the performance of the labor market, changes in mortgage rates, and credit conditions. Employment and personal income will grow in 2020, but more slowly than in recent years. Nonetheless, these new jobs and bigger paychecks – plus appreciating home values – will give more people the wherewithal and the confidence to buy homes, sustaining the housing market's recovery.

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