Savannah Chamber

41 The Savannah Outlook: 2021 Michael J. Toma Fuller E. Callaway Professor of Economics Parker College of Business Georgia Southern University Evan Page, Research Assistant, Department of Economics The Covid-19 pandemic shook the national and regional economy to its core in the second quarter of 2020. At the low point of the pandemic recession in April, Savannah metro employment plunged 14% while the unemployment rate surged to 16.6%. The leisure and hospitality sector was especially hammered by the pandemic and restrictions on business trade. The sector lost nearly 50% of its employment base, and as the close of 2020 draws near, had recovered to only approximately 83% of its pre-pandemic level. The overall economic story for 2021 will depend crucially on the pace of recovery in this sector. Economic growth in 2021 will be 4%, with the bulk of the growth backloaded in the second half of 2021 as service sector employment strengthens. Although 4% growth is over twice the long-run growth rate, the high number mostly reflects recovery from the unprecedented pandemic-induced decline in 2020. The underlying diversification of the region's economy contributes to its economic stability and vitality, however, short-run economic damage caused by the pandemic fell most heavily on the tourism and hospitality sector in the region. For 2021, strength in logistics and distribution, port activity, and real estate development will drive the regional economy. Service sectors, particularly those the tourism and hospitality sector will struggle in the first half of 2021 before seeing moderate growth in the second half of the year. Widespread vaccination and the accompanying increased level of confidence and comfort among consumers and workers interacting in the service sector will be the key to a stronger recovery in the third and fourth quarters of 2021. The diversification of the regional economy is provided by the strength of its underlying economic drivers that are (in no particular order) manufacturing, the port, tourism, health care, the military, and real estate development. Each of these facets of the regional economy will be discussed after the presentation of a general economic forecast for the region in 2021. General Conditions and 2021 Forecast The Department of Economics, in association with the Center for Business Analytics and Economic Research (CBAER), in the Parker College of Business at Georgia Southern University produces the quarterly publication, Economic Monitor, that analyzes current economic conditions in the Savannah MSA (Chatham, Bryan, and Effingham counties), and presents short term forecasts for the area (email: mtoma@georgiasouthern.edu). The Economics Department produces the leading (forecasting) index and the coincident index of regional economic activity in the Savannah metro area. The coincident index of economic activity is designed to measure the regional economic "heartbeat" based on factors characterizing the underlying foundational components of the Savannah metro area economy. During the past several years, annualized growth in the Savannah Business Index average 2.2%. The growth phase, reaching back to 2010, came to a screeching halt in the second quarter of 2020 as consumer, employer, and government reaction to the pandemic severely curtailed business activity. The business index plunged 38% (annualized) in the second quarter. The index began to recover in the fourth quarter of the year, but remains well below pre-pandemic level. A primary coincident factor is nonagricultural employment in the Savannah MSA. Through November 2020, employment has recovered to 98% of its pre-pandemic level. The 2% gap, however, is concentrated in the hospitality and leisure sector where employment stands at 82% of pre-pandemic level. Through November, the annual average for employment was 177,500 in 2020, a decline of 4.9% from 2019. Employment growth was uneven across major sectors of the regional economy. In a year during which total employment fell by 9,200 jobs, the logistics sector and health/education each added 200 workers while construction added 100 jobs. Sectors suffering the most in 2020 were leisure/hospitality (-5,100 jobs), manufacturing (-1,000 jobs), and local government (-700 jobs). However, it should be noted that rebound growth in logistics (+1,400 jobs) and business/professional services (+2,300 jobs) has been exceptionally strong such that November employment in each sector was 10% higher as compared to the pre-pandemic peak in February.

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