Savannah Chamber

16 1 The Georgia Outlook for 2021 By Jeffrey M. Humphreys, Terry College of Business, University of Georgia www.selig.uga.edu The 2021 baseline forecast for Georgia's economy calls for the recovery from the COVID-19 recession to continue. GDP and employment growth will quicken in the second half of the year because that is when we assume an effective vaccine is widely available and adopted. The main risk to growth, however, remains COVID-19. For example, it may take longer than we expect to find either an effective vaccine or another medical solution to the virus, which would slow the pace of growth and postpone full economic recovery. The pandemic seriously damaged Georgia's economy. For example, the peak-to-trough drop in nonagricultural employment was 11.4 percent, which was much worse than the 8.2 percent peak-to-trough drop during the Great Recession. The heaviest job losses were in the leisure and hospitality, air transportation, and textile mill products industries. More positively, unlike the Great Recession, the COVID-19 recession's hit to Georgia's economy was not as hard as its hit to the national economy. Georgia's 11.4 percent peak-to-trough job loss was smaller than the US job loss of 14.5 percent. The COVID-19 recession did not last any longer in Georgia than in the US as a whole – it started in February and ended in May. Because the depth from which Georgia's economy must recover is less than that of the nation as a whole, full recovery of Georgia's economy should arrive faster here than for the US. Indeed, the initial 3-month "bounce" in jobs added back 55 percent of the jobs Georgia lost compared to only 42 percent of the jobs lost nationwide. In Georgia, there is relatively less economic debris to clean up. In addition, many factors that caused Georgia to outperform the US economy prior to the pandemic will reassert themselves. The pattern of faster economic growth in Georgia than for the nation as a while will continue through 2021. State-specific forces that will sustain Georgia's economic recovery through 2021 include: (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 than most states from higher housing sales and starts; (4) more leverage than most states from higher vehicle sales; (5) good prospects for Georgia's military bases; (6) state and local governments face less daunting fiscal challenges than in most states; and (7) demographic trends that are supportive of growth. Georgia's population will grow strongly due to the in-migration of educated workers as well as retirees. The 2021 forecast calls for Georgia's inflation-adjusted GDP to increase by 4.0 percent, which compares well to the 3.7 decline estimated for 2020. Georgia's 2021 GDP growth rate of 4.0 percent will be 0.5 percentage points higher than the 3.5 percent rate estimated for US GDP. Similarly, Georgia's nonfarm employment will rise by 1.5 percent in 2021, which is above the 0.9 percent gain estimated for the US. Georgia's unemployment rate for 2021 will average 5.1 percent, or about 0.9 percentage points lower than the 6.0 percent rate estimated for 2020. Georgia's unemployment rate will remain below the US unemployment rate. The state's nominal personal income will grow 0.2 percent in 2021, which is lower than the 5.2 percent gain estimated for 2020. It should be noted that the sharp slowdown in personal income reflects the winding down of federal stimulus programs that provided large transfer payments to individuals rather than slower growth of Georgia's economy. In contrast, the wage and salary based personal income will grow faster in 2021 than in 2020. The pattern of job growth across Georgia's industries will be different than it was before the virus crisis. In 2021, several of the industries hit hardest by the COVID-19 pandemic will post the fastest growth, but the high percentage gains reflect rebounds off very depressed levels rather than healthy recovery. Examples include, bars, restaurants, hospitality, tourism, movie theatres, live entertainment, air transportation, high contact personal services, and the sharing economy. Indeed, most of these same industries are the farthest from full economic recovery. Some may never recover (e.g., movie theatres). In contrast, logistics, distribution, warehousing, professional and business services, the information industry, FinTech, education, and health services will fully recover relatively quickly, posting solid job growth in 2021. In addition, positive job growth will occur in manufacturing, financial activities, transportation

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