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27 The Savannah Outlook: 2023 Michael J. Toma Fuller E. Callaway Professor of Economics Parker College of Business Georgia Southern University Julia Toma, Research Assistant, Georgia Institute of Technology In 2022, the Savannah regional economy continued its remarkable recovery from the pandemic recession. The 15% plunge in employment during 2020 has been completely erased by strong growth in 2021 that carried forward into 2022. Accordingly, unemployment dramatically declined from its peak at 16.1% in 2020 to 2.8% by late 2022. The few lingering pandemic-induced employment gaps in leisure & hospitality, retail trade, and the service sector in general were closed in 2022 as those sectors recovered as consumer preferences shifted back to travel and services in 2022. In 2023, baseline growth in the regional economy will be powered by strength in logistics and distribution, port activity, manufacturing, and real estate development. A mild national recession widely anticipated in 2023 will limit upside potential but is not expected to result in job loss in the Savannah metro area. Economic growth in 2023 will be 2.5% with employers adding about 5,000 jobs during the year. The diversification of the regional economy is provided by the strength of its underlying economic drivers that are (in no particular order) manufacturing, port operations and logistics, tourism, health care, military activity, 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 2023. General Conditions and 2022 Forecast The Department of Economics, in association with the Center for Business Analytics and Economic Research (CBAER), in the Office of Research 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. As a result of the pandemic in 2020, the business index plunged 41% (annualized) in the second quarter of 2020, but then rebounded 30% (annualized) in the closing quarter of 2020. By the end of 2021, the business index had recovered to exceed the pre-pandemic level by 6%. As of the close of 2022, the business index was 9.7% higher than its pre-pandemic peak. A primary economic coincident factor of the Savannah Business Index is nonagricultural employment in the Savannah MSA. Year-to-date through November 2022, total monthly employment averaged 199,500. This represents growth of 4.8%, translating into 9,100 additional jobs in the region. Employment is now 5% higher than its pre-pandemic peak. Employment growth was consistent across major sectors of the regional economy and reflected recovery in consumer preferences toward services in the post pandemic economy. Of the 9,100 jobs created in 2022, growth was led by leisure and hospitality (+2,100, +8.3%), business and professional services (+1,900, +7.2%), education & health services (+1,300, +4.9%), and retail trade (+1,300, +4%). Service sector employment now exceeds its pre-pandemic peak by 5%. Only state and local government and miscellaneous other services remain below pre-pandemic levels.