Savannah Chamber

16 3 The financial crisis and the real estate bust did more damage to Georgia's financial activities sector than to the nation's financial sector. For example, the peak-to-trough drop in statewide employment in financial activities was 12 percent compared to a drop of 9.6 percent for the U.S. The outsized job losses in financial activities reflected overexposure to construction, land development, and commercial real estate loans, which led to an all-time high in bank failures. Our forecast now indicates that financial activities will see a 1.6 percent job growth in 2015. Georgia also suffered from restructuring in areas unrelated to the bursting of the property bubble. One-third of Georgia's information jobs are gone, but the industry overall will expand modestly in 2015. The gains reflect three factors: surging demand for newer wireless services and high-volume data applications; Atlanta's deep and broad pools of IT-savvy workers; and media jobs in film and television that reflect generous economic development incentives. Public-Sector Restructuring The last remaining large imbalance--government spending--is hard to miss. Of the three levels of government, state government has made the most progress adjusting its spending and staffing to reflect available revenue. Its biggest remaining challenge for is uncertainty about federal funding for mandated programs such Medicaid. Pension liabilities and retiree health care costs are not too far behind. Local governments will struggle with cuts in federal and state funding; pension liabilities; and retiree health care costs. But, on top of those challenges, some local governments haven't fully reconciled their reduced ability to generate revenue with their spending and staffing levels. That's mostly because local governments are extremely dependent on property taxes for revenue, and assessed property values always lag market values.. Going forward, the damage to Georgia's economy will depend on what lawmakers decide to cut. If the cuts continue to focus on defense spending, it will be tough on the communities that are economically tied to large military bases. In contrast, Georgia would only take an average or below average hit if the focus of federal restructuring were to shift from the federal agency budgets towards the specific entitlement programs that are the root causes of the budget problems, but that's unlikely to happen in 2015. Federal Reserve Policy Federal Reserve actions to increase short-term policy interest rates will be a slightly stronger headwind for Georgia than for the nation as a whole. The shift in Federal Reserve policy from an accommodative to a restrictive stance will create more economic drag in Georgia than in many other states because Georgians carry more debt and have save less. Housing Recovery Home building and real estate development will be extremely important to Georgia's economy. The number of single-family home starts for new construction will increase by 20 percent as the housing market responds to a more favorable balance of supply and demand. New jobs, slightly bigger paychecks, and appreciating home values will give more people the money and the confidence to buy homes. That will sustain the housing market's recovery. It's no surprise that the recent rebound in home prices is helping credit conditions to ease. But low appraised values will continue to restrain conventional lending as well as housing turnover. Another restraint on housing activity is that many of Georgia's homeowners with mortgages still owe more on their mortgages than their homes are worth, and that severely limits the availability of financing. In addition, even more Georgians with mortgages can't absorb the transactions costs involved in selling their homes, much less make a down payment, so they are stuck in their current homes.

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