Savannah Chamber

12 1 The Georgia Outlook for 2016 By Jeffrey M. Humphreys, Terry College of Business, University of Georgia www.selig.uga.edu Georgia's economy will continue to expand, but the pace of job growth will slow significantly. The pace of GDP growth will be sustained, however, and the pace of personal income growth will accelerate slightly. Because the massive restructuring of Georgia's private sector is complete, the risk of another recession is low (25 percent). The primary risks likely to trigger a new recession are mistakes in fiscal and/or monetary policies, a much sharper than expected slowdown in China, massive shifts in asset prices, or a widespread financial panic. Our 2016 baseline forecast calls for Georgia's inflation-adjusted GDP to increase by 3.3 percent, which is almost identical to the 3.2 percent growth estimated for 2015. Georgia's 2016 GDP growth rate will be 0.8 percent higher than the 2.5 percent rate estimated for U.S. GDP. It will also be above the long-term average 2.9 percent rate of national GDP growth. The positive differentials reflect (1) projects already in Georgia's economic development pipeline; (2) more leverage from the housing recovery; (3) more supportive demographic forces; (4) more small business startups and expansions; and (5) low oil and gas prices. The state's nominal personal income will grow by 5.7 percent in 2016, which is significantly higher than the 4.6 percent gain estimated for 2015. It also exceeds the 4.9 percent gain expected for U.S. personal income. Georgia's nonfarm employment will rise by 2.3 percent, which exceeds the 1.4 percent gain estimated for the nation. It's significantly smaller, however, than either the 3 percent job gain or the 2.7 percent job gain estimated for Georgia in 2014 and 2015, respectively. The main headwinds will be the strong U.S. dollar and weak foreign economies that will restrain Georgia's exports, cuts in federal defense spending that will hurt some Georgia military base communities, and less monetary stimulus. Georgia's unemployment rate for 2016 will average 5.5 percent, or about 0.6 percent lower than the 6.1 percent rate estimated for 2015. The unemployment rate will come down more slowly in 2016 because of slower job growth as well as slight increases in labor force participation. Job growth will be very well balanced. The fastest growth will occur in construction, followed by professional and business services, and mining and logging. Education and health services as well as leisure and hospitality will see above-average gains. Solid but below-average job growth is expected for trade, transportation and utilities, financial activities, manufacturing, and information. Positive—but very slow—job growth is projected for government. Prospects for Services The forecast indicates that all of Georgia's major categories of services-related businesses will expand, with the broader base of growth reflecting the upturn in housing markets, growing demand for information and high technology services, and competitive economic development incentives. Improving economic conditions—especially the upturn in real estate—and improving demographic trends will help Georgia's financial institutions. Rising asset values favor banks' top line growth. Despite relatively stable net interest margins, higher demand for most types of loans will support banks' profits, but the compliance costs of re-regulations and less mortgage refinancing will challenge the bottom line. In 2016, headquarters jobs will be an important force powering Georgia's economy. Hartsfield-Jackson International Airport and Georgia's ideal geographic location makes Georgia a good hub from which to serve operations in the Americas. Access to talent and the strength of the business community also are important drivers of headquarters locations. Projects announced in 2015 that brought, or will bring, substantial job gains at headquarters operations include Mercedes Benz, Sage, Comcast (regional headquarters), Wells Lighting, CSM Bakery Solutions, Courion, and Osmose Utilities. Transactions processing, data processing, cyber security, and development of software and mobile apps will see job growth. IT companies that announced major projects in 2015 include Applied Systems, Courion, Sage, and Stefanini. Fiserv, a provider of financial services and technology solutions, will add 500 jobs over the next five years, bringing its total employment to about 2,500 workers. Healthcare IT is an emerging industry that promises to create thousands of high-paying jobs in Georgia over the next decade.

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