Savannah Chamber

14 1 The Georgia Outlook for 2018 Jeffrey M. Humphreys, Director Selig Center for Economic Growth University of Georgia The 2018 outlook for Georgia's expanding economy is good. The pace of GDP and personal income growth will be sustained. New jobs will be plentiful, but tight labor markets mean jobs will grow at a slower pace. Job growth will be well balanced, with gains in both goods-producing and services-providing industries. Georgia's politics are business-friendly. Atlanta is the distribution and cultural center of the Southeast. The state's population is growing strongly due to the in-migration of many young, educated workers. Existing home prices will rise to all-time record highs. On average, Georgia's economy will grow significantly faster than the nation's economy. Because Georgia's economy is strongly linked to the national economy, the risk of a recession beginning sometime in 2018 is 40 percent, up from 35 percent in 2017 and 25 percent in 2016. The primary risks likely to trigger a new recession are external to Georgia; financial panics and/or massive shifts in asset prices (e.g., equities and/or bonds), mistakes in U.S. fiscal and/or monetary policies, geopolitical tensions, and a hard landing in China. In addition, there is little doubt that a full-blown trade war would shock both the national and Georgia economy into a severe recession. (Georgia is the nation's eleventh largest export and seventh largest import state.) The 2018 forecast calls for Georgia's inflation-adjusted GDP to increase by 3.2 percent, which is the same last year. Georgia's 2018 GDP growth rate will be 0.7 percent higher than the 2.5 percent rate estimated for U.S. GDP. It will also be above the 2.9 percent long-term average rate of U.S. GDP growth. The positive differentials reflect (1) many major projects in Georgia's economic development pipeline, (2) more leverage from the housing recovery, (3) more supportive demographics, (4) faster expansion of Georgia's manufacturing industries, (5) fast-paced growth of trade and distribution, (6) more competitive economic development incentives, and (7) more customized workforce-training. The state's nominal personal income will grow by 5.8 percent in 2018, which is about the same as the 5.6 percent gain estimated for 2017. It exceeds the 5.5 percent gain expected for U.S. personal income. Georgia's nonfarm employment will rise by 2 percent in 2018, which exceeds the 1.1 percent gain estimated for the nation. It is smaller, however, than the 2.5 percent job gain Georgia posted in 2017. As always, there will be some headwinds: The strong—but weakening—dollar will make it difficult for our exporters. The Federal Reserve will hike interest rates and reduce the size of its balance sheet, which will increase borrowing costs on the margin. Tight labor markets will temper job growth. Low productivity growth will limit increases in wages and salaries, which in turn will limit growth in consumer spending. In addition, U.S. auto sales are expected to decline in 2018. Asset markets also will be vulnerable to correction. Georgia's unemployment rate for 2018 will average 4.9 percent, or about 0.1 percent lower than the 5 percent rate estimated for 2017. The unemployment rate will not drop very much because of in-migration of workers from other states, increases in labor force participation, and the slowdown in job growth. The pattern of job growth across industries established in 2017 will repeat in 2018. The fastest job growth will occur in construction, followed by professional and business services, leisure and hospitality, and education and health services. Solid, but below-average job growth will occur in manufacturing, financial activities as well as trade, transportation and utilities. Positive, but slow job growth is projected for

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