Savannah Chamber

23 business confidence and increased tourism activity in the underlying economy. The support services offered by firms in business/professional services represent an important source of new demand for labor based on growth meeting the growing needs of other regional businesses and consumers. The remaining coincident indicators (consumer confidence, hotel room revenue, and airport boardings), except for electricity sales were improved in 2017 as compared to 2016. Port activity increased substantially during the year. Indicators of the tourism industry also demonstrated strength, with hotel room revenue and boardings at the airport up by more than 7%. Electricity sales (through the third quarter), were disrupted in the short-run by hurricane activity, but remain on a positive long-term trend indicating general growth in residential, commercial and industrial activity. The Coastal Empire Leading Economic Index is designed to forecast regional economic activity during the upcoming nine-month period. Through the third quarter of 2017, the forecasting index is up 3% as compared to the 2016 annual average. However, the index was disrupted by late-year hurricane activity that has somewhat clouded its forecasting signal. The hurricane effects in the index are shaking out in end-of-year data, so the index appears poised to return to its intermediate-run signal of continued and sustainable growth in the regional economy during 2018. The forecasting index primarily is developed from indicators characterizing the regional housing and labor markets. The labor market continues to demonstrate notable strength. First, after accounting for 33,000 new jobs generated since 2009, the number of initial claims for unemployment insurance (UI) fell well below the level typically experienced during the pre-recession period from 2000 to 2007. The number of initial filings for UI averaged 602 per month (-15%) in 2017 as compared to 711 per month in 2016. This is about 17% below the pre-recession monthly norm. Indeed, as the year ended, the seasonally adjusted number of initial UI filings hit the lowest level (440 per month) seen since March 2000 and the second lowest number recorded in data going back to 1995. This compares to 2,000 new UI claims per month when the worst of regional job losses occurred in 2009. The residential construction market experienced growth in 2017 that is expected to improve in 2018. This reverses a modest "breather" in 2016 following four years of growth averaging 23% annually. Through November 2017, the number of permits issued is on track to be about 5% above the number issued in 2017. This is moderate and sustainable growth for permits issued for single family homes and is consistent with the 1995-2002 pre-building boom period of "normal" construction activity (after adjusting for population growth). As indicated above, the bedrock foundation components of the regional economy are currently performing well (the coincident index). The regional forecasting index is sending the signal of moderate growth for 2018, about on par with the pace of expansion recorded since 2012. Given tightening conditions in the labor markets, 2018 will be a year of good news for workers in the region that is expected to enhance growth in the housing market. In 2018, employment in the Savannah metro area is expected to increase by approximately 2.8%. This is well above the long-term trend rate (+1.7%) of employment growth, and is consistent with typical growth recorded since 2012. Growth for 2018 remains sustainable because it is broadly based, lacking reliance on any one sector to sustain the forward momentum. The annual unemployment rate for 2017 was 4.4% for the region. Continued employment growth will further reduce the unemployment rate to 3.6% in 2018. Continued tightening in the labor market is creating upward pressure on wages that is expected to continue through 2018. Turning to population growth, the region's long-run attractiveness as a place to live, work, and retire remains unaffected by short-run business cycles. Tourist demographics describe a very desirable pool of would-be in- migrants. The typical Savannah tourist (13.9 million annual visitors) is well-educated and has above-average income. Regional job creation and continued improvement in the housing markets that feed Savannah's in-migration will continue to influence population growth in the short-run. Population growth in 2018 should be strong, following strength in employment growth. For 2018, population growth is expected to be approximately 1.8%, above the typical pace of growth since 2010. In conclusion, the Coastal Empire Coincident Economic Index indicates the regional economy has been growing consistently for eight years, creating 33,000 new jobs along the way – mostly in the private sector. The regional

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