published Thursday, August 28th, 2014

Georgia economy to pick up, forecaster says

Georgia jobs forecast

* 7.8 percent - Current unemployment rate

* 6.5 percent - Average jobless rate in 2015

* 5.9 percent - Average jobless rate in 2016

Source: Economic Forecasting Center, Georgia State University

Look for growth to be solid for Georgia in the coming year, but mixed consumer spending patterns are flummoxing retailers, car dealers, economists and policymakers who make plans and projections based on their behavior.

"It's a rascal of a recovery," said Rajeev Dhawan, director of the economic forecasting center at Georgia State University.

Dhawan said retail sales growth is "nothing great, but in sync with the recovery's subpar income growth." But new vehicle sales have exploded this year due to price wars and deep discounts. In addition to cars, consumers are in the mood to buy new homes. But housing sales have slowed from a year ago and the multiplier effect triggered by new home sales for industries like the Dalton-based carpet industry is only so far.

"When it comes to buying furnishings, we are seeing a puzzle," Dhawan says. "Retail level spending that typically goes hand-in-glove with new home construction has slowed sharply."

Dhawan attributes the resurgence of big-ticket purchases to consumers' reflated balance sheets, where the biggest investments, homes and stock market portfolios, are up.

Looking ahead, Dhawan projects a consistent upward trajectory in business fixed investment even as the Fed hikes rates in mid-2015. The resulting job growth and, more importantly, job quality will improve income and GDP growth in 2015 and 2016.

The state will add 74,100 jobs this calendar year and 83,600 jobs in 2015.

The unemployment rate, which is currently 7.8 percent in Georgia, will slide through the next two years. Joblessness should average 6.5 percent next year and 5.9 percent the year after, Dhawan said.

Paralleling the center's projection for Georgia is the forecast for metro Atlanta, which represents more than half the state's economy: Metro Atlanta will add 55,600 jobs next year and slightly more in the year after, Dhawan said.

The most likely obstacles to local growth will be global factors -- especially rising oil prices and Chinese economic woes -- combined with the expected decision of the Federal Reserve Bank to raise interest rates.

Nationally, growth should be slightly better in 2015, Dhawan said, predicting a 2.4 percent expansion compared to the expected 2.0 percent average this year. However, he said job growth will slip to 188,000 a month next year.

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