Economist: Too many people playing it safe

Photo by Casey Dixon

Photo by Casey Dixon

ALBANY, Ga. -- The same panel of three people have trekked to Albany for the past three years, painting a gloomy economic forecast for the Southwest Georgia area. But on Thursday before a gathering of more than 200 business and civic leaders at the Hilton Garden Inn, they predicted a somewhat more optimistic future.

"The great recession has ended and there is an 80 percent chance the recovery will continue. But we are still looking at a slow, jobless recovery," Robert Sumichrast, Dean of the University of Georgia's Terry School of Business said. "People and businesses have been in a risk avoidance mode since June of 2009, but I would advise against an overabundance of caution.

"If my forecast for sustained economic recovery is correct, then too many people are playing it safe. Now is a good time to take calculated risk. Interest rates are at historic lows and banks are beginning to lend again. The best loans are often made during economic recoveries. If you are a business leader, then consider investing some of your cash to raise output."

Joining Sumichrast on the panel were Beata Kochut, a research analyst with UGA's Selig Center for Economic Growth, and Mark Masters, a research associate with Albany State University's Flint River Water Planning and Policy Center.

Coming out of the recession, Georgia's economy has recovered slowly, recording just 1 percent growth in 2010. The Selig Center forecasts that Georgia's economy will sustain its recovery and expand by 2.9 percent in 2011 after adjusting for inflation.

The center predicts the rate of growth for the state's gross domestic product (GDP) will match the nation's growth rate for the first time in seven years.

"As the lingering effect of recent restructuring and the real estate bubble fade, Georgia will begin to out perform the U.S. in 2012," Sumichrast said.

So where's the growth?

Sumichrast said that the forces driving economic growth are fundamentally shifting from the public to the private sector.

"We are almost through with government stimulus and inventory building," he said. "Going forward, GDP growth will be based primarily on consumer demand, both foreign and domestic. Now that the baton has been passed to the private sector, the economy is no longer on life support.

"The recovery has become self-sustaining. But due to weak job growth, it's almost certain to continue very slowly.

The odds of finding a job will improve in 2011, though the state's jobless rate will remain stubbornly high.

"In times of economic uncertainty, we live and die by the GDP," Kochut said. "After three straight years of job losses, the Albany MSA leveled off last year. This year we predict a 0.2 percent increase in non-farm jobs, both full- and part-time. While not great, it's better than in the past few years.

"The MSA should see substantial improvement in 2012. But the area is in a deep hole because the steep loss of jobs since 2001 has caused economic stress."

The panel agreed that the state's fastest-growing industries in 2011 will be business services and the transportation and warehousing industries. And for the first time in many years, Georgia's manufacturers will be hiring.

Sumichrast thinks the housing market, which precipitated the recession, will also improve this year, saying home sales will continue to rebound though prices may dip by another 5 percent through the first half of the year.

"I believe that Georgia's prolonged and severe housing bust has run its course," he said, "and homebuilding will contribute to Georgia's economic growth in 2011."

Masters then spoke in regard to the regions agricultural prospects.

"Overall, it was a pretty good year for the region's ag industry," Masters said. "Peanut acreage was up 11 percent, corn was down 34 percent after the price fell off, but cotton was up 31 percent."

As for predictions for this year, Masters said, "Cotton is doing phenomenally well, and we expect a shift from corn to cotton. The battle for acreage this year will be interesting to watch.

"2011 is looking really good for us. There is a steady stream of optimism within the ag community."