Business outlook in Georgia and Valdosta good for 2008

By Billy Bruce

February 09, 2008 03:28 pm

— VALDOSTA — The bad news is that the U.S. may suffer a short-term recession in 2008 that could drag into 2009 before a rebound begins. The good news is that Georgia and the Valdosta Metropolitan Services Area are in better shape than the nation as a whole and both should be able to weather any impending economic downturn without suffering long-term impacts.
That’s the news that economic experts shared with attendees to the Valdosta-Lowndes County Chamber of Commerce 4th Annual Business Outlook briefing last Thursday at the James H. Rainwater Conference Center.
Dr. Jeff Humphreys, director of the Selig Center for Economic Growth in the Terry College of Business, University of Georgia, joined Dr. Cynthia Tori, associate professor of Economics, Langdale College of Business at Valdosta State University, to brief local business leaders on how the ongoing economic downturn is playing out locally.
Dr. Cliff Lipscomb, assistant professor of marketing and economics, Langdale College of Business at VSU, also offered a presentation on the local housing market. His remarks were presented in an earlier report in the Times.
The ever present “R” word being bandied about by economic analysts across the nation who are trying to gauge the economic downturns being caused by the housing market and mortgage crisis, rising increases in per-barrel crude oil costs, the war in Iraq and other factors turned this year’s Business Outlook gathering into an opportunity for the Chamber of Commerce to bring in experts to help local business owners figure out exactly what the score is for the Valdosta MSA in 2008, 2008 Chamber Chairman Walter Hobgood said at the Thursday event.
“There’s been a lot of doom and gloom about the economy,” Hobgood said. “Some say we’re approaching a recession. Some say we’re in a recession. Some say we’re trying to talk ourselves into a recession. Our area has been somewhat insulated from the economic downturns being experienced elsewhere, in part, by our geographic location, and in part, because of the diversity of our economy. We’re hoping our speakers today can help us define where we are.”
Humphreys concentrated his remarks on comparisons to economic data on the U.S. and Georgia. He noted that a year ago, he predicted that there was a 1-in-4 chance that Georgia would enter a recession in 2007. By mid-August 2007, he changed the prediction to a 40 percent chance. Today, Georgia has a 45 percent chance to suffer recession in 2008, Humphreys said.
But that prediction is coupled with his prediction that there’s a 55 percent chance that business will continue to grow in Georgia in 2008, Humphreys said.
Although the Georgia housing market has slowed somewhat, and the national economy, growth wise, is in decline, the state is still growing, he said.
There were 66,000 new jobs added in Georgia in 2007, with a 3 percent increase in GDP (gross domestic product),” he said. “If you look at the U.S. economy, the first month of 2008 was negative. We (Georgia) may be looking at a negative quarter in the first quarter of 2008. We’re right on the edge. While the national economy is decreasing, Georgia is expanding.”
The housing market in Georgia should begin to rebound later this year. Statewide, there was a decrease of new residential permits by 35 percent in 2007, and Valdosta permits were down 20 percent, he said.
“If you are selling new homes, activity should pick up by mid-2008,” Humphreys said. “If you are building new homes, you might have to be more patient. It might be 2009 before there’s an upturn in new home sales.”
The national mortgage crisis brought on by the sub-prime lending fiasco shouldn’t impact Georgia as it has other areas like Florida and California, but Georgia could suffer a severe blow if there is a break in crude oil supply, Humphreys warned.
Crude oil prices will remain high in 2008, hovering between $80 to $100 per barrel, but Georgia can withstand the situation. However, if there is an interruption in the crude oil supply, the long lines of consumers waiting at gas stations to pump gas that was experienced in the 1970s could return, he said.
“We are a major transportation and logistics state, especially in Savannah and Atlanta. A recession stemming from high fuel prices would do a lot more damage in Georgia than at the national level,” he said.
Another factor that could shift Georgia’s economy into a recession this year is the damage to the agricultural economy from the drought. Urban agriculture has been devastated by the drought, and retail nurseries and other ag-related businesses in Georgia are in serious trouble as a result, Humphreys said.
“But the drought, alone, is not capable of pushing us into a recession,” Humphreys said.
On the positive side, Georgia continues to enjoy steady population growth that helps the economy grow. The state’s population is growing by 2 percent a year, which is twice the national level and fifth fastest in the U.S., Humphreys said.
The population growth enables the state to provide an adequate supply of workers for new business and to retain a strong consumer base for selling products, Humphreys said.
Another factor working in the state’s favor for
avoiding recession is its ability to compete nationally for corporate headquarters. “It’s cheap do to do business in Georgia,” Humphreys said.
China has become a positive factor, which might surprise some, Humphreys said.
“Since the middle of 2006, three Chinese companies have announced major investments in Georgia,” Humphreys said.
Also, Delta Airlines, headquartered in Atlanta, won approval to provide flights to China, which expands its market and adds potential for more Chinese business relationships, he said.
“The (Georgia) Department of State is working very hard to get a Chinese consulate established in Atlanta,” he noted.
Military bases in Georgia continue to grow, despite some base closures, adding thousands of new jobs at Fort Benning and the Columbus area, and cargo business at sea ports in Savannah and Brunswick continues to boom, Humphreys said.
A report compiled by Humphreys for the Georgia Ports Authority reveals that the statewide economic impact of Georgia’s two deepwater ports in 2006:
• Generated $55.8 billion in sales, or 8 percent of Georgia’s total sales.
• Generated $24.8 billion in gross state product, or 6 percent of Georgia’s GP.
• Generated $14.9 billion in income, or 5 percent of Georgia’s personal income.
• Provided 286,476 full and part time jobs, or 7 percent of Georgia’s total employment.
• Generated $6.3 billion in local, state and federal tax revenues.
“Regardless of whether the state goes into a recession, cargo business will continue to increase at our ports,” Humphreys said.
Other factors that should help Georgia stave off any long-term impacts if recession occurs in 2008 are:
• Most businesses are working with lean staffing, so temporary layoffs wouldn’t send a large number of workers to the unemployment lines. “So layoffs wouldn’t be deep and would probably be temporary,” he said.
• The Federal Reserve has cut the prime interest rate five times since September and plans further action. “It’s hard for a recession to last when the fed keeps cutting interest rates to fight economic downturns,” Humphreys said. “I don’t think we’re looking at a protracted recession. I think we’re looking at a milder recession.”
VSU’s Dr. Tori concurred.
“Construction has been a little bit of a concern,” she said. “But if you drive around Valdosta, you’ll see the construction at South Georgia Medical Center and at Valdosta State University...”
Opportunities for expansion of health care and related industries in Valdosta are plentiful with the area’s continued population growth and with the community’s goals to attract amenity-seeking retirees. Also, the Chamber’s ambitious Impact 2012 project, which has goals to increase jobs within existing businesses and expand business in targeted higher-paying career fields, among other goals, is “a feather in the community’s cap,” Tori said.
“Impact 2012 provides an avenue for economic development for 2008 and beyond,” she said. “Here in Valdosta, the forecast looks good for continued economic growth and continued job growth.”

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