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Bleak Times Ahead?
Forecast says Georgia economy will get worse before 2011 recovery
by Walter C. Jones, Morris News Service
February 26, 2009
ATLANTA -- Georgia's job losses and other economic woes will intensify and continue well into 2011
before a modest recovery begins, according to a somber prediction released Wednesday by a prominent
economist.
"In summary, the prognosis for growth in the coming 12 to 18 months is bleak, to say the
least," wrote Rajeev Dhawan, director of Georgia State University's Economic Forecasting Center, in
a quarterly outlook released Wednesday.
Job losses will push the state's 8.1 percent unemployment rate to 9 percent by the end of the
year and up to 10.3 percent next year and to 10.5 in 2011. Construction will take the biggest hit,
shedding 13 percent of its jobs this year, followed by manufacturing, business/professional
services and retailing. Education and health remains the only growth area as even government
declines as a result of depressed tax collections.
Consumers sense their jobs may be on the line, making them hesitant to spend money that would
help restart the economy, he said.
What about the impact of federal stimulus spending?
Dhawan warned that it will take time to work. The reason is most businesses were so thrown
off course by the credit crisis that they have been focusing more on repairing their balance sheets
than market expansion.
"Now, corporations are in what I call a self-preservation mode which involves drastic,
cost-cutting maneuvers, including increased layoffs and an unwillingness to invest," he said.
Georgia banks haven't been immune from the credit crisis, either, he notes. Six have failed
in the last 12 months, requiring government takeover, and others have received stern warnings from
federal banking regulators.
"Thus, banks are not lending, existing instead in a capital-preservation mode," he said.
"This scenario makes it tough to buy a car even if the price is extremely low due to auto makers'
discounts."
For the national economy, Dhawan expects gross domestic production to shrink 3 percent this
year and just 0.2 percent in 2010. The national unemployment rate will peak at 10.3 percent.
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