As the end of a financially fragile year draws near, thoughts turn to next year and what lies ahead in the economical forecast for Georgia and the rest of the nation. For answers, Business to Business turned to Dr. Jeffrey Humphreys, director of the Selig Center for Economic Growth at the University of Georgia's Terry College of Business. A member of the Governor's Council of Economic Advisors and a monthly columnist for Georgia Trend magazine, Humphreys prepares and writes the Georgia Economic Outlook. The report has twice received the Association for University Business and Economic Research's Award for Excellence.

BtoB : There were talks of an economic recovery in 2010.  But, are the talks of a recovery greatly exaggerated?
Dr. Jeffrey Humphreys: I know it does not feel like it, but I believe that Georgia's recession is over. The economic recovery that began in the second half of 2009 is probably not going to fall apart, but it will be bumpy. I do not expect a double dip recession, but the economic recovery almost certainly will be subdued rather than vigorous.  Because the setbacks in terms of GDP were quite large and the projected rate of growth is not very high, it will take at least two full years for GDP to surpass its previous peak. And, it will take four years before Georgia's labor market replaces the 340,000 jobs lost during the period leading up to, during and in the immediate wake of the recession.

BtoB : As we move forward, how will a rebound happen? What shape will the recovery take?
JH: The business cycle will be W-shaped rather than classic V-shaped, but the second dip on the W is unlikely to go into negative territory. Both federal fiscal and monetary stimuli will be exceptionally strong and should continue to gain traction as the credit markets gradually heal. 

Five headwinds will reverse, or at least become much less intense, allowing Georgia's economy to move forward in the remaining months of 2009 and gradually giving organic growth the upper hand. First, the credit markets are thawing. Second, single-family housing sales and starts bottomed out in the spring of this year. Third, inventory liquidation was overdone. Fourth, barring a major supply interruption, oil prices will be lower in 2010 than they were throughout most of 2008. Fifth, the intense cycle of wealth destruction ended in the second quarter of 2009.

BtoB : What are the indicators that will drive recovery in the first two quarters of 2010?
JH: Housing activity will be on the increase and businesses will begin to hire (second quarter) and spend for equipment and software. The global economy will expand at a moderate pace and the dollar will weaken slightly, boosting prospects for export-oriented businesses. Many of the large relocation and expansion projects announced by the Georgia Department of Economic Development will provide a tailwind to Georgia's economic growth. The tumult in the financial markets should continue to diminish. Credit will become more widely available to credit-worthy borrowers. Georgia's above average population growth also will be an important driver of the economy. Once the ice breaks in the housing market, retiree-based economic development will be an increasingly important factor in Georgia growth.

BtoB: Which sectors are lagging, and why?
JH: State and local governments will continue to eliminate positions through early 2011 due to continuing budget difficulties. Also, the down cycle in nonresidential construction will continue through at least the fourth quarter of 2010. High and rising delinquency rates on commercial real estate loans will stymie conventional lending. Meanwhile, manufacturing will continue to bleed jobs, but at much slower rate. Manufacturing sub-sectors with the best immediate prospects for job growth - or at least job stability - include wood products, nonmetallic mineral products, and transportation equipment.  

BtoB : When you look at 2010 - and beyond - what would you tell business leaders to expect?
JH: The main take away from my forecast for business people is that the recession is over.  So, this is the time to take advantage of the economic recovery that just began. Georgia, and especially Atlanta, got hit somewhat harder by the recession - due primarily to an overdependence on homebuilding, but the state is poised to participate fully in the economic recovery that began in August 2009.