Forecaster sees modest job losses

Additional paychecks in 2011 expected to offset 2010

The balance of the year will come with modest job losses for metro Augusta, according to a prominent economist's prediction Wednesday.


Like the rest of the state, Augusta is feeling the impact of a weak employment recovery, said Rajeev Dhawan, the director of the Economic Forecasting Center at Georgia State University. However, job losses will be only 0.3 percent, an improvement from the 2.3 percent loss in 2009.

Last year, the metro area lost more than 4,800 jobs as unemployment rose to 9.5 percent. Industries shedding the most workers were manufacturing, construction, wholesale and retail trade.

"Given that we expect a mild improvement in the local economy, we forecast a mild drop in employment of 0.3 percent for 2010 and a 1.2 percent increase in 2011," Dhawan wrote in his detailed forecast.

A 0.3 percent decline is about 400 jobs.

Augusta State University economist Simon Medcalfe has a more optimistic view of Augusta's labor situation this year.

"I see a little improvement, but it is going to be slow," Medcalfe said.

The Augusta metro area, specifically Aiken County, landed a couple of companies that will add jobs this year.

"That construction down at Plant Vogtle, if that goes ahead, is really going to create some job growth in the area. I don't know that we would see any true effects this year, but it is certainly on the horizon," he said.

Georgians expecting a brisk bounceback in the economy and rapid job creation due to pent-up demand are thinking of the wrong type of recovery.

"Previous sharp recoveries were accompanied by a strong recovery in jobs -- one that is notably absent at present as investment spending, a leading indicator of job growth, continues to be weak," he said.

The center released its quarterly forecast Wednesday morning. Problems at Georgia's banks hamper the recovery because there's little lending available for companies that do want to expand.

Besides the 33 bank failures in Georgia since 2007, two out of three remaining banks are operating under regulators' orders to modify their practices.

Georgia will continue losing jobs until late in the year for a 2.0 percent decline, Dhawan predicted.

Only Columbus, with its infusion of new soldiers, will experience job growth this year. Employment reductions in other cities will range from 1.4 percent in Athens to 0.3 percent in Augusta and Savannah.

The prediction of a slow recovery in jobs is shared by other economists, and by the president and CEO of the Atlanta Fed, Dennis Lockhart, who addressed Augusta business leaders last week.

"I expect businesses to be very cautious with respect to inventory accumulation, capital spending and hiring," Lockhart said.

Lockhart said his forecasters at the Atlanta Fed are predicting a slow recovery in the job market and a slow decline in the unemployment rate.

Lawmakers agonizing over where to cut the state budget won't get a reprieve from the economy, according to the forecast.

Gov. Sonny Perdue built his budget recommendations for fiscal year 2011 on an assumption that the state's economy would grow tax revenues by 4 percent. Perdue acknowledged when he released it last month that some observers might find that optimistic.

Dhawan's forecast is a little more pessimistic. It calls for growth of just 3.5 percent, on the heels of an 8.5 percent drop for FY10.

"Given expectations for a recovery with no projections for significant job growth in the construction and financial sectors in Georgia, we expect no significant improvement in state revenue collections for FY10," the forecast said.

"However, the building of a new Kia assembly plant and the recent opening of NCR's ATM manufacturing facility may improve revenue collections later this year because the multiplier effect of these economic activities is usually significant," the forecast said.

More economic developments

INTEREST RATES: Federal Reserve Chairman Ben Bernanke told Congress on Wednesday that record-low interest rates are still needed to sustain the economic recovery and to help ease the sting of high unemployment.

JOBS BILL: Senate Democrats delivered the first of several promised election-year jobs bills Wednesday, passing a measure blending highway funding eagerly sought by the states with tax breaks for companies that hire unemployed workers.

NEW HOME SALES: The Commerce Department reported Wednesday that new home sales dropped 11.2 percent in January to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half-century. The big drop was a surprise to economists who were expecting a 5 percent increase over December's pace.