Augusta Economy

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Economists expect subpar growth, but no recession

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It is often said that "all economies are local," and in the greater Augusta area, that truism will be especially meaningful in 2008.

  Nate Owens/Staff
Nate Owens/Staff

That's because the hard times brought on by the ailing U.S. housing market will not have as much impact here as it will in other parts of the country where new-home construction reached unsustainable levels, economists said. As a result, local home prices should remain steady and the increase in foreclosures should be minimal.

"The softening in the nation's economy should be less evident in Augusta's economy," said Wachovia Bank economist Mark Vitner.

The Augusta-Aiken market's historically slow employment growth will likely continue as service sector growth is offset by continued losses in the manufacturing sector, where improving technology and increased reliance on foreign workers means fewer employees are needed to produce goods.

In all likelihood, 2008 won't be a standout economic year, but it won't be a laggard, either. Here's what state economists are forecasting for our area for the coming year:

Mark Thompson

Augusta State University

Dr. Thompson's Greater Augusta Economic Activity Index, which he will introduce to the public Jan. 15, is based on several local leading indicators that allow him to forecast a six-to-nine-month period. What is he seeing right now?

"I would say there is no growth over the next six months," he said. "The good news of no growth is no decline."

He believes employment growth will offset any job losses caused by the area's housing decline, which he categorized as a "correction."

"The evidence I see is that we didn't have the rapid price appreciation that other metro areas had," he said. "We didn't have the huge boom; subsequently, we're not going to have the huge bust, so to speak."

He considers consumer spending to be the wild card for 2008.

"One question is always retail activity," he said. "Until recently, consumers seemed to be spending quite well. That may also be due to oil prices."

Mark Vitner

Wachovia Bank

Mr. Vitner believes slowing sales will make retailers less likely to expand, especially in areas such as ours. He said older national chain stores might even close.

"There's been a lot of growth in retail in Augusta," he said. "We'll likely see the pace of retail expansions cool off a bit."

The area's chemical and health care industries are expected to continue to do well in 2008, but he is uncertain about industries tied to military spending.

"With the Iraq war winding down, military spending is going to slow," he said.

Historically low housing prices in the metro Augusta area will continue to make it an attractive destination for people leaving higher-priced markets and corporations seeking a favorable quality of life for its employees.

"The moderate cost of living was a large component of ADP coming," Mr. Vitner said, referring to the Fortune 500 company that opened a service center in west Augusta this year.

Doug Woodward

University of South Carolina

Dr. Woodward said he expects manufacturing employment will shrink by 4.2 percent next year. In the textile industry sector, the decline will be worse, about 7 percent.

"We're accustomed to seeing erosion in the manufacturing job base in South Carolina. If there is a silver lining in this dark cloud, it would be that the falling dollar will make our manufacturing exports more competitive internationally. Exports should increase," he said.

"The depreciating dollar also should boost the state's tourism, notably from Canadians flocking south to take advantage of their strengthened currency."

Overall, he is forecasting job growth in the Palmetto State to be about 1.1 percent next year.

Rajeey Dhawan

Georgia State University

Dr. Dhawan was out of the country and could not be reached for comment. Excerpts from his latest statewide forecast posted on the school's Web site said he expects growth in all Georgia metro areas in 2008. The "star metro areas," he said, will be Savannah, Hinesville, Warner Robins and Gainesville.

Roger Tutterow

Mercer University

Though Dr. Tutterow believes "we're closer to recession than any time in the past," he is not predicting a recession, either locally or nationally, in 2008.

He believes the Augusta area's nonfarm employment growth in 2008 should be comparable to the gains made in 2007, he said, noting that payrolls are up about seven-tenths of a percent during the past 12 months. He forecasts tightening in the financial-services industry because of the slumping real estate market.

The area's labor market, however, has a major advantage because it is a "mecca for health care services."

"That's a fairly immune sector," Dr. Tutterow said.

The region will continue to benefit from Fort Gordon's surviving the 2005 base closings in addition to new developments at Savannah River Site.

Dr. Tutterow said local home prices are unlikely to rise in 2008.

"I think that we're getting closer to the bottom of the residential real estate correction, but we're not there yet," he said.

Jeffrey M. Humphreys

University of Georgia

Dr. Humphreys expects the Augusta-Aiken area will "enjoy faster economic expansion in 2008" with employment climbing 1.9 percent, or 4,100 jobs.

He forecasts strong performance in the area's service-producing industries, notably health care and private education.

He and the university's Terry College of Business dean, Robert T. Sumichrast, will present more detail at the annual Economic Outlook Luncheon on Friday at the Augusta Marriott Hotel & Suites.


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