Originally created 12/07/00

Experts: State will weather slower growth

ATLANTA - Georgia's slowing economy will be felt most notably in the housing sector, which faces six months of recession, and in manufacturing, where growth will stall as inventories are whittled down, one university economist said Wednesday.

Forecasts issued this week from four institutions made the same prediction for Georgians next year: noticeably slower growth but no general recession.

Interest-sensitive industries, such as construction and related fields, will feel the effect of the brakes applied by the Federal Reserve Bank earlier this year in the form of higher lending costs. And none is looking for the Fed to lower rates to ease the economic slowdown.

"You may escape it, but I don't know if your neighbor will," said George Benson, dean of the University of Georgia's Terry College of Business.

Georgia State University's prediction was less ominous.

"Right now, we see the likely outcome is slow growth," said Mary Kassis, executive director of the Economic Forecasting Center at the Atlanta university. "There is a chance of recession depending on what happens with oil prices or a war in the Middle East, but our forecast assumes that will not happen."

Locally, Augusta's growth will slow, but won't stall, economists at each school say.

Jobs should increase between 1.9 percent and 2 percent, with the new positions spread across most sectors, but especially services, telecommunications and transportation. Printing and chemicals are boosting payrolls heading into next year.

Wholesale and retail trade, fueled by rises in personal income and people moving into the area, also should grow next year.

Construction has already stalled in metro Augusta.

The Federal Reserve's so-called beige book, released Wednesday, focused mainly on the balance of this year, but noted that activity is generally weakening, especially in residential construction and manufacturing. But that is resulting in slightly less demand for workers, easing pressure on wages.

Economist Andrew Hodge, senior vice president of the WEFA Group, said less growth reduces the risk of inflation.

"This will be a pause that refreshes, and only one that can be called a pause by New Economy standards," he said.

In recent years, some economists had concluded that the advent of the Internet and greater reliance on productivity-enhancing computers resulted in a sort of new economy in which business cycles of boom and recession were less evident. But Mr. Hodge said Wednesday that cycles haven't disappeared, even though the current boom should continue making history as the longest ever for the United States, at 10 years and counting.

Slower economic growth translates into smaller raises and bonuses, less leisure travel - which could affect Georgia's tourism industry - and reduced job turnover, Mr. Benson said during a briefing in Atlanta before 2,000 executives who paid to attend.

The precise predictions for next year vary significantly between what Georgia State and the University of Georgia are projecting. Georgia State estimates Georgia's gross state product will grow 3.5 percent in 2001 and 2002, while the Athens school more optimistically expects 4.9 percent growth in 2001.

Non-farm job growth numbers range widely, too. Georgia State figures employers will create just 63,300 new jobs next year; the University of Georgia expects 91,000. That would result in an unemployment rate next year of 4.3 percent according to Georgia State, or 3.8 percent according to the Athens economists.

Reach Walter C. Jones at (404) 589-8424.


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