The first year of the Trump administration will bring a “skirmish” over trade that will buffet the Georgia economy, but not keep it from growing, according to a closely watched forecast from Georgia State University.
Growth and hiring will continue but slow, with the most vulnerable companies being those that rely on international business, said Rajeev Dhawan, director of the Georgia State Economic Forecasting Center, during the center’s quarterly conference.
Overall, Georgia will add about 77,600 jobs this year, compared to about 103,300 last year and 118,700 the year before that, Dhawan predicted.
The unemployment rate, currently 5.4 percent for the state, will likely dip to 5.2 percent for the year, according to his forecast.
A strong rebound late in the year depends on Congress delivering on some of President Trump’s promises on tax and regulatory relief, he said.
“There will be a six-month trade skirmish. And there will be a sweet present of a tax cut for Christmas,” Dhawan said.
The job market will advance unevenly, he said. For example, because many metro Atlanta corporate jobs are tied to trade, growth in that sector will slow, while the logistics and manufacturing sectors will likely lose jobs.
Georgia exports already are under pressure, thanks to a stronger dollar that makes them more expensive overseas. The new administration’s tough talk on trade could further hinder growth in trade-related sectors, Dhawan said.
Last year, Georgia exported $35.7 billion in goods, down 7 percent from 2015.
An estimated 387,000 jobs in the state are directly linked to exports. More than three times that number are indirectly supported by exports, according to the U.S. Global Leadership Coalition, a network of businesses and non-profit organizations.
Still, other forces will fuel growth, Dhawan said: business investment has picked up – and that adds demand for hiring in non-trade sectors.
“The domestically-driven sectors are doing well.”
Jobs in state and local government – which did not grow during the recession – will benefit from the solid flow of tax dollars that a healthy economy delivers, he said.
“If you want the most stable industry, that’s it.”
The financial sector should also continue growing, he said.
That outlook sounds right, said Kenji Kuramoto, chief executive of Atlanta-based Acuity, an accounting and financial services firm.
The company has grown from 15 to 77 employees in the past three years, hiring about 30 people in the past year. They expect to hire more than 20 people this year, mainly financial specialists and sales staff, Kuramoto said.
The lion’s share of Georgia’s new jobs will be in metro Atlanta, he predicted: 52,200, compared to 70,800 last year. However, he cautioned that less than one in five of the new jobs will be “premium” positions with better-than-average pay.
Other factors could also affect growth.
Higher interest rates make borrowing money more costly for both companies and consumers, which can chill the housing market. Higher rates would likely also mean a stronger dollar, which will make imports more expensive and threaten to spark inflation.
So the Federal Reserve, which had planned to keep raising basic interest rates this year, has been paying attention to the president’s rhetoric and threats about trade.
A member of the Fed board recently said that a 20 percent increase in the dollar’s strength would have a similar effect to a boost in interest rates of 2 percentage points.
The Fed will probably act, then stand back to see how things play out, Dhawan said.
“Expect one rate increase this March.”
Non-farm jobs added in Georgia
Source: Georgia State University Economic Forecasting Center, Bureau of Labor Statistics