Industry sign banking georgia form now
Welcome to the Georgia economic
outlook. I would like to present University of Georgia's
president Jere Morehead to open the program. Good morning and thank you for
joining us today. I'm Jere Morehead, President of the
University of Georgia, and it is my privilege to welcome you to
the 38th annual Georgia economic outlook, hosted by the Terry
College of Business. I wish we could all be together in person
for this exciting event, but I'm grateful for the technology and
the hard work of the event organizers that have made it
possible for us to be together virtually. The COVID-19 pandemic
has forced all of us to adapt, and I could not be prouder of
the ways that UGA faculty and staff have innovated to continue
carrying out the university's vital teaching, research and
service missions to help our state cope with this crisis.
This morning, our speakers will deliver the kind of economic
insights that make this annual leading resource for economic
forecasting in the state of Georgia so vital. Although the
customary statewide tour has been sidelined this year, we are
very proud of the outstanding reputation that the economic
outlook series has established over its long history. I know
that Dean Ayers and the Selig Center staff look forward to
returning they're traveling roadshow of luncheon programs
around this day, this time next year. Today's program provides
businesses and public officials with the most recent economic
data needed to make informed decisions that benefit the
citizens of Georgia. We are honored to have Dr. David Altig,
Vice President and Director of Research at the Federal Reserve
Bank of Atlanta. As our keynote speaker, Dr. Altig will deliver
the national forecast, and Terry College of Business Dean, Ben
Ayers will deliver the state forecast. The economic outlook
is just one of the many ways the University of Georgia is helping
to promote business innovation and growth across our state.
Another way is the Small Business Development Center,
which helped more than 3000 small businesses receive $88
million in federal funding this year to keep hard working
Georgians on their payrolls during this pandemic. UGA's
Cooperative Extension worked with the Georgia Department of
Agriculture to help coastal fishermen and seafood
distributors find new markets for their catch when the
restaurant industry was shut down. Research conducted by
faculty and students at the University of Georgia also
contributed to our state's economic growth through the
development of new products. UGA is consistently ranked in the
top five among US universities for driving new products to the
marketplace. More than 800 products based on UGA research
have been brought to the market today. And we have been ranked
in the top 10 for licenses and options with industry for more
than a decade now. Many of these products and licenses are for
treatments and vaccines for deadly diseases such as
COVID-19. I can share some exciting news that one of our
faculty members, Dr. He in the College of Veterinary Medicine
has developed a candidate vaccine for COVID-19 that can be
administered via the nose and does not require ultra cold
storage making it more accessible than other potential
vaccines to communities worldwide. This vaccine is
licensed to his startup company and is being manufactured right
now for an upcoming phase one trial. UGA continues to advance
the innovation district initiative to further promote
economic development locally and across Georgia. The renovation
of the Spring Street building located at the interface of
historic North Campus and downtown Athens is on track for
completion in January to further expand faculty entrepreneurship,
and industry engagement. In recognition of our institution
wide commitment to economic growth and opportunity, UGA was
once again named an innovation and economic prosperity
University this fall by the Association of Public and Land
Grant Universities. We are proud to work with business and
government partners, and many others to improve lives and
strengthen communities throughout Georgia and beyond. Now, it is my pleasure to
introduce Dr. Benjamin C. Ayers, Dean of the Terry College of
Business. Dean Ayers holds the Earl Davis Chair in Taxation. He
came to UGA in 1996 and served as director of the college's
highly regarded Tull School of Accounting for nine years before
becoming Dean in 2014. Under his leadership, the Terry College
completed a successful capital campaign, raising $195 million
to support faculty, programs, and facilities and dedicated the
new home of the Terry College of Business on the UGA campus known
as the Business Learning Community. In 2016, the Terry
College established a campus-wide entrepreneurship
program, and three years later, opened Studio 225, the
University Students Center for Entrepreneurship located in
downtown Athens. Over the past seven years, the college has
launched several dual degree programs, a new Master's in
Business Analytics, market-driven certificates and
specializations, and a new academic minor in business. At
the same time, the college has grown undergraduate and graduate
enrollment and achieved the highest percentage employment
rates for graduating students in the college's long history. Dean
Ayer serves on the boards of Synovus Banks Northeast Georgia
division, Benson's Incorporated, and the CFO Roundtable. Let's
hear now from Dean Ayers who will introduce our keynote
speaker. Thank you, President Morehead.
We appreciate your being with us and we were thankful for your
leadership at the University of Georgia. Let me begin by
managing expectations of the audience joining us. We're going
to cover a lot of ground in the next 40 or so minutes following
my introduction of Dave Altig. He will give the presentation of
the national forecast and then I'll return with a Georgia
economic outlook. Dr. Altig and I will split the time that we
have remaining and we will wrap this up by the top of the hour.
With that, we're pleased to bring you the expertise and
perspective of Dr. David Altig. He is of course the director of
research and executive vice president of the Federal Reserve
Bank of Atlanta. He oversees the bank's Research Division and
advises the Atlanta Fed president on monetary and other
policy issues. Dr. Altig is taking on the mail this year as
Vice President of the National Association for Business
Economics and he is an adjunct professor of economics at the
University of Chicago. Before joining the Atlanta Fed, he was
on the research staff at the Federal Reserve Bank of
Cleveland, and began his research career as a professor
of Business Economics and Public Policy at Indiana University.
He's going to take us through the National Economic Outlook
and related impact of the COVID-19 pandemic. Dave, the
stage is all yours. Thanks, Ben. It's a great
pleasure to be with you today. I have to tell you that being in
the business of forecasting, which I am means that you can't
have too well developed a sense of shame. Even in the best of
circumstances, you know that your projections are going to be
wrong along some dimension, with 100% probability that's always
the case, but there has not been a circumstance in my lifetime
where I think it's been more challenging to get out the
crystal ball and sort of be able to with great confidence, say
where we're headed. Nonetheless, that's what I'm going to do, so
it's important for me to point out that the views I'm going to
share with you are really views from the staff of the Atlanta
Fed, they don't represent the views of the Federal Reserve
System, the Board of Governors, or anybody else, for that
matter, except those of us toiling in the business in the
virtual halls these days of the Atlanta Fed. So, here's what the
economy looks going forward, the national economy going forward,
looks like to us. This is a picture of the trajectory of
gross domestic product, the broadest measure of economic
activity that we have. The way this picture is constructed, is
that 100 there on the on the vertical axis represents the
level of GDP at the end of 2019. So you see the huge dip in
production through the second quarter, and then the gradual
return through the third quarter, and then our view going
forward for the next couple of years. And the important thing
to recognize now, so I say our views, these are actually the
forecasts from the Wall Street Journal panel of forecasters,
the solid line represents the median of those forecasters and
then the shaded area is sort of the range of projections, this
is really not different from our view of where we're headed over
the next couple of years at the Atlanta Fed. If you're thinking
in terms of growth rates, this would imply something on the
order of a contraction this year of two and a half to three and a
half percent, depending on how the fourth quarter comes out and
then above trend growth for the next couple of years, maybe
something like 4% next year, and then something slightly lower in
2022. But if that forecast comes true, then we will have
essentially return to the level of gross domestic product that
we were at, at the end of last year, by the end of next year.
So that's not exactly normalized, because under normal
circumstances, of course, we would have been experiencing
positive growth throughout this period. So we will sort of be at
our potential so to speak by the end of 2021, but we will have
recovered sort of the lost ground on the assumption that
growth next year is somewhere long around 4%. Now, that
assumption is predicated on a couple of key factors, the first
being that is that fiscal support is not done. So embedded
into our projections. In any event, I'm not quite sure what
all of those Wall Street Journal folks have in mind, exactly, but
would to come up with those sorts of numbers in our shop,
we're actually assuming another fiscal package to be passed and
I think if we're lucky, we'll see it, the momentum that we've
seen over the last couple days end up in something in the next
couple of weeks, but certainly by the end of the first quarter,
a fiscal package of you know, we're not very precise about
these things, but somewhere in the neighborhood of a trillion
to a trillion and a half dollars, is foundational to our
view of the economy going forward and returning to even by
the end of 2021. And this picture here really sort of
illustrates how important that fiscal support has been in in
the recovery thus far. So the solid black line here is
personal income, disposable income changes over
the course of the year. Again, sort of if you look to the
beginning of this chart, we're looking at thinking about the
level of disposable income in February right before the
pandemic hit and then tracing through time. And what the chart
does is it decomposes the components of changes in
disposable income through time. So if you want to, if you
thinking about disposable income, it's basically what you
earn from working, what you earn from your non labor sources like
investments. Plus benefits from the government minus the taxes
you pay. And the important part of this chart is that blue
shaded area, which is the part of disposable income in the
economy that's coming from labor earnings. So it's what workers
are receiving in the form of wages and salaries and those
have been negative numbers. So this positive performance of
income in the economy is really driven by primarily, by
government support in the form of unemployment insurance in the
form of payments from the CARES act and so on. It has been
absolutely critical, you've heard, I think, probably
everybody in the Federal Reserve System make this point, and make
the point that a continuation of the recovery and positive growth
in the next year really is based upon the assumption that we get
additional fiscal support. It has been the case that consumers
have not been what I would say irresponsible or profligate, or
unaware of the risk going forward in their own behavior.
So you can see this is a picture of savings rates by households,
which has absolutely exploded, reflecting the fact that people
are quite aware that these supports are designed to get
them from point A to point B in this crisis, and are acting
accordingly. That is concentrated. If you look into
the details of this statistic that's concentrated at higher
levels of income, as you would might guess, at the lower levels
of income. There's a closer tracking of consumption
spending, consumer spending and an income, which sort of adds up
to the case I was making really in the previous chart, which is
whether or not the consumer can remain resilient across the
board, in the face of continued struggling with slow activity in
the economy associated with the pandemic is going to depend in
large part on whether or not some non-market support for
personal income is going to continue. If it does, I think
the outlooks look pretty good, but one thing that we all know
that bears repeating, is that the circumstances across sectors
in the economy is quite a disperse. Total retail sales, that is if
you just think about the macro economy. Total retail sales have
at this point, reached and surpassed the level that they
that they were at, back in February. So again, this is a
chart that sort of starts the world in February and thinks
about where we are relative to February levels of activity.
Retail sales is now above that 100 benchmark in this chart, but
it is very, very different depending upon what sector
you're thinking about. And all the usual suspects are in the
positive and negative territories. The most obvious
being if you're in a brick and mortar retail operation, your
production and your activity has fallen and not recovered and not
recovering very quickly. If you're an online retailing or
non store retailing, not only are you above the levels of
February quite comfortably, you never really kind of experienced
the downturn. So the key challenge here, of course, is to
figure out whether or not this sort of differential performance
across sectors is something that's going to persist and be
structural, when all is said and done, or whether sort of just
sort of the bridge support of fiscal policy can get us from
point A B and back to something that looks like the pre-pandemic
norm. Now, obviously, that sectoral of those sectoral
differences and economic activity are reflected in the
labor market. If we look overall, about 60% of the losses
in jobs associated with the arrival of the pandemic have
been recovered, that's still quite a long way from normal and
is different depending on what sector we're talking about. And
of course, the original impact is very, very much different. So
the parenthetic numbers on the labels on the horizontal axis
there reflect the initial impact of the Coronavirus before
recovery in the labor market. Basically, in February and
April, so you can see that employment in the leisure sector
fell by 50%, whereas in manufacturing, it was 11%.
Across the economy, the decline was about 15%, but again, the
circumstances are very much dispersed, and very much
dependent upon where you sit, something that's really not a
surprise to anyone. One of the implications of that is in this
chart here and what I've done in this chart here is I've split up
jobs in the economy into occupations that are identified
by skill level required in those occupations. So I've got low
skill, middle skill, high skill. Low skill would basically be
sort of your service sector jobs, middle skill would be
construction and manufacturing, high skill would be management,
professional jobs, bankers, and so forth. The green chalk bars
here in this chart represent the share of jobs in those
occupation buckets in February of this year. And the orange
bars represent the share of losses borne by people in each
of these types of jobs. So if you look at the green bar it's
basically the middle skill in high skilled jobs,
manufacturing, and professional jobs account for about 80% of
jobs in the economy. Those lower skilled jobs represent something
a little bit less than 20% of the jobs in the economy, pre
pandemic. But of course, the orange bars indicate that
disproportionately, the job losses have fallen to these
lower skilled jobs as you know and as was reflected in the fact
that the the leisure sector, for example, lost 50% of employment
between February and in April. It's important to note that the
job losses are obviously distributed across the economy
and across the different types of jobs in the economy and in
fact, the number of jobs lost in low skill is not greater than
the number of jobs lost across the rest of the economy, But disproportionately this is
the sector that's it, and this is not always the case in
downturns. You might think that that's typically the types of
jobs that get hit hard in a recession, but that's actually
not the case. So I have a comparison here of the share of
job losses in the great recession and associated with
the financial crisis of 2007-2009. I know that Ben has
some charts that make a comparison across these events
as well. And what you can see is that whereas you might
characterize the recession this time, associated with the
pandemic, as as hitting the low skill sector the hardest,
proportionately in any event, it was not the case in the great
recession of 2007-2009. In fact, that was a middle skill
recession and the negative bar there in the low skill category
it means that proportionately low skill workers weren't hurt
really at all in that recession. So this is a very much flavor, a
different flavor than the last recession, but what happened in
the last recession is is still with us. So here I've sort of traced job levels across
these different skill categories, as we go back
starting in 2007. So you can see here, the low skill is blue, the
middle skill is red, the high skill jobs are green and you can
see sort of the low skilled jobs hanging up in positive
territory. This is not seasonally adjusted and that's
why there's all this choppiness in the picture, but you can see
there's really not any sort of negative impact back in
2007-2009. It's all showing up pretty much in the red line, the
middle skilled jobs, and the middle skilled jobs never
recovered and that's the important part of this picture
and now we get to today, we can see the sharp, sharp drop off in
the low skilled jobs, as well as the impact still on the middle
skilled jobs. And I want to just think about that, in my closing
minutes a little bit harder. It means to me that we have some
major challenges associated with this pandemic when it's all over
and addressing the labor market over issues associated with lower
skilled workers, with the persistent challenge that is
still with us from the last recession. So this is a
challenge and opportunity and we've been thinking an awful lot
about the workforce development challenge confronting us on the
other side of this particular recession that is piled up on
top of the challenge from the past recession. So I want to
consider a hypothetical example, this is a young woman who
apparently lives in the 1940s that we call Leia. She's a 25 year old single
mother of one child age four, she was working in a movie
theater prior to the pandemic and at minimum wage, and minimum
wages that is associated with this type of job receives a set
of pretty common benefits for someone at these income levels,
Child Tax care, tax credits, food assistance, and medical
care subsidies. That job is likely not to exist,
or exist in the same numbers on an extended period of time, over
Leia's career path time the other end of the pandemic
and the opportunity here and the challenge here is to use our
workforce development systems, which importantly, involve our
university system across the country, and the state of
Georgia in particular, to address the challenges of people
like Leia and people in the circumstances of those middle
skilled jobs back prior to the 2007-2009 recession. And what I basically want to
emphasize, is the return to the public, the return to the
taxpayer of taking this opportunity, and mobilizing our
educational system, and our workforce development systems to
address the old and new challenges in the labor force
and the lost jobs associated with these downturns. So here's
what I'm going to think about I'm going to think about taking
Leia, putting her into a workforce development program
that qualifies her to be a Computer support specialist. I
know that and Dean Ayer's slides there, there's a he's got a
point out some of the opportunity occupations that
exist in the state of Georgia. This is, IT is one of them. And
so what this chart basically says is what does the taxpayer
gain if we can move someone like layoff from a minimum wage job
to something like a computer support specialist, which now is
one of those sort of middle skill jobs? And the answer is timeframe, the return to the
taxpayer is about $275,000 in present value, meaning any
investment we can make that doesn't cost $275,000 for Leia
is a net benefit to the taxpayer. So we're thinking now
in terms of various sorts of support to get us through this.
One is monetary policy and the Federal Reserve has been very
clear that it does not intend to move off of its accommodative
stance anytime soon. The last we heard from them that their
projection is interest rates, policy interest rates will stay
near zero for as far as the eye can see, in some sense, through
the next several years and things play out as projected.
I've noted the need for fiscal support to bridges from point A
to point B. Here's another element, we need to be thinking
very seriously about, how do we shore up the timber of our labor
markets, and take this opportunity to move people to
permanently better positions, which benefit by them, and all
of us as taxpayers. So thanks for your your time. I will at
this point, turn it back to Ben. Thank you, Dave. I appreciate
your insight into the national economy and the impact of the
COVID-19 pandemic and impact and issues associated with workforce
and in our outlook for our future. Our highest priorities
the Terry College are preparing our graduates for a lifetime of
success and advancing economic development in the state of
Georgia and beyond and as part of our efforts, we provide
timely research on economic conditions around the state and
today's program is a great example of our public service
and outreach mission. Our goal is to provide students with an
education that is highly valued in the marketplace and enhanced
through high impact experiences like internships, consulting
projects with leading companies and study abroad. Currently, 10
military college programs are ranked among the nation's best.
It is because of the wide base of support from our alumni and
from the state of Georgia that our students aspire to more,
they achieve more and are better prepared to both serve and lead
in their communities and professions even in a pandemic.
Over the past four years, 95% of our graduates have found
employment and careers consistent with their
aspirations within three months of graduation and this bodes
very well for graduates, but also importantly for the state
of Georgia. So now let's talk about next year's forecast. The
2021 economic forecast for the state of Georgia is positive,
reflecting continuing recovery from the COVID-19 recession.
Absent another lockdown the population broad shut down on
the economy, the COVID-19 recession is over. It lasted
three months making it the shortest recession on record. It
was short because the fiscal and monetary policy responses were
both massive and timely. Although brief, the COVID-19
recession was steep and did a lot of damage to our state's
economy. The peak to trough drop in employment was 11% and that's
actually worse than 8% drop caused by the Great Recession.
Georgia's unemployment rates soared to 12.2% in April up from
only 3.5% in February. On a more positive note, unlike the Great
Recession, the COVID-19 recession did less damage to
Georgia's economy than to the US economy. The Nation lost 14% of
its jobs to the recession compared to only 11% here in the
state of Georgia. Our economic forecasts for Georgia calls for
the economic recovery to continue. The main drivers of
the recovery being consumer spending, a booming housing
market, and Federal Reserve policies. Full recovery of the
economy will arrive sooner here in Georgia than in the US. In
Georgia, there's relatively less economic debris to clean up. In
addition, many of the factors that cause Georgia to outperform
the US economy prior to the pandemic are reasserting
themselves. Some of the reasons why Georgia's economic recovery
will outpace the US will include the build out of projects and
our economic development pipeline, our competitive state
level economic development incentives that will help refill
our development pipeline, we'll get more leverage than most
states from the housing boom, as well as more leverage than most
states from the upturn and vehicle sales. There are good
prospects for Georgia's military bases, our state and local
governments will face a less daunting fiscal challenge than
those in many other states. And as in the past, our population
will grow faster than the nation's due mainly to
immigration from other states. We expect the economic recovery
from the COVID-19 recession to occur in three distinct phases.
The first phase of recovery was the initial bounce and economic
activity due to the lifting of Stay-at-home restrictions and
business reopenings. That phase is now over. Now we're in the
second phase of the recovery, which is in a more extended
period of choppy economic growth that will linger until an
effective vaccine is widely available and adopted. During this period, it is going
to be a bit of a slog because we do not expect another round of
widespread lockdowns, the population or shutdowns of
businesses, Georgia's economy is not likely to slide back into
another deep recession. The final phase of Georgia's
economic recovery begins once an effective vaccine is widely
available and adopted, which we assume will occur in mid 2021.
At that time, GDP and employment growth will quicken. Georgia's
economy will fully engage in a period of steady above average
economic growth will begin. If we are correct, that effective
vaccine is available and widely administered by mid next year,
Georgia's GDP will increase by 4% in 2021. That is good
compared to the 3.7% decline that we estimate for this year
and Georgia's GDP growth of 4% will be .5% points higher than
the 3.5% rate that we estimate for the US GDP next year.
Georgia's labor market will also improve the number of jobs will
rise by 1.5% next year, which will be above the .9% gain
estimated for the US, most of those gains will come in the
second half of 2021. Georgia's unemployment rate for 2021 will
average 5.1% or about .9% points lower than the 6% rate that we
estimate for this year. The prospects for personal income
growth are not as good as the prospects for both GDP and jobs.
The state's personal income will only grow by .2% next year,
whereas us personal income will decline slightly. Our low
expectations for personal income growth mostly reflect the wind
down of the massive federal stimulus programs that provided
large transfer payments to individuals in 2020, as Dave
mentioned. The slowdown will occur even though that wage and
salary base income will grow faster next year than in 2020. I want to spend a few minutes to
go through the phases of Georgia's recovery in a bit more
detail. In late April, Georgia eased restrictions on businesses
operations and on people's movements. Many other states
soon followed and opened up their economies. Despite
contagion fears and social distancing, people emerged and
many businesses either fully or partially reopened. Economic
activity surged, there was a sharp increase in consumer
spending. Retail sales, on average quickly recovered and
soon surpass their pre-pandemic levels. In addition, home
sellers and providers of services that could not be
postponed any longer benefited relatively quickly. The initial
bounce was uneven, with many types of businesses not
benefiting much. For examples, consumers strongly shifted from
spending from services to goods, which helped retailers and
manufacturers of consumer goods, but hurt service providers
ranging from hair salons to hotels and motels. The labor
market also rebounded in the initial three month rebound,
Georgia added back 55% of the jobs that it lost and the nation
added back 42% of the jobs it lost. In the third quarter, GDP
returned to 95% of its pre-pandemic level, up from only
90% in the second quarter. The initial rush to spin represents
a rebound from extreme shocks and massive economic stimulus
rather than economic reality, and that pace of economic
recovery could not be sustained long term. In the final quarter
of 2020, the pace of economic recovery is slowing. The
economic realities of permanent job and income losses are
settling in. Most of the large federal fiscal stimulus programs
are winding down and effective vaccine is still not yet
available and the COVID-19 pandemic continues. Official
lock downs are over, but many even among those who are not on
the most vulnerable populations do continue to self isolate.
Almost everyone is practicing social distancing, which limits
the spread of the virus, but also restrains economic
recovery, especially for providers of many high context
services. In 2021, the balance of positive or negative forces
should sustain Georgia's economic recovery. V shape
recoveries for retailers and housing are the biggest
positives, but they are also the biggest exceptions and elongated
U rather than a V will better describe the recovery for most
businesses. It will help that many households have saved a lot
and will spend some of their savings. Nationally the personal
savings rate will drop to about 8% next year. That extra
spending out of savings should sustain the growth of consumer
spending, which is vital to our recovery. The Federal Reserve
will do whatever it takes to support the struggling economy,
including keeping policy interest rates at zero into
2023. It is very good that COVID-19 dramatically
accelerated the adoption of digital technology and remote
work that will support increased spending for high tech
equipment. Another positive is that depleted inventories in
firmer orders will shore up industrial production next year.
Next year, economic development successes will strongly support
our state's economic recovery. Despite COVID-19, Georgia
economic developers landed more economic development projects in
fiscal year 2020 than in the year before. Nine of the 10
largest projects announced in the first three quarters of 2020
were actually announced after the COVID-19 shutdown began.
This success reflects many factors that make Georgia a
great state in which to do business, as well as an
extremely competitive team of economic development
professionals. Demographic forces are another factor behind
Georgia's economic recovery. Next year, Georgia's population
will grow at a pace that exceeds the national average, at .8%
here in Georgia versus .5% for the US as a whole. There will be many negative
forces that will restrain Georgia's economic recovery.
Most importantly, the pandemic is not over. Due to social
distancing and contagion fears, many high contact businesses
will continue to operate at greatly reduced capacity levels
that may not be very profitable. Some types of businesses for
example, live entertainment will remain essentially shut down.
The debt that companies took on to survive the pandemic may
limit their growth during the recovery. In the absence of
large scale stimulus programs, if not continued, will limit
growth in 2021. Business and personal bankruptcies will rise
next year, which will also be a source of layoffs. Put it all
together and economic growth will be weak until an effective
vaccine is widely available and adopted. Now we assume that one
or more approved COVID-19 vaccines will be widely
available and administered by mid 2021. If this assumption
holds, the slog will be over, and economic growth will
accelerate in the second half of 2021. If it doesn't hold, it'll
take a bit longer to reach herd immunity and in turn longer
before the economy fully engage and recovers. The expectation of
above average pace of economic growth in the second half of
2021 reflects a dramatic broadening of Georgia's economic
recovery to include even the most severely impacted
industries and geographies only possible because of the
widespread vaccination of the population. For the first time
since the pandemic begin, high contact industries such as
restaurants, hotels and live entertainment will be able to
fully engage and regional economies such as Brunswick that
are highly dependent on travel, hospitality and tourism will
gain traction and will rapidly move forward. Many businesses
will find that they are significantly understaffed and
will boost hiring and consumer and business confidence will
rise significantly. A virtuous cycle of above average economic
growth will begin and will likely business be sustained for
several years. In the wake of the pandemic, job growth
occurred George's industries will be different than it was
before the virus crisis. In 2021, industries hit the hardest
by the COVID-19 pandemic will initially posts the fastest
growth but the high percentage gains reflect rebounds off very
depressed levels. Full recovery will take many years. Examples
include bars, restaurants, hospitality, tourism, movie
theaters, live entertainment, air transportation, high contact
personal services, and the sharing economy. In contrast,
logistics, distribution, warehousing, professional
business services, information industry, FinTech, education and
health services will recover relatively quickly. In addition,
positive job growth will occur in manufacturing, financial
activities, transportation and utilities, but full recovery may
take a couple of years. Due to the strong housing market,
homebuilders will be hiring aggressively next year, but poor
prospects for commercial real estate markets means that
non-residential construction firms will be laying off workers
in 2021. Next year, retail sales will be strong, but retail jobs
will continue to be lost as market share shift to less labor
intensive channels. With disappointing revenue
collections state and local government jobs will decline in
2021. Next year, home sales and homebuilding will be a major
driver of Georgia's economic recovery. Housing experienced a
V shaped recovery in 2020 and activity will rise even higher
next year. Low mortgage rates, job growth, and population
growth are some of the traditional supports for housing
that look to boost demand in 2021. In addition, telecommuting
and social distancing made the home more important to people.
Low yields and other types of assets probably means investors
will be very active in residential real estate markets
in 2021. Next year, we expect the number of single family home
starts for new construction to increase by 19% and new multi
unit homebuilding to increase by 6%. Very impressive gains for an
economy that is still struggling to recover. Another support for housing is
appreciating home values. As of mid 2020, Georgia's existing
home prices were 23% higher than prior to the Great Recession
peak. The year over year increase in Q2 of 2020 was 4.5%.
The degree of home price recovery though does vary widely
across the state as you see from the slide. Next year home price
appreciation will continue, but home prices will rise more
slowly. We expect a 3% increase in home prices in 2021. One
reason that home price appreciation will slow is that
as mortgage forbearance programs wind down, more distressed
properties will come onto the market in 2021. The outlook for
manufacturing is positive. The main driver of growth in
manufacturing production will be recovering demand for
manufacturing goods due to factory shutdowns in the first
half of 2020. There's also a need to produce more to restock
stores and warehouses. Georgia saw many manufacturing economic
development projects that were announced in 2020 and those
projects will contribute to the increase in industrial
production next year. The build out of headquarters projects
will be an important force building Georgia's current and
future economic growth. There are now 30 companies on the 2020
fortune 1000 list that are headquartered in the Atlanta
MSA. That's up 4 companies from 2019. In spite of the pandemic,
Georgia competed very effectively for headquarters
projects in 2020. For example, Papa John's chose Georgia as the
location of its new global headquarters, and that will
bring 200 jobs to the Atlanta MSA. IT, FinTech, and
cybersecurity will strongly support Georgia's economic
recovery. The list of IT and FinTech companies that have
announced major projects in recent years is quite long.
Several of those are listed on the slide that you see. IT,
FinTech, and cybersecurity companies received a boost from
the COVID-19 crisis because contagion fears push people to
adopt new mobile technologies, including mobile banking and
touchless payment systems. Most consumers are pleased with the
services and will never return to their pre-crisis ways of
banking and shopping. The digital transformation of many
industries ranging from healthcare to education to
mobile banking was an existing trend, that the pandemic
dramatically accelerated. The speed of this widespread digital
transformation increases the risk of cyber attacks, which
does put Georgia's cybersecurity industry on to a higher short
term and long term growth trajectory. Due to the continued
recovery of US and global GDP, the prospects for Georgia's very
large transportation and logistics industry are very
good. There are many logistics and distribution projects and
Georgia's economic development pipeline. The slide lists some
of those recent projects announced. This industry will
benefit from Georgia's expanding role as a regional and national
logistics and distribution center, as well as the
accelerated shift from a fiscal retail to online retail. We believe the risks of the
forecasts are skewed to the downside. COVID-19 is still the
main recession risk. A dramatic worsening of the pandemic could
cause the economy to go back into recession. Even if there's
not a dramatic surge in COVID-19 cases, more federal fiscal
stimulus may be needed to avoid a double dip recession. A
mistake in US government's response to the pandemic is a
downside risk to our forecasts. Because risks are tilted to the
downside, it is better to err on the side of too much stimulus
rather than not enough. Recent rapid growth in lending to
highly leveraged businesses represents a another risk to the
economic recovery. Corporate leverage is at historic highs,
now 49% of US GDP. The Federal Reserve has taken notice of the
rise in corporate debt levels and created a facility to buy
corporate debt. Because interest rates are extremely low,
leverage lending probably will not trigger a double dip
recession, but it could worse in a recession triggered by another
factor. There are still some geopolitical risk capable of
triggering another downturn. Trade tensions with China and
the high levels of sovereign debt are two of the most
important. An escalation of the US China trade war could cause
another recession. Due to both the COVID-19 pandemic and
insufficient deleveraging after the Great Recession, sovereign
debt levels are very high and could bring on a global
financial crisis. In closing, I am pleased to report that
Georgia's economic recovery will continue and will continue to
continue strongly in 2021. The main drivers of growth will be
consumer spending, a booming housing market, and Federal
Reserve policies. COVID-19 is our main recession risk. The
availability of an effective vaccine would remove that risk
and we assume that will happen in mid 2021. If correct,
Georgia's economy will shift on to a steadier above average
growth trajectory and that is good news for us all. Of course,
there is more to the forecast than we can cover in a short
program such as this. Each of you have the opportunity to
retrieve the full version of the Georgia economic outlook as an
e-book. ebook provides an in depth discussion of the forecast
for the US for the state of Georgia and for many of our
state's metro areas. On screen, you will see the link and
promotional code SELIG21 to download your copy of the
forecasts. I want to again thank Dr. David Altig for his national
forecasts and also thank all of you for supporting the Terry
College of Business and the University of Georgia. We wish
you the very best during the holidays and a happy and
prosperous 2021. Thank you.
