This column has chronicled Georgia’s outstanding growth in revenues for the past year, noting the 6.4 percent growth rate for fiscal year 2015 over FY14 and how the state finished the year in June over $1 billion ahead of the previous year.
But we cannot ignore the gathering clouds on the world horizon that seem to be inching their way onto mainland U.S. If there is one thing we have learned about Georgia’s economy, it’s that we are not an island. Georgia, more than ever, is a player on the world economy stage and thus subject, possibly, to the ups and downs of other nations, particularly of China and the rest of our trading world.
I guess we worry because Georgia was somewhat slow to feel the Great Recession. Although, I don’t know anyone who thinks the state is as vulnerable as Georgia was in 2007 with construction and housing overbuilt. But, regardless, it is definitely prudent to recognize what is going on in the U.S. and around the world and to make decisions as a state that provides for every eventuality.
First, the encouraging stats
As calculated by the Bureau of Economic Analysis (BEA), state personal income for the second quarter of 2015 for Georgia rose to $410.8 billion — 0.9 percent growth — keeping up with the national average of 0.9 percent growth.
According to the Bureau of Labor Statistics (BLS), preliminary average weekly hours of production of employees on manufacturing payrolls declined to 43.3 hours in September from 43.5 in August. However, average weekly earnings rose in September to $785 from $779 in August.
A preliminary estimate of 4.26 million workers in non-agricultural employment for September 2015 shows a net change of 84,200 jobs in one year. Also, unemployment dropped to 5.8 percent in August from 6 percent in July, and remained flat in September. The Bloomberg Georgia Index (BGAX:IND), which consists of 94 publicly-traded Georgia companies, gained 23 points in October to rest at 452.91 on Oct. 20. The companies on the index are some of the major employers and investors in the state, and their presence in a more global market is felt here at home.
Georgia’s gain in a 12-month trailing average of revenue collections is 6.8 percent — a healthy pace to be sure. This is after making adjustments for revenues from HB170, the Transportation bill.
Trouble on the horizon — or a minor blip?
September 2015 saw 30,199 initial claims for unemployment insurance in the state up from 26,928 claims in September 2014. In state monthly revenues, net sales and use tax collections were negative compared to the previous year’s net for the first time since March of this year. The Consumer Confidence Index, which generally follows the ebbs and flows echoed in sales tax collections, increased in September by 1.7 points. Consumer expectations, however, decreased slightly to 91.0 from 91.6 in August.
Housing is usually a key industry for much of our state. The number of residential building permits, as surveyed by the US Census Bureau, dropped from 4,295 in July to 3,201 in August.
Global slowdown bringing headwinds for here at home?
While the broad economic indicators are mixed, storm clouds are clearly on the horizon in the U.S. economy. In states that have released September revenues, there were lower receipts recognized in Arkansas, West Virginia, Iowa, and Kansas, but increases in Vermont, and a slight increase in Missouri.
In the southeast, Georgia, Alabama, Tennessee, and Mississippi saw positive revenue growth, while Louisiana and Texas saw decreases. The region has also been experiencing weaker sales tax collections.
Using a 12-month trailing average, Georgia, Alabama, Mississippi, Louisiana, and Texas all had negative sales tax collections in September. Only Tennessee had positive growth. Nationally, sales tax collections were flat in September. Caterpillar’s recent announcement of slashing jobs is certainly not good news, but is indicative of their larger exposure to emerging markets. The announcement noted slower equipment sales to China as a factor.
Slumping commodity prices are also a global concern. The global forecast downgrade by the International Monetary Fund (IMF) in early October followed declines in many commodities including copper, gold, aluminum and oil. Farm commodity prices continue to lag at historic lows in some cases with no long-term relief in sight. Low prices take a significant portion of farm income out of circulation which may foretell lower equipment purchases and credit issues as well. Beef, pecan and vegetable prices are bright spots.
Cautious optimism the best route
We should all continue to be encouraged by Georgia’s economic growth. Regardless of any short-term issues, Georgia is blessed with a very positive long-term outlook. In the short-term, however, we should be aware of what is going on around us half a world away and continue conservative spending policies.
I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7094 (fax)
E-mail at Jack.Hill@senate.ga.gov
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