Two categories dominate state revenue collections and are mentioned repeatedly in these columns — individual income and sales taxes. Individual income taxes account for half of tax collections, and sales taxes account for about a third of collections.
Long term recovery of the state thus is dependent on collecting more from these two categories. Tax collections will mostly rely directly or indirectly on new quality job creation and resulting income and sales. All jobs, though, are not created equal. I use the term “quality” because the level of pay is an important factor in our economy. This week we will explore the outlook for quality job growth in this state.
At the end of 2007, there were 4.14 million nonfarm jobs in Georgia. Over the course of two years, jobs declined 6.4 percent to 3.87 million nonfarm jobs in 2009. Over this time period, the unemployment rate went from 4.6 percent to 9.6 percent. In fact, the number of jobs at the end of 2009 tracked at 2004-2005 levels (not so coincidentally, revenue collections in 2009 also tracked at 2004-2005 levels). This return to 2004-2005 levels was more startling considering that Georgia’s population grew by almost a million more people. From 2009 to 2010, Georgia was 3rd, at 39,100 in the total number of jobs lost among the states. As of now, the unemployment rate is 10 percent.
Manufacturing jobs from 2004 to 2007 hovered between 430,000 and 450,000. At the end of 2009, this sector only employed 357,000 people — a 20 percent loss.
Non-manufacturing jobs are currently the largest sector of employment in Georgia, accounting for 3.5 million jobs (down from 3.7 million at its peak in 2007). Within this sector we see some different trends. Construction jobs were the key to our recovery in 2004-2005, but they have declined by 25 percent from their high point. We cannot count on growth in this category until the housing market clears the glut of foreclosures and other available inventory.
Also since 2007 we can see job declines in the following areas: retail trade down 8.4 percent, finance down 9.0 percent, professional and business services down 10.1 percent. Some categories though have experienced job growth over this time. Health services is up 2.7 percent. Colleges and universities, most likely due to enrollment growth, are up 10 percent. Federal, state and local government jobs, mainly as a result of education growth and federal stimulus funds, have shown an increase of 2.5 percent.
The Bureau of Labor Statistics, though, points to a sobering reality of the jobs lost. The majority of jobs lost were high and mid-paying jobs.
Those sectors that are currently hiring are choosing to employ lower wage jobs. So unfortunately, the quality of jobs is also declining.
Forecasts for 2010-12
Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, noted in his August state forecast that he too believes that job growth (and the quality of the job) will be the key to a rebound in tax collections. His forecast is that employment will improve only slightly in the second half of 2010. In calendar year 2011, Georgia’s economy will create 60,300 jobs (18,100 “premium” or high paying jobs), which equates to a 1.1 percent annual job growth rate. Calendar year 2012 will contribute 78,300 jobs, which will mean 17,200 premium jobs. If Georgia meets these forecasts, the unemployment rate will still be 9.2 percent at the end of 2012. In short, we will only recover 40 percent of the jobs lost since 2007.
What is interesting in Dr. Dhawan’s forecast is that job growth will not primarily be a result of luring in companies from out of state, but rather as a result of current Georgia businesses expanding. In his opinion, better access to credit, as well as healthier balance sheets, will encourage businesses to expand. It also will be important to deal with the housing crisis because homeowners need to be able to move in response to a job offer.
Federal stimulus funds, when first passed, were partially intended to fill the gap until state revenues picked up. In Georgia, state revenues will not rebound by the time the funds go away in FY 2012 — in fact, these statistics show that it will be a while before we see revenue collections return to 2007 levels.
One of the priorities that lawmakers will have in the next session is deciding the best approach to creating quality jobs that do not rely on the housing sector. Our strategies will need to be a balance of creating incentives to start and expand businesses, attracting businesses to relocate to Georgia, and building the infrastructure (both physical and human) to support these jobs.
Job creation is a longer term issue, but in light of the weakness in the homebuilding and commercial construction industry, it is an issue that policy makers must deal with sooner.
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
Or call toll-free at
1-800-367-3334 day or night
Reidsville office: (912) 557-3811
