November 19, 200
By some measures, Georgia and Atlanta
suffered the largest economic decline during the last recession since the Great
Depression. Such large job losses
raise questions as to whether the structure of the economy has been damaged.
If so, recovery will be long and tortuous.
As I have mentioned before, all recessions
have financial side effects. Of
course, the three liquidity crises followed by a bank holiday in the 1930s is
the most dramatic of those problems. However,
the recession of 1970 undermined corporate commercial paper.
Real estate financing could not compete with the Reconstruction Finance
Corporation's liquidation of foreclosed properties in the early 1990s.
This time, the problem area has been venture
capital. After returning gains well
in the 20 percent range per year for a decade, the ability to bring companies
public or even to merge them with other companies basically vanished by 2001.
Only now is there a dribble of new companies going public.
Mergers are beginning to rebound, suggesting the financial correction may
be over, but no groundswell is yet obvious.
Unlike banks, who need to raise all their
lending criteria and lower their loan holdings when they suffer significant
defaults, the venture community merely falls back to safer financing of income
producing but not yet public companies. Those
who lost money are "qualified investors" meaning they earned more than
a quarter million dollars a year and probably had well over a million dollars in
Thus, the financial impact of this recession
has been relatively minor.
Perhaps that is why Atlanta is showing
renewed vigor in creating jobs. Since
April, when job growth turned positive from previous year levels, Atlanta has
been able to extend its gains to almost 66,000 more jobs than a year ago by
September (the October numbers are not yet available).
Jobs have grown a satisfying 3% over pervious year levels.
This compares with continued job loss from previous year levels for the
Once again, building projects, such as
Atlantic Station, sewer work, and airport expansion, have been aiding employment
in construction. However, an
estimated 86,000 new people certainly needed those more than 45,000 houses that
were built. (They are emptying out
of apartments, however, where vacancy rates reached 10% before stabilizing late
in the summer).
Manufacturing remains a problem in Atlanta,
as in other parts of the country. However,
manufacturing is a smaller part of the Atlanta job market and food processing
has been expanding almost as fast as transportation equipment production has
been declining. To be sure, we are
trading higher for lower paychecks, but at least manufacturing is not a complete
Trade employment remains flat, as wholesale
continues to deteriorate (as in the remainder of the nation) and retail is not
yet convinced that rising sales can be sustained.
Air transportation and warehousing also are soft but trucking is
beginning to rebound while courier services are on the rise.
Fortunately, wireless telecommunications are
growing because wired employment is on the same downtrend in Atlanta as in the
nation. In finance, Atlanta shows
greater strength in insurance than in the nation, but other finance is growing
The big growth is in employment services but
health, leisure, and food services also are expanding.
The hotel industry remains down but shows slightly more vibrancy than the
weak industry nationwide.
While local government may have more people
than is justified in this weak economy, the state's payrolls have been shaved
Unfortunately, Atlanta is the good news for
Georgia. Without Atlanta, job
growth is only a meager 2600 for the remainder of the state.
(That still is better than the nation, but not by much).
Manufacturing still is important statewide,
although 5 percent job losses in the past year make it less significant.
Those textile mill closings are permanent.
Some of the wood product manufacturing will not return.
Even printing and chemicals may be seeing structural weakness.
All but 700 of the 13700 new health care
jobs in the state are in metro Atlanta. Jobs
are still being lost in arts, entertainment, accommodations, and food services
Of course, this is not new.
Atlanta has been the engine that pulled the state out of recession in the
past. As a result, those tax
revenue gains now being experienced by the state are largely from Atlanta.