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 net worth. 

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 nation. 

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 disaster. 

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 only modestly. 

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 appropriately.

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 outside Atlanta. 

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. 

Unlike metro Atlanta, where I expect new job records in two years, the remainder of the state appears to have suffered structural damage.  The only good news in this is that the nation suffered more, and Georgia


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