September 3, 2003
Georgia and Atlanta suffered an unusually long and severe
recession. However, once the
recovery began last fall, jobs have begun to grow much more strongly than in the
U.S. In the past twelve months
Georgia created almost 52,000 jobs while the nation was losing more than 400,000
Despite this better job growth, tax collections continue to
lag previous year levels, at least in July.
As a result of this apparent disconnect between job growth and gains in
other economic measures in Georgia, Rajeev Dhawan of Georgia State University
has called the Georgia recovery an "optical illusion."
His argument is that high wage jobs have been lost and they
are being replaced by jobs that have much lower purchasing power.
Certainly, the 24,500 job gains in employment agencies are not getting
the same wages as the 23,300 lost manufacturing jobs were generating in the past
year. Those lost computer programming jobs paid more than the
growing jobs in food service are earning.
Growing purchasing power is what drives a recovery.
If high wage jobs are lost and are being replaced by low wages and
temporary positions, then even the relatively rapid job growth in Georgia
compared to the nation may not be enough to sustain economic expansion here.
Dr. Dhawan may eventually be proved correct in his
analysis. But we do not yet have
enough information to reach that conclusion.
Those weak sales tax receipts for July reflect consumer
spending in May (and some other months where resolved tax disputes are added to
the normal monthly totals). Nationwide,
spending was still sluggish in May. Activity
then accelerated in June and skyrocketed in July.
If Georgia experienced a similar change in sales patterns
(auto incentives and the change in withholding tables suggest that similar
incentives for spending were increasing here at the same time they were growing
elsewhere), then collections should turn positive in August and show significant
positive growth from previous year levels in September.
I am not saying that the 6.4 percent revenue estimates used
for the current state budget will materialize.
I think we probably will fall more than a percentage point short of that
mark. However, we will not suffer a
third consecutive year of shrinking revenues at the state and local level
according to my forecast.
I am concerned about how sustainable those job gains are,
but not because spending will not surface.
Construction jobs in Georgia are still 8.3 percent above previous year
levels. A housing boom certainly is
aiding this, but such gains are not sustainable in the current economic climate.
More than 10,000 jobs were created in what the Labor
Department calls remediation in the past year.
These jobs are to handle the mortgage refinancing that surged when
interest rates were falling. Now
that refinance applications have fallen from cyclical highs to the lowest level
in more than eighteen months in a span of only two months, many of those jobs
Perhaps some of the 7400 new jobs in arts, entertainment
and recreation in the past year could disappear if consumers back away from
supporting such endeavors.
On the other hand, the government payroll gains are in
education, where 100,000 new migrants per year into Georgia are placing growing
burdens on the education payrolls. Furthermore,
I believe many of those "leased" workers from temporary agencies are
receiving solid wages. They are
temporary because employers are not yet willing to add permanent staff after
suffering the wrenching decision to cut jobs during the recession.
Those "leased" airline mechanics are earning about as much as
those currently unemployed programmers were making.
And the distribution system of trade, transportation, and
utilities has yet to create any meaningful jobs. A typical recovery normally sees sharp gains in hours worked
in those areas before new positions are created.
The higher paychecks offset the lower number of workers receiving them
when a recovery begins in earnest. Once
the recovery progresses, those jobs begin growing as well.
When I add up the possible job losses in construction and
remediation with the likely job gains in trade and distribution as the recovery
progresses, I see state employment growth rising to well over 80,000 by the end
of this year. Job growth of more
than 100,000, which would absorb those new Georgians and begin the process of
re-employment, is on the horizon for 2004.
However, the state does have a serious problem.
Virtually all the job growth is in Atlanta.
Excluding Atlanta, job gains are only 4400.
Rural Georgia continues to struggle to replace those lost mill jobs.
While some urban areas have added distribution and expanded financial
services, there is minimal job growth beyond metro Atlanta, and virtually none
outside the other metro areas in the state.
Of course I am not happy with the employment picture in
this state. And there is a
possibility to Dr. Dhawan has put his finger on a major problem in talking about
the absence of growing purchasing power.
If Georgia lags behind the nation in personal income growth
for the second and third quarters (data that is not yet available) then Dr.
Dhawan will have identified a serious problem.
I do not think that will happen. I
believe that Georgia will be among the top five states in growing personal
income in those quarters, just as it is in the top five in creating jobs.
The stigma of losing jobs twice as fast as the national average during the recession cannot be erased by such income gains alone, but it surely helps.