The dean of the University of Georgia Terry College of Business on Wednesday
called the state economy poised to outpace national economic growth this year.
But, said Dean Robert Sumichrast, that growth requires vigilant business executives and politicians to avoid the most precarious decisions that loom before them.
Sumichrast predicted a 2.1 percent growth in the state economy this year, bolstered by a private sector that's crested over the remains of the housing bubble and pushed by major industrial projects, such as the $200 million Caterpillar plant in Athens and Baxter International opening a $1 billion plant east of Atlanta.
"The massive restructuring of the private sector is complete, meaning our housing bubble is over," Sumichrast said Wednesday to a room of state and local officials at the Georgia Economic Outlook luncheon at UGA.
The prediction contrasts with economic forecasts in recent years, he joked.
However, the hangover of the housing bubble still exists: He estimated that a third of homeowners in Georgia owe more than their houses are worth, stifling workforce mobility.
That and continued slow growth -- but growth nonetheless -- means Georgia likely won't return to pre-recession employment figures until 2016. During the recession, Georgia lost 340,000 jobs.
Also, many of the newly-created jobs don't match the skills of the unemployed, Sumichrast said.
And while major industrial employers relocating and expanding to the state have been grabbing headlines for much of 2012, he said that continued uncertainty at the federal level will likely stifle much more of that.
While the U.S. House of Representatives agreed to a three-month extension of the debt ceiling Wednesday, that doesn't provide long-term certainty, he said, especially since failing to raise the limit means catastrophe.
"Let me be clear: If Congress does not increase the debt limit, we will go into a deep recession," he said.
It would be more disastrous than the automatic spending cuts that still loom over federal agencies should Congress not reach a deal on deficit reduction. Those automatic cuts, known as sequestration, would likely cost the state 0.5 percent of its gross domestic product growth. Though federal cuts could have a disproportionate impact on Georgia as well, depending on what they are, he said.
However, Sumichrast praised the Federal Reserve for continuing to keep interest rates low, and he said he doesn't expect a hike in those rates until 2015.
He expects the public sector to continue to suffer as well, with more state jobs turning into part-time positions and local government budgets continuing to contract.
There is a silver lining to the housing industry as well, he said. The forecast has home construction up 20 percent versus last year and he sees people buying homes to live in them as driving the market -- not investors, as it was last year. He also expects modest population increase in Georgia, which helps drive its economy.
Also suffering, Sumichrast said, are public schools, which continue to lag behind most other states on important academic assessments.
To fix the problem, Sumichrast said more investment is needed in early education programs and less derision of schools by the public.
"We should recognize that many of our schools, many of our students, do really well," he said.
Distributed by MCT Information Services
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OCTOBER 30, 2014
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