Georgia’s economy is on track to surpass its pre-pandemic peak and fully recover by the end of 2022, recover faster than the national economy.
“I am pleased to announce that by the end of 2022 Georgia’s economy will fully recover from the COVID-19-related recession,” Benjamin C. Ayers, Dean of the Terry College of Business, said during of the 39th Annual Georgia Economic Outlook from the University of Georgia.
“Despite the waves of infection, labor shortages and other supply constraints, we have made tremendous progress in getting back to normal.”
The state is expected to see an overall growth in its gross domestic product of around 4.3%. Despite the risks posed by the supply chain and labor shortages, inflation and the prospect of higher interest rates, the overall risk of a recession in 2022 is very low – only around 20%.
Following last year’s Georgia Economic Outlook virtual event, UGA reverted to its annual forecast in person at the Georgia Aquarium in Atlanta. The forecast is based on the Georgia Economic Outlook report, produced by the UGA’s Selig Center for Economic Growth.
This year’s forecast is positive with steady growth projected throughout the year; although slower than the initial recovery seen in 2021. Georgia’s GDP recovered fully in 2021, but the labor market did not. In 2022, the state is expected to exceed its number of jobs before the pandemic, signaling a full recovery.
âAt this time, Georgia’s economy can be seen as completely healed in terms of jobs,â Ayers said. “In contrast, the number of jobs in the United States is unlikely to exceed its pre-pandemic peak before the second quarter of 2023.”
While the state’s economic recovery in 2021 was sparked and supported by federal economic supports, the private sector will fuel growth in 2022.
âThis is quite a change from 2020 and 2021, when the federal government was the main – and sometimes the only – economic engine,â Ayers said.
Jobs are making a comeback
Georgia’s unemployment rate will fall below pre-pandemic levels in 2022, averaging about 3.2% or about 1% below the national unemployment rate.
There will be a sharp increase in hiring in the sectors hardest hit by COVID-19 – hospitality, transportation and personal services. In addition, Georgia will see solid growth in hiring in local communities as well as in the logistics, business services, construction, information and financial technology sectors.
The manufacturing sector will experience hiring growth, but it will be somewhat limited until supply chain issues are resolved.
Personal income will increase by 1.9%, exceeding the projected national increase of 0.6%.
Consumer spending, business spending and housing
Georgia’s recovery will be supported by three main economic drivers: consumer spending, business spending and housing.
Job growth and higher wages will propel consumer spending. In addition, consumers will tap into the savings accumulated during the pandemic. U.S. households have accumulated $ 2.5 trillion, or 12% of GDP, in additional savings during the pandemic.
Georgians are expected to spend around 4.5% more in 2022.
âUnlike 2020 and 2021, consumer spending on services will grow faster than spending on goods,â Ayers said.
Businesses are expected to increase spending on new technology and equipment by 6%, as they continue to invest in new ways of doing business that emerged during the pandemic. They will also spend more on new types of structures: data centers, research and development centers, warehouses and distribution centers.
With the move towards telecommuting and the popularity of online shopping, businesses will have less need for retail space and office space. However, there will be strong interest in reallocating some of the unused retail and office space, thereby stimulating more business investment.
The long-term impact of the pandemic on the way people work, shop and live is also having an impact on the housing market. During months of working and learning at home, many families reassessed their need for space and amenities. This desire for larger homes and more private spaces is still fueling house prices and home construction.
âPut it all together and people are willing to pay more for a single family home than they did before the pandemic,â Ayers said. “Plus, low yields on other types of assets mean investors will be active in residential real estate markets.”
Home prices are now 37% higher than they were in 2008, and the Selig Center predicts that new home construction will rise 8% in 2022.
Despite many promising indicators, Georgia and the United States will still face challenges on the supply side throughout 2022, ranging from shortages of raw materials and finished goods to shortages of workers.
On the bright side, most of the unmet demand for goods and workers is simply delayed, increasing the prospects for growth once labor shortages and supply chain issues are resolved.
The main risk to the economy from labor shortages and supply constraints is that inflation could escalate longer than expected.
âWe’ve seen some of this before,â Ayers said.
“A quick and aggressive pivot from easy money to tight money could trigger a recession because the economy is not well positioned to absorb much higher interest rates.”
Companies hold historically high debt ratios, and a sudden rise in interest rates could trigger a recession through a corporate debt crisis or a sudden correction in the stock markets.
A third relatively low risk to the economy is the pandemic itself.
âWe expect each subsequent wave of cases to do less damage to the economy, but mutations in the virus that are more deadly could develop,â Ayers said.
For more details on Georgia’s 2022 economic outlook, including regional economic forecast, visit www.terry.uga.edu/about/selig/publicatio