The most recent economic watch from Georgia Southern University reflects that the Savannah metro area’s economy slowed in the second quarter of the year and that a local recession is unlikely.
„The region’s economy has given up some ground as growth has slowed over a nearly two-year period,” said Georgia Southern’s Fuller E. Callaway Professor of Economics Michael Toma, Ph.D. said. „At this point, the remaining forward momentum in the Savannah metro area through 2023 is closely tied to port activity, the logistics industry, and non-residential construction that supports the regional tourism and hospitality sector. While it is clear that regional economic growth has slowed significantly, Savannah has the potential to avoid a recession in the second half of 2023.
Continued moderation in 2024
The business forecast index fell for the fifth straight quarter, suggesting continued moderation in the Savannah metro economy into early 2024. As in the first quarter, leading indicators of both the regional housing market and the labor market were mixed. Interest rates continued to hover around 6.8% on 30-year mortgages, limiting upside potential in the residential construction market for single-family homes.
In the labor market, a slight decline in new filings for unemployment insurance benefits doesn’t mask the fact that new filings are 15% higher than a year ago.
As in the first quarter, prospects for regional economic growth to 2023 correlate with the pace of hiring for Hyundai Metaplant and associated suppliers. While the U.S. economy appears to be avoiding the most widely predicted recession, at least for now, there are more concerns than desirable core inflation. Then, interest rates are expected to remain higher than previously thought until 2024.
Employment trends send mixed signals
While the total number of jobs was reported to have increased by 1,900 workers in the second quarter from the first quarter, the underlying data for each major sector of the economy showed a collective decline of 600 workers. The largest concentration of accumulated losses was in logistics and retail, about 500 jobs each, indicating that other service sectors collectively offset job growth in the quarter.
However, for the first half of 2023, totals and aggregates of individual sector data have been aligned, showing an increase of 3,400 employees (+1.7%) compared to the year-ago data. Total employment in the metro area averaged 201,000 through mid-2023.
The service economy lost 700 workers in the quarter. This was partially offset by service sector job losses of 300 workers in business and professional services, 200 workers in tourism/hospitality and other sectors. The education and health sector and tourism/hospitality are the two largest employment sectors in the region, both employing 29,000 workers each.
Regional tourism indicators were mixed in the second quarter. Tax receipts from hotel room and short-term vacation rental sales are generally on a strong upward trend, although some fluctuations in the data mask short-term, quarter-to-quarter change. Quarterly boardings at the airport increased by 1.1%. Rental car tax receipts increased, but alcohol sales taxes declined after adjusting for seasonality and inflation.
The goods manufacturing side of the economy added 200 workers in the quarter. Production was steady at about 18,900 workers. Construction employment rose by 300 to 9,500, its highest level since the Great Recession of late 2007 to 2009.
Private sector wages rose modestly in the quarter, rising from $25.01 to $25.25 an hour. Wage rates appear to have stabilized after a sharp fall in the previous quarter. Nevertheless, hourly wages were 4% lower compared to year-ago data. The length of the private sector work week is stable at 32.3 hours.
Home sales market
Building permit issuance for single-family homes fell 4% from the previous quarter. The number of permits issued for single-family homes was 580 in the quarter, compared to 603 in the previous quarter. The median value of each single-family unit rebounded slightly, rising 3.3% from $249,400 to $257,500. In a notable development, the number of multi-family residential units approved in the quarter rose to 652 units, the same as in the previous 12 months. Over the past 18 months, 1,634 multifamily units have been approved. The last time a similar number of multi-family permits were issued was between 2006 and 2008.
In the labor market, the monthly number of initial claims for unemployment insurance (UI) fell 3.5% to 724 from 751 in the previous quarter. However, this is 15% higher than the average of a year ago. The seasonally adjusted regional unemployment rate fell to 2.9% in the second quarter from 3.1% in the first quarter and rose slightly from 12 months earlier (2.8%).
A note from the researcher
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The Economic Monitor provides a continuously updated quarterly snapshot of the Savannah Metropolitan Statistical Area economy, including Bryan, Chatham and Effingham counties in Georgia. The Contingency Index measures the current economic heartbeat of the region. The leading index is designed to provide a short-term forecast of the region’s economic activity over the coming six to nine months.
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