North Georgia's economic health is beginning to show signs of improvement. Mike Ryan, associate professor of economics at the University of North Georgia, talks about the changes impacting the region's economy.
What are some indicators of economic improvement in our region?
The unemployment rate for the Georgia Mountains Region (Banks, Dawson, Forsyth, Franklin, Hall, Hart, Lumpkin, Rabun, Stephens, Towns, Union, and White counties) has been falling during 2013, reaching 6.9 percent in April. There was an increase in June to eight percent, but that mirrors increases at the state and national levels.
Another significant indicator is the rebound in the real estate market and the number of housing starts. Through May 2013, the region saw 1,419 units started—an increase of approximately 32 percent over the first five months of 2012. At this pace, housing starts would expand more than 3,400 for 2013.
During the first quarter of 2013, personal income for Georgia decreased by 0.9 percent. While this may seem like a negative, this decline includes the effect of the expiration of the payroll tax holiday at the end of 2012. Last year, each worker benefitted from a two-percentage point reduction in the personal contribution rate for social security taxes. If we were to adjust for such a change, the state data would reflect an increase of 1.1 percent or more.
How does the housing market improvement affect the region's economy?
The real estate component of the state's Gross Domestic Product (GDP) was $48,270 million or 11.1 percent of GDP in 2012. However, that does not include other economic activity derived from the sales of homes. Additional expenditures on consumer items such as furniture, appliances, paint, and remodeling are likely. Also, as a result of each sale, there is greater spending at restaurants, dry cleaners, gas stations, etc. Further, in an effort to maintain inventory, the sale of a new home leads to a new housing start in an 8-1 ratio. In total, estimates from the Harvard Joint Center for Housing Studies and the National Association of Realtors suggest that the average sales price of a home in Georgia creates an additional $36,897 in total income in these other areas.
Demand is driving new residential housing construction across the Georgia Mountains Region, but it will take a few more years to reach prerecession levels. The most significant demand is in Forsyth and Hall counties as a result of their proximity to Atlanta. Realtors report a decrease in available inventory and a relative "shortage" of housing. There is approximately a four-month inventory of new and resale houses, representing a significant decrease from the past few years.
At this point, how does the economy of northern Georgia compare to the national economy?
On the national level, the recession officially ended in 2009, but economic growth has been slow with limited improvement in output and employment. The Federal Reserve has engaged in substantial expansionary policy actions since 2008, keeping interest rates near zero and providing a major boost to the economy. The national real estate market continues to rebound with 16 consecutive months of year-over-year price increases, which last occurred from February 2005 to May 2006.
During the recovery, the unemployment rate in Georgia has been slightly higher than that of the U.S. However, the unemployment rate for the Georgia Mountains Region has been better than that of the state as a whole and roughly comparable to the national level of unemployment. To further compare the region to the nation, we should note that the 0.9 percent decline in personal income in Georgia for the first quarter of 2013 was slightly better than 1.2 percent average decline for the nation.
For the most part, the Georgia Mountains Region has experienced roughly the same economic conditions as the nation as a whole. We are seeing a steady, but sluggish recovery.