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Outlook ‘optimal’ despite slowing regional economy
A banner welcomes Hyundai Motor Group to their future home at the Bryan County mega-site in Ellabell, Ga., Friday, May 20, 2022. Georgia officials are close to finalizing a deal with the automaker to build a $5.5 billion electric car plant near Savannah,
A banner welcomes Hyundai Motor Group to their future home at the Bryan County mega-site in Ellabell. - photo by Associated Press

The Savannah metro economy’s path of slowing growth continued for the fifth consecutive quarter, according to Georgia Southern University’s latest economic monitor, which reflects the fourth quarter of 2022. Yet, the outlook for the region is optimal.

“Prospects for 2023 remain relatively healthy because of continued growth in the regional logistics industry and associated real estate development,” said Michael Toma, Ph.D., Georgia Southern’s Fuller E. Callaway Professor of Economics. “Further, ramping up for the Hyundai Metaplant opening in 2025 will become more apparent in 2023. These factors are expected to insulate the Savannah metro area from the widely forecasted nationwide recession in 2023.”

Modest Growth in Region

The business index for the Savannah metro economy increased 0.6% in the closing quarter of 2022. The growth trajectory continued to slow following the frenetic period as the Georgia and Savannah economies surged in 2021. The Q4 index economic activity increased to 213.6 from 212.4, supported by growth in employment, electricity sales, retail sales and boardings at the airport. Trends in hotel room and shortterm vacation rentals along with port activity played lesser roles as 2022 ended.

Employment Trends

Metro Savannah employers added 1,200 workers during the quarter to reach 201,800. This is 3.8% higher than year-ago employment and 5.6% higher than the pre-pandemic peak in early 2020.

Employment growth was concentrated in the service sector. Leading sub-sectors included leisure/hospitality (+900 jobs) and education/health (+700 jobs). Business and professional services shed 100 workers and were only slightly above year-ago levels. Logistics employment increased another 1,000 jobs to reach 19,100 workers in support of port and distribution activity. Business and professional services, education, health and tourism remained the top three sectors in terms of employment. They were remarkably balanced with all three sectors within 400 workers of each other at roughly 27,600 employees in each sector.

Indicators of the regional tourism industry modestly improved in the fourth quarter. Seasonally adjusted hotel and motel sales tax receipts increased 10%, while boardings at the airport remained flat as compared to the third quarter. Car rental taxes fell 1.1%, but alcohol sales (wine in particular) during the holiday season increased 8% even after adjusting for the usual seasonal pattern. Employment in tourism and hospitality increased to 27,800 and reached full post-pandemic mode 2% higher than its pre-pandemic peak.

The goods-producing side of the economy was flat during the quarter. Construction employment increased 100 workers to reach 9,000, which is only 1,000 workers below the amount needed to support the frenzied pace of home construction in the build up to the Great Recession. Manufacturing employment was unchanged at 18,800 workers and is up about 4% for the year.

Upward pressure on private sector wages eased as a result of moderating tightness in the labor market. The inflation-adjusted average hourly wage rate in the metro area private sector was $26.56, a 1% gain in the quarter. On an over-the-year basis, wage pressure eased from 15% growth to 10% growth before adjusting for inflation. The length of the private sector workweek shortened modestly to 32.3 hours, reflecting a 0.5% decline from the previous quarter.

Housing Market Volatility remains the watchword for residential construction of single-family homes. The seasonally adjusted number of homes permitted for construction rebounded 16%, continuing a trend of significant increases and decreases anchored around 575 permits issued per quarter since early 2019. The number of permits issued in the fourth quarter increased to 537 from 463 in the previous quarter. However, the average valuation for each single-family unit decreased 10% to $262,400 from $291,600 and is expected to continue falling into the first quarter of 2023.

With respect to forecasting indicators from the labor market, the monthly number of initial claims for unemployment insurance (UI) fell 22% to 590 from 755 in the previous quarter. Although this is good news, the number of new UI claims averaged about 670 during the previous six months, well above the pre-pandemic lows of about 500 per month. The regional unemployment rate held steady at 2.7% and was down from 3% at the end of 2021.

Savannah Metro Economy Remains Favorable Even as the prospects for the national economy weaken in 2023 and the regional forecasting index trends downward, expectations for the Savannah metro economy remain favorable. In the Savannah area, a U.S. recession in the middle to later portion of 2023 is likely to cause a slowing of regional economic activity rather than a significant decline.

This insulation from a nationwide recession is afforded from continued investment by the Georgia Ports Authority, growth in the logistics industry and accompanying nonresidential and residential development. As additional announcements of Hyundai suppliers accumulate (now at six firms with 4,500 employees and $2 billion in investment) join the 8,100 jobs and $7 to $8 billion in investment at the metaplant itself, residential and nonresidential investment will continue.

Editor’s note: The Georgia Southern economic monitor “provides a continuously updated snapshot of the Savannah Metropolitan Stastical Area economy, which includes Bryan, Chatham and Effingham counties. You can fiind out more at https://research.georgiasouthern.edu/ big/big-programs/cbaer/economic-monitor- newsletter/

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