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 coincident index measures the current economic heartbeat of the region. The leading index is designed to provide a short-term forecast of the region\u27s economic activity in the upcoming six to nine months

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Georgia Southern University Digital Commons@Georgia Southern Economic Monitor Armstrong News & Featured Publications 2019 Economic Monitor Michael Toma Center for Business Analytics and Economic Research Georgia Southern University Follow this and additional works at: https://digitalcommons.georgiasouthern.edu/armstrong-analysis-monitor  Part of the Economics Commons This newsletter is brought to you for free and open access by the Armstrong News & Featured Publications at Digital Commons@Georgia Southern. It has been accepted for inclusion in Economic Monitor by an authorized administrator of Digital Commons@Georgia Southern. For more information, please contact digitalcommons@georgiasouthern.edu. Published by the Armstrong State University Center for Regional Analysis  |  Savannah GAMichael Toma, Ph.D., director, Center for Regional Analysis  |  Department of Economics  |  912.344.2538The Savannah metro economy weathered the effects of Hurricane Irma and maintained strong economic growth through the third quarter of 2017. However, September data for several underlying indicators of current economic activity were weak.  In particular, employment and electricity sales suffered somewhat during September, but early quarter strength kept the economy on the growth track, despite the weakness in September. Consumer confidence in the South Atlantic states and plane boardings at the airport also supported the index of current economic activity.   The forecasting Coastal Empire economic index decreased modestly during the third quarter, also reflecting passage of Hurricane Irma.  The regional labor market, in particular, was hit by the hurricane. Further, housing market indicators remained sluggish for the second consecutive quarter. While growth in the regional economy continued during the third quarter, there is some evidence of the economic damage caused by Hurricane Irma. The weakness in the forecasting index is likely to be temporary. The regional economy quickly shook off the effects of Hurricane Matthew in 2016 and a similar longer term response is expected for Irma.Bumpy GrowthThe Coastal Empire coincident economic index increased 1.1% (4.4% annualized) to 181.6 from 178.7 (revised) in the previous quarter. The pace of economic expansion increased on the shoulders of strong July and August data, even as Hurricane Irma affected several key indicators in September. On Thursday, September 7, 2017, a mandatory evacuation order for all Chatham County and Georgia coastal areas east of I-95 was issued to take effect at 8 a.m. on Saturday, September 9. As Irma tracked further west than expected, the evacuation order was adjusted at 1 p.m. on September 9 and limited to low-lying coastal and island areas of eastern Chatham County. By then, however, a significant number of residents had already evacuated and, along with the curfew in effect until Tuesday the 12th, disruption of business activity in the county was certain.Electricity sales (a broad indicator of residential, commercial, and industrial activity) and retail sales both declined by about 6% from the previous quarter. The length of the workweek (number of hours worked) was 7% shorter in September, as compared to August and October. Further, consumer confidence in the South Atlantic states was shaken in September, but began to recover in October.  Total employment for the quarter increased 1.2%, but because Irma was centered on the Georgia-Alabama border on September 12, when firms report their monthly employment totals, September employment was 1,200 jobs fewer than reported in August. From August to September, the combined losses in leisure/hospitality, retail trade, and business/professional services were 1,800 jobs. Modest scattered growth in other sectors accounts for the change in the overall total for September data.By contrast, in the quarterly data, Savannah metro employment increased 1,700 jobs (+1.2%) to 180,900 from the second quarter to the third quarter.  Regional employment is a very healthy 2.7% ahead of year-ago levels (see graph on back page). Employment growth was led by local government (+800), leisure/hospitality (+700), and education/health (+500). Business/professional services dropped 300 workers during the quarter. On the goods-producing side of the economy, manufacturing employment held steady at 16,800 workers.  Construction employment notably increased by 300 jobs to stand at an eight-year high of 7,400 workers.  While regional employment hit its post-recession low toward the end of 2009, construction continued to shed workers for another three years (see graph below). Construction then bumped along the bottom through 2012 and 2013 before beginning to CONTINUED GROWTH, SOME HURRICANE SOFTNESSThird Quarter 2017Coastal Empire Economic IndicatorsLeading and Coincident Indexes1990-91Recession2001Recession2007-09Recession19901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620171901701501301109070170150130110907050Growth in the Savannah metro economy accelerated in fourth quarter of 2019, extending the gains of the previous quarter. All eight coincident economic indicators in the index increased, but growth was stronger in port activity, electricity sales and tourism.  The business o casting index fell slightly during the fourth qua te  but does not include any data reflecting regional impacts of the COVID-19 pandemic. In 2020, economic dis ocation caused by virus containment and mitig ti n eff s willbe substantial a d will be layered on top of (and dominate) the already cautionary signal sent by the forecasting index. The regional economy will likely be, at best, flat in the first quarter of 2020, followed by a sharp contraction in the second quarter. Expectations for third quarter are currently hazy but expected to improve as the quarter progresses with a more substantial release of pent-up consumer demand and economic growth in the fourth quarter.The Savannah metro economy expanded 0.7% (3% annualized) during the quarter. The coincident index of economic activity increased to 192.7 from 191.1. With the exception of the second quarter, annualized growth in the metro area economy was a healthy 2.8% in 2019.  The index of urr nt economic activity was supported primarily by port activ ty and sales of electricity to reg onal comm rcial, industrial and residential users. Port activity closed out the year with 6% annu l growth while electricity sales incr ased during the year. Modest growth in region l employment (+0.3%) contributed to the gain, while quarterly gains in hotel room rentals (+6%), retail sales (+2.8%) and plane boardings at the airport (+1%) boosted the economy.            The Georgia Department of Labor completed its annual “tune-up” and revision of monthly employment data available through the Current Employment Statistics program. Each year, the payroll employment data gathered through a survey of businesses is benchmarked against headcount employment available from the state’s un mplo ment insurance program. The 2020 adjustments resulted in an upward revision of 2,600 jobs f r the first quarter of 2019 but  ownward revision of 500 jobs toward th  end of the year. Employment i avannah’s three-county metro area was 186,300, a gain of 600 jobs from the previous quart r and 0.5% higher than year-ago data. J bs in business and professional services continued to erode, shedding another 500 jobs and contributing to the loss of 2,200 jobs in the sector since the first-quarter peak of 22,600 workers. Business and professional services are proxy indicators of business-to-business demand for services. Manufacturing employment gained 300 workers to stand at 19,200, a record-setting high. In addition, construction added another 300 jobs, rising to 8,300 workers. Employment in the leisure and hospitality sector was 27,700 at the close of the year.ECONOMY ENDS STRONG, SUBSTANTIAL DECLINE EXPECTEDHourly wages in the private sector bumped up to $22.90, a gain of 1% during the year. The length of the workweek increased to 33.4 hours, a 2.5% increase as compared to year-ago data. Both of these labor market i dicators will be under substantial pressu e in 2020.  U.S. gross domestic roduct (GDP) gro tincre se  modestly in th  fourth quarter, rising at  rate of 2.1% (annualized), matching third-qua ter growth. Mo est consumer spending growth (+1.7%) and nonresidential construction (-8.1%) held GDP r wth dow , but residential construction (+6.2%), government expenditures (+2.6%) and exports (+2%) contributed to economic growth. Expectations for nationwide economic contraction resulting from the coronavirus generally call for a GDP loss of 4% to 10% in the second quarter and about half this amount for the third quarter. Outlier forecasts are as high as declines of 15% to 25%, similar to the contraction in Chinese manufacturing output through early March 2020. Note that two-thirds of all U.S. Regional Economy Expands  in Late 2019U.S. EconomyFourthQuarter 2019Published by the Georgia Southern University Center for Business Analytics and Economic ResearchMichael Toma, Ph.D.  |  Department of Economics  |  Savannah, GA  |  912-344-2538inject as much liquidity as needed into the financial system by purchasing government bonds, municipal debt, corporate bonds, mortgage-backed securities and direct loans to main street business ($300 billion). The Fed is encouraging banks to borrow directly from it through its discount window lending program and is establishing lending facilities to channel short-term credit to businesses and households. These are similar to the actions conducted by the Fed to maintain continued operation of severely stressed financial markets during the recession  of 2007-09.The Savannah area business forecasting decreased during the quarter. The index fell 0.4% (-1.5%, annualized), a similar decline as registered in the second quarter of the year. These two declines sandwiched a 2% (annualized) gain in the third quarter.  In the labor market, the number of initial claims for unemployment insurance (UI) dropped 15% to 580 from 625 in the third quarter, but remained 8% higher as compared to previous-year data. The seasonally adjusted unemployment rate fell four-tenths of one percentage point to 2.8% in the fourth quarter, seven-tenths of one percent less than one year ago. Both of these labor market indicators are expected to deteriorate rapidly in the first and second quarter of 2020.In the regional housing market, seasonally adjusted building permit issuance for single-family homes (a proxy for new residential construction) increased for the third consecutive quarter. Building permits issued increased 7.9% to 625 units from 580 units. Average valuation per single family unit increased 1.1% to $226,200economic output is consumed by households. As household spending activity is increasingly limited by temporary suspension of business operations, avoidance of crowds, shelter-in-place orders and loss of household income, total economic activity will decrease sharply.Fiscal and monetary policy tools are being deployed against the economic fallout associated with the pandemic. Collectively, the policy tools are meant to create a bridge from the current situation back to the baseline economy. The goals are to provide credit to businesses experiencing a short-run loss of revenue and support the income of workers most affected by constrained business activity.Congress passed an initial $8.3 billion bill and a subsequent $100 billion bill, both of which collectively funded vaccine development, increased testing for the virus, two weeks of paid sick leave for workers at businesses with less than 500 workers, and additional funds for Medicaid, unemployment insurance and food stamp programs. Further, the federal government is currently crafting legislation that could yield an economic stimulus package of about $2 trillion, including direct payments to households ($500 billion) and lending programs for small business ($350 billion), severely stressed industries ($425 billion) and airline companies ($75 billion). Also included is a substantial increase in eligibility for and duration of unemployment insurance benefits ($200+ billion), and about $240 billion in healthcare expenditures and hospitals ($100 billion). In two emergency moves in March, the Federal Reserve cut interest rates down to the .0% to 0.25% range from 1.5% to 1.75%. Further, the Fed is standing ready to from $223,600. Building permit valuation per unit is 2.6% above comparable data from late 2018. Residential construction is expected to wane, but refinancing activity is likely to be strong as borrowers seek to lock in historically low mortgage rates.In summary, while the Savannah metro economy ended 2019 strongly, the prospects for the next six to nine months are not good. As global and nationwide economic recession sets in, activity in port operations, logistics and distribution will contract in the region. Regional manufacturing is more likely to be affected by social distancing in the workplace or self-imposed suspension of activity to protect worker health that will either slow or halt production. People-intensive service sector businesses, especially those in the leisure and hospitality industry, will experience substantial decline in short-run demand as a result of virus containment efforts. Reported closures and curtailment of activity at regional retail, restaurant and tourism-related businesses are accumulating. As shelter-in-place orders become necessary in the region, business activity will be severely limited except for firms in sectors deemed essential. Firms with a robust online ordering system and access to a distribution network will suffer less than traditional bricks-and-mortar establishments. The length of stay-at-home restrictions will be directly correlated with the severity of short-run economic dislocation. Wide swaths of the regional economy will be affected by the pandemic in the near term. On the other side, pent-up consumer demand is expected to fuel a fairly rapid national and regional recovery that is expected to take root in the third quarter and blossom during the final quarter  of 2020. A Note From the AnalystThe Economic Monitor is available by email and at the Center’s website  (GeorgiaSouthern.edu/parker/big/big-programs/cbaer/). If you would like to receive  the Monitor by email, please send a ‘subscribe’ message to CBAER@georgiasouthern.edu. Hyeeun Shin provided research assistance.About the IndicatorsThe Economic Monitor provides a continuously updated quarterly snapshot of the Savannah Metropolitan Statistical Area economy, including Bryan, Chatham and Effingham counties in Georgia. The coincident 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 in the upcoming six to nine months. Expectations for Savannah Metro AreaARMSTRONG CAMPUS    SAVANNAH|

Coastal Empire Economic Monitor, 4th Quarter, 2019

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Coastal Empire Economic Monitor, 4th Quarter, 2019

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