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Dhawan: Georgia's economy facing threats

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  • 1. Wednesday, May 26, 2010 Dhawan: Georgia’s economy facing threats Atlanta Business Chronicle Rajeev Dhawan View Larger Georgia, still lagging the nation in job creation, now faces economic threats from the Icelandic volcano, the BP oil leak in the Gulf of Mexico and the financial woes in the European Union, according to Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University in his Forecast for Georgia and Atlanta May 2010. The three “fires,” as Dhawan calls them, have the potential to disrupt Georgia’s economic recovery. He said the recent Icelandic volcano could create problems here if it were to affect the airline and tourist industries over a prolonged period. The oil leak in the Gulf of Mexico, if the problem worsens, could shut down the Gulf coast tourism industry and harm the wetlands and beaches for decades to come. For the beach states adjoining the Gulf of Mexico, the leisure and hospitality sector produces about $60 billion of economic activity annually. In the short run, the spill will increase bankruptcies and foreclosures that will hurt an already fragile, regional banking system, Dhawan said. A weakened region will lead to a reduction in Georgia’s inter-commerce trade. “But the economic fire with biggest consequences is the one burning across the pond,” Dhawan said. “It started in Greece, spread to the rest of Europe and is now threatening the survival of the Eurozone as a currency union. There are two areas of potential damage for Georgia: demand for our exports via the currency (price) channel; and investment relationships with Europe.”
  • 2. European Union countries bought $5.1 billion, or 18 percent, of Georgia’s total exports in 2009. Dhawan noted Georgia remains behind the nation in job growth. While the nation added 583,000 jobs since last December in every category but finance and state and local government, Georgia lost almost 4,500 jobs in the first quarter of this year. Dhawan said the good news is that “in 2011 and 2012 the manufacturing sector will gain 13,300 jobs -- something this sector has not experienced in some time.” Overbuilding has hampered the construction sector, while declining property tax collections will continue to have a negative impact on local government, he said. But after losing almost 340,000 jobs from late 2007 to late 2010, Georgia will add 130,000 jobs in the next two years, Dhawan predicted. The Atlanta metro area will add 55,000 of those jobs. He expects Georgia’s employment growth to stay negative until the end of 2010. The Peach State will lose 16,500 jobs this year. He forecasts 56,600 new jobs in the state during 2011. Georgia’s unemployment rate will increase significantly to 10.6 percent in 2010 from 9.6 percent in 2009, Dhawan estimated. In 2011, unemployment will slightly decrease to 10.2 percent. Atlanta’s employment growth will remain negative for a total loss of 12,500 jobs in calendar year 2010. Dhawan predicts an increase of 42,500 jobs in Atlanta next year.