I don’t know what you’ve asked of Santa Claus for Christmas, but one thing ought to be on everyone’s wish list: a big dose of optimism. After the year we’ve had, a belief that brighter days lie ahead would be welcome for all.
Fortunately, we needn’t wait for Dec. 25 – or for a COVID-19 vaccine. I see three big reasons to believe 2021 will be a more prosperous year for all Georgians.
1. More and more Georgians are back to work: As recently as four years ago, a state unemployment rate of 4.5% would have been a welcome improvement. As recently as four months ago, hitting that number before the end of 2020 would have seemed highly unlikely. Yet, that’s exactly what our most recent figure (for October) was.
In April, the month Georgia’s economy was most fully locked down, the jobless rate hit 12.6% – four times what it had been in January and February. More than 700,000 people lost their jobs in a matter of weeks. Eight in 10 of those people had found work just six months later; it took almost six years for Georgia’s job market to recover to that same degree following the last recession.
Of course, two in 10 who lost their jobs have yet to return to work, so this recovery is not yet over. The number of employed Georgians is still at late-2017 levels, and the number of unemployed Georgians is at mid-2017 levels. Our economy is still expected to be about 3.7% smaller this year than it was in 2019. Which brings us to the next reason for optimism.
2. Georgia’s economy is recovering faster than the national economy: The University of Georgia earlier this month released its annual economic forecast. It predicts our state economy will grow by 4% in 2021, which would just barely eliminate the losses from 2020. That’s a pretty quick turnaround, and it’s significantly quicker than the national growth rate of 3.5% forecast by UGA’s Selig Center for Economic Growth.
While another recession is possible, UGA’s forecasters said that’s likely to be overcome by a combination of promising vaccine developments, booming markets for residential real estate and construction, and surging spending by consumers who have been piling up savings this year.
Some economists have described the current recovery as “K-shaped,” because it’s going up quickly for some and still pointed downward for others. But given that American households overall just recorded their highest aggregate level of net worth in history, rising 3.2% during the third quarter to hit $123.52 trillion, there should be enough consumers turning on the spigots to boost those who haven’t yet shared in the upswing.
3. Georgia’s revenues continue to rebound strongly: The dollars flowing into our state coffers continue to amaze. This past week, the state reported net revenues in November were 8.3% higher than in November 2019. Through the first five months of the fiscal year, they’re up 5.7% – or $551.1 million. This more than offsets the reduction in revenues the pandemic caused during the budget year that ended June 30.
I’ve described before the reasons state officials are nervous about this increase. Enhanced federal unemployment benefits drove much higher tax withholdings, and some of that money may go back to Georgians as refunds when they file their taxes next year. But the surge in employment growth, if it’s sustained, should dampen that effect.
A true revenue rebound would eliminate the need for further spending cuts to what already was a relatively lean budget before the pandemic, and stave off state-government layoffs or furloughs. More important, it would confirm that economic growth has really returned and should continue to drive further private-sector job growth.
Sadly, this isn’t the story in every state. Forty-two states have higher unemployment rates than Georgia’s, including all of our neighbors except South Carolina. Five states (California, Hawaii, Louisiana, Nevada and New York) remain above 9%.
Even Santa’s magic won’t fix those states anytime soon.
Kyle Wingfield is president and CEO of the Georgia Public Policy Foundation: www.georgiapolicy.