Fri, March 01, 2024

Peering into the economic outlook crystal ball

Augusta University (AU) continued a longtime tradition of putting a spotlight on the area economy over the past year and predictions for the coming year.

Dr. Simon Medcalfe led the university’s annual Economic Forecast breakfast on Thursday.

Medcalfe, a professor of economics at AU and contributor for the Augusta Business Daily, began with an overview of changes in types of business, percentage of employment, and population growth.

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Between 2004 and 2023, Medcalfe said the mixture of industries, including hospitality, healthcare, education, and manufacturing, while looking different on the surface, remain much the same.

“The only one that changed by more than two percentage points was education and health services,” he said. “That was up from 12 percentage share to 15% share. Manufacturing is down 2%, leisure and hospitality is up 2%. So not a lot of change.”

Cal Wray, Augusta Economic Development Authority leader agrees with Dr. Medcalfe’s overall data, but said things have progressed rapidly in the manufacturing space.

“Manufacturing did take a hit in the recession of 2008, but we have had a tremendous rebound and growth in the last 10 years,” he said.

He points to the expansions of Arubis, PureCycle, and Solvay. “We have more growth slated in the coming years.”

One area that experienced a major change is one of Augusta’s core economic drivers, Fort Eisenhower. In 2004, the Army post was facing the possibility of downsizing or closing during the Base Realignment and Closure (BRAC) Commission’s review.

Less than 10 years after surviving BRAC, the post would experience the start of substantial growth.

“Cyber Command was announced that it was going to come in 2013, but you’ll see that military employment started to increase before Cyber Command was actually announced,” Medcalfe said. “When Cyber Command is fully operational, we’ve already seen that big increase in military employment. Over 20 years, we’ve gotten about 3,000 extra people based on Fort Eisenhower now, as we’ve always known is the bedrock of our economy.”

Within the Augusta metro area, encompassing Richmond, Columbia, Burke, McDuffie, and Lincoln counties in Georgia, along with Aiken and Edgefield counties in South Carolina, there has been an overall population growth of 20%, but one county has seen a dramatic increase.

“Over 60% increase in population in Columbia County. When I arrived 20 years ago, there was a 100,000 population of Columbia County. Now it’s about 160,000,” he said. “If you look at the average of this, straight average out, Columbia County will be the biggest county in our MSA (Metropolitan Statistical Area) by 2030, just 6 or 7 years’ time.”

Medcalfe said the state of the economy remains a big concern, but this year and moving into 2024, with inflation being the top concern.

“If you look at average weekly earnings and then adjust for inflation, so we get real average weekly earnings over the last couple of years, all these negative numbers, just the impact of inflation is destroying our purchasing power and our real wages,” he explained. “That’s certainly a concern. Inflation running now around about 3.2%. This time last year was 7.7%. If you look at what people are concerned about by looking at Google Trends and seeing what their search terms were, inflation remains pretty high.”

The possibility of a recession has also been a concern at the local and national levels. Medcalfe said short-term interest rates versus long-term rates, along with leading economic indicators along with improvements in the labor market still indicate a recessionary period, however, the data is “bouncing all over the place” with no obvious trend and doesn’t strongly indicate a recession in the near future.

Darin Myers, a local business coach with TAB, The Alternative Board agrees with this conflicting sentiment.

“A case in point: consumer confidence is weak, however consumer spending remains relatively strong,” he said

The question then becomes the outlook for 2024. Medcalfe anticipates it will look a lot like the economic indicators of 2023.

“I think the chances of recession have probably slipped a little, I think there’s less chance of a recession,” he began. “Inflation is certainly still a concern. 3.2% sounds kind of low, but because of the amount of inflation, we’ve had prices about 20% higher than two years ago, and it’s still a concern, still eating into people’s wages. I think the Fed (Federal Reserve Bank) came to the party late in terms of raising interest rates to control inflation, but I think it’s probably doing quite a good job.”

Medcalfe believes interest rates will remain inflated as the Fed tries to bring inflation to its goal of 2% while continuing to avoid a recession.

The annual breakfast is organized by the James M. Hull College of Business. Dean Mark Thompson said it is a way to provide a comprehensive overview of the national and local economic outlooks.

“I think the best way to describe it is we have experts that can provide insights to the business community, the community at large. And so, this is our way of creating a more educated workforce,” he said, adding it is also an opportunity to bring businesses together and provide some insights as to what’s going on.

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