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Sunday, Jan. 11, 2009

Local business people, experts give their economic outlook in the areas of jobs, housing, retail, banking and distribution/manufacturing

When the door slammed shut on 2008, it was not strong enough to hold back the economic turmoil that began a year earlier. The economic issues from last year are being pulled along into 2009, and most experts say it could be next year before we start coming out of the doldrums.

“I think we will likely see the economy, at best, move sideways and likely contract some in the first two quarters of 2009, said Roger Tutterow, professor of economics with the Eugene W. Stetson School of Business & Economics at Mercer University. “I think probably the earliest we can hope to see any meaningful growth would be in the summer months. But you are still probably looking toward 2010 before we start talking about any type of return to normality.”

Last year in Middle Georgia, hundreds of people lost their jobs as several companies announced layoffs or shuttered their doors. Unemployment rates in Middle Georgia rose from 5 percent in January to 7.4 percent in November. The December rate has not been reported yet.

Several retailers, such as Goody’s, Circuit City and Steve & Barry’s, announced the closure of their stores. Some banks in the state failed — none in the midstate — and many institutions continue to deal with foreclosures and other financial issues.

But Middle Georgia, because of its diversified work force, may not feel the full force of the recession as much as some areas of the country.

The Telegraph talked to several experts about Middle Georgia for their insight on the general state of the economy and their prediction for this year focusing on five industries: jobs, housing, retail, banking and distribution/manufacturing.

JOBS

Michael Thurmond, commissioner of the Georgia Department of Labor

Looking back at 2008, the midstate “relatively speaking” held up well compared to other areas of the state. While there were some layoffs last year in the medical industry here, it is still considered a hot spot for employment. Jobs in education will still be available, but “the local school districts will struggle, and we’ll see some cuts or at least a hiring freeze at the local level.”

Some job growth is expected at Robins Air Force Base and at the companies that support it.

Unemployment is expected to continue to rise in 2009, especially in the manufacturing sector, “which has literally bled jobs now for the last five years.” Also, construction employment is expected to continue to suffer in both residential and commercial markets.

Morgan Law, executive director of the Houston County Development Authority

“I’m afraid we could have some limited job loss in Houston County in 2009, especially if the slowdown in residential home construction continues. But there has been no indication of significant industrial employers having layoffs or closures.”

The base remains a steady source of good jobs for the entire region, and it could bring many more if funding is found to go forward with the Georgia-Robins Aerospace Maintenance Partnership initiative, called G-RAMP. It is a proposed aircraft facility adjacent to Robins Air Force Base which would expand its work force.

Chip Cherry, president/CEO of the Greater Macon Chamber of Commerce

This year will be a challenging time for the business community and for the state government, “which will trickle back to us in the form of education and services.” At best, job growth probably will be flat this year.

A year ago, a large number of people were expected to retire from Robins Air Force Base and other companies, and the concern was about finding replacement workers. But because of lower performance in retirement plans, those workers likely will hang onto their jobs longer. Now, we’re concerned where recent graduates will find jobs.

Because of the diversity in the employment base of the midstate, the local economy should recover quicker than some other areas of the Southeast.

HOUSING

Warren Faircloth, real estate broker, CPA and owner of Faircloth Realty, 2008 president of the Central Georgia Board of Realtors

The local slowdown in home sales and building in 2008 was due more to fears raised by reports of national mortgage problems rather than local conditions.

Houston and Peach counties have shown steady growth for the past 50 years and should continue to grow in 2009. There has been a spike in people looking for homes in recent weeks as mortgage rates have gone down, and that should stimulate sales further in 2009. There may have been some overbuilding of speculative homes in the last couple of years. “We would sell four spec houses, and five or six would be built to replace them.”

But the inventory of new homes should begin to decrease rapidly, and that should improve the market for the sale of existing homes.

Greg George, associate professor of economics and director of the Center for Economic Analysis and Forecasting at Macon State College

“The housing market has been in trouble and will continue to be in trouble nationally and that is true locally” due to high foreclosure rates and the stock of houses on the market, which causes prices to shrink.

The housing market has been stagnant for awhile in Middle Georgia, but we are not facing the problems seen in some states. The Middle Georgia housing market is fairly well-insulated from a lot of that, but higher foreclosure rates will carry over from last year.

As the economy remains in a recession until first quarter 2010, more job losses are expected, which will result in more housing issues.

“If the economy picks up in ’09, I would think that real estate would follow.”

Sandy Davis, association executive of Middle Georgia Association of Realtors

Inventory of houses are at historic highs and interest rates are at historic lows. “There is no better time for a buyer to buy a home.”

Sellers need to realize that because more houses are on the market, their home may stay on the market longer than in the past.

“We think the bottom is coming,” but can’t say if it will happen this year. The days of easy money and easy lending are gone.

“I do think the market will come back healthier and stronger. It always has and always will.”

Middle Georgia has not experienced the extreme overpricing of homes and is not expected to see the extreme lows.

RETAIL

Roger Tutterow, professor of economics at the Eugene W. Stetson School of Business & Economics at Mercer University

Retailers will face a lot of challenges this year nationally and locally. There is not a lot of job creation and most markets are losing jobs, which will likely continue for at least several more months, if not quarters.

When job losses occur, it puts “downward pressure” on consumer confidence and people pull back on some of their discretionary spending.

“Because the holiday shopping season was so weak, there are a lot of retailers moving forward in a lot worse financial position than they normally would be.”

Over the next couple of quarters, it’s unlikely retail will rebound.

Lower gas prices will help some people find the money to spend, but credit conditions remain tight.

Bill Gresham, Houston and Peach County Regional President of Atlantic Southern Bank, co-owner of Ace Hardware in Byron

Sales are likely to remain slower similar to the last quarter of 2008, through much of 2009, as consumers remain conservative waiting for the overall economy to recover.

“We’ve had our store open less than a year, so we don’t have anything to compare to. But the Ace brand was down 10 to 12 percent in sales in 2008 in almost every store. We feel if we are able to survive this downturn, and so far we have, we should be fine for the future, and we’re looking for things to pick up in 2010.”

John Heavener, president of the Georgia Retail Association

At the beginning of 2008, Georgia retailers conservatively estimated a 1 percent to 1 1/2 percent increase in retail sales.

“We will be lucky to make that 1 percent.” Some department stores showed a 3 percent to 4 percent decline over 2007. “So it doesn’t paint a real rosy picture for 2009. We are going to see some traditional retailers, both local and mom-and-pop and regional and national retailers close stores in Georgia or go out of business. So I think 2009 will be a struggle for retail, and it’s going to be because of the struggle of the economy. I really don’t think we’ll see an uptick ... until at least third quarter.”

While new shopping center developments will stall and existing ones will see a lot more dark windows, some companies plan to expand. For example, Baskin Robbins is looking to add 30-60 stores in Georgia this year.

Retailers produce about 42 percent of the state’s revenue, so when retailers close and employment is down, “it’s a big issue for us.”

BANKING

Roger Tutterow

Usually, more pressure is put on banks during a recession because businesses aren’t borrowing money to expand operations.

Georgia has seen some banks fail, and we are likely to see more of that in 2009. But most of the failing banks had a high concentration of acquisition and development construction loans.

“Most of the focus on the real estate crises has been about mortgages, but most banks, particularly the community banks such as those in Middle Georgia, don’t have that much exposure to mortgages.”

We may see some healthy banks acquiring “some of their problem counterparts.” But don’t expect to see existing banks open new branches or new banks being founded.

“My guess is, that although the credit crunch will start easing some over the next couple of quarters, 2009 will still be a challenging year for banking.”

Bill Gresham

The overall national economy likely will remain slow through much of 2009. But Middle Georgia, and Houston and Peach counties in particular, should continue to fare better than most other areas, thanks in large part to the influence of Robins Air Force Base.

“Having the base does not make us recession-proof, but Robins keeps more than 20,000 people employed, (which) means we will not struggle as much as some other areas, such as Atlanta or Jacksonville.”

More bank mergers are expected in 2009 as stronger banks, using funds from the federal rescue plan, take control of weaker ones.

David Oliver, senior vice president of communications and marketing of Georgia Bankers Association

The outlook for 2009 is for a continued difficult economy, and it will be a more difficult than usual environment for banks. But a vast majority of Georgia’s banks are well-capitalized according to regulators. In many ways, Middle Georgia reflects the overall industry as a whole, but it will vary from bank to bank.

The key to making the overall banking environment and the economy better is to see a turnaround in the housing market. This has been the primary driver of stress on banks and that includes banks in Middle Georgia.

While underwriting standards have tightened up and banks have to be more cautious during a tough economy, there is money available and loans are available.

“Banks are out there looking for good credit-worthy projects and good credit-worthy borrowers.” It may be more difficult for people to get loans, and they may have to do more shopping around.

DISTRIBUTION/MANUFACTURING

Morgan Law

Manufacturing growth looks to be stagnant in the national economy for another six months to a year, but Houston County should fare better. There are seven projects being actively pursued for the county, not including the G-RAMP initiative and Little League Southeastern Headquarters relocation. One is an expansion by a company already in business in the county, and six are new companies that might locate in the area. Six of the seven could begin operations or construction in 2009 if they select Houston County. Four of the seven are manufacturing-related and three are office operations.

The number of prospects is better than this time a year ago when there were five. None of those five located in the county.

“One was a heartbeat away from coming here but put things on hold due to the national economy. It may eventually happen, but not until the economy recovers.”

Pat Topping, senior vice president of Macon Economic Development Commission

Last year, we had 56 new projects looking at this area, and of those, about 25 were manufacturing. Warehouse and distribution has been a target industry for us since 2001 and it’s still an active area. Two distribution projects are still very active, but the economy has slowed them down.

We are working closely with the Georgia Ports Authority in Savannah because that’s a prime source for companies looking to get into the United States. And we are part of a group organized in 2008 called the I-16 Corridor Alliance, which is an effort to grow businesses along Interstate 16.

The economy is pushing decision-making a lot longer than it used to take.

“Some projects have just dropped, either because of the economy or because they can’t get funding.”

Kumho Tire Co. pushed back construction of its Bibb County facility from the beginning of this year to the end of this year due to the economy.

We could still see some construction begin in 2009 with facilities operational in 2010.

Jim Lovett, Georgia Power’s community and economic development manager for Central Region

Project activity is down. Normally, I would carry 10-15 active distribution/manufacturing projects at any given time during the year, and now I have about seven active projects.

“We are definitely seeing fewer projects, and projects in the pipeline are taking longer. The reasons range from ‘financing is harder to obtain’ or ‘taking longer for corporate approval.’ ”

Also, several companies in the midstate are seeing some layoffs or temporarily shutting down, especially plants related to the housing industry.

But on the plus side, there are several large pieces of property throughout Middle Georgia along Interstates 75 and 16 that are available for new facilities. When the economy does turn up a little, I think we’ll be in a position to move forward.

To contact writer Linda S. Morris, call 744-4223. To contact writer Chuck Thompson, call 923-3109, extension 235.