Looming recession signals transition to sustainable growth for Savannah's regional economy
The economic recession projected to impact the first two quarters of 2023 will be nowhere near what most of us have already lived through (think 2008) and experienced during the pandemic, according to Michael Toma, Fuller E. Callaway Professor of Economics at Georgia Southern University.
“The next recession is going to be more like a garden variety recession in which, at the national level, the unemployment rate might go to 5% or 6%, and GDP [Gross Domestic Product] might decline for a couple of quarters, but it’s not going to be a severe downtown.”
Chatham County and the surrounding region seem poised to weather the recession better than most places, too, because of its diverse economic base.
Savannah is the center for medical services for a more than 60-county area; the large military presence between Fort Stewart in Liberty County and Hunter Army Airfield in Chatham County pumps federal dollars into the local market. But even with the looming downturn, the logistics and manufacturing sectors provide a stabilizing force.
“We’re adding jobs at 5% to 6% per year. That’s not sustainable in the long run,” said Toma ahead of the release of GSU’s Quarter 3 Economic Monitor newsletter. “So, a number on the order between 2% and 3% per year is sustainable.”
Logistics and Manufacturing: Georgia Ports and Hyundai
Toma believes that the logistics industry is positioned well for the next decade, especially given Georgia Ports Authority’s billions in investments in infrastructure, facilities and expansion.
Manufacturing’s prospects are even brighter over the next two to five years, said Toma, because of the ripple effects of the Hyundai electric vehicle plant, slated to open in Bryan County by 2025 and bring in 8,000 jobs.
“We’re going to see slow growth through the first half of the year, and then things will start to pick up in the second half,” Toma predicted. “How much they pick up in the second half of the year will depend in part on how fast Hyundai and its suppliers start to ramp up their hiring in the short run, because they have to start hiring people.”
Some of that hiring has already begun and is expected to take off in the latter half of 2023 and remain significant through 2024.
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Tourism: Some hiccups expected
Any recession – mild or otherwise – will likely put a crimp in Savannah’s service-tourism sector. When squeezed, families often cut the extras, like eating out or traveling.
But Toma doesn’t see hard hits coming tourism’s way. Instead of airline travel, “folks might actually shift and substitute toward a drive-in destination like Savannah… We have a good tourism product, so to speak. And with the opening and operation of Plant Riverside, that adds what I would consider to be a missing piece to the Savannah tourism experience.”
Housing Market: Slowing, but not stopping
Housing activity has remained robust across the tri-county region, with prices for dwellings remaining higher than pre-pandemic levels. But the slowing economy “is likely to reduce some pressure on the housing market,” said Toma. “That doesn’t necessarily mean that home prices are going to go down as a result … but that would mean that home prices that had been appreciating on the order of 20 to 25% over the last three or four quarters should start to trend downward toward a typical and sustainable rate of appreciation.”
That pressure has been felt most in the western parts of Chatham County and in Effingham and Bryan counties where manufacturing and logistics has expanded. Data provided by Georgia MLS Real Estate Services shows that while sales volume increased in Effingham by 3.3% 2021, fewer houses have sold this year as the median home price in Effingham soared 51.7% between 2021 and 2022.
In both Bryan and Chatham counties, sales volume decreased, and prices began to drop ever so slightly as mortgage interest rates increased and active listings remained on the market longer than in prior months.
This article originally appeared on Savannah Morning News: Savannah GA 2023 Economic Outlook: Slow start with sustained growth
