Georgia Southern’s Q1 Economic Monitor Reports Regional Economy Slowing and Remaining Strong

Georgia Southern University’s latest Economic Monitor, which reflects the first quarter of 2022, reports that growth in the Savannah metropolitan economy moderated in the first quarter of the year.

“The broadest indicators of economic activity — overall regional employment and electricity sales to residential, industrial and commercial users — continue to signal strength,” said Michael Toma, Ph.D., professor of Fuller E. Callaway Economics of Georgia Southern. “After a good performance in the fourth quarter, there was a slight decline in the first quarter of tourism and port activity. In general, the regional economy maintained its forward momentum, but slowed its rate of acceleration.”

Toma also noted that the Savannah metropolitan economy will grow about 2% through the end of 2022, which is significantly slower compared to the rebound year of 2021. The economic future is a bit more grim now that inflation is rising, the Federal Reserve is tightening and global energy and commodity markets remain rocked by Russia’s invasion of Ukraine, he said.

Overall strength, but some sectoral weaknesses

The business index for the Savannah metropolitan economy rose 1.3% in the first quarter of 2022, about half the pace of the previous quarter. The current economic activity index fell from 204.7 to 207.3. The index was supported by strong employment growth of 1.6% in the quarter and electricity sales growth of 2.1%. Indicators for port activity, tourism and retail sales slowed during the quarter.

Metro Savannah employers added 3,100 jobs, bringing total regional employment to 197,500, more than 5,000 jobs and 3% above the pre-pandemic peak of 192,100 in the fourth quarter of 2019.

The Georgian Ministry of Labor recently completed its annual employment benchmarking process in which monthly payroll survey data is compared to workforce data. Total employment data did not change significantly, but business and professional services were revised downwards while the information sector, including the film and entertainment industry, was substantially revised upwards.

Employment Trends

Employment in the service sector added 2,800 jobs. Business and professional services jumped again, adding 1,700 workers, bringing the two-quarter gain to 3,100 jobs. Logistics added 300 jobs to 17,800, even as container throughput fell 8% from its fourth quarter level. Container throughput, however, remains up around 3% on the previous year.

Indicators for the regional tourism industry were mixed in the first quarter. Inflation-adjusted hotel and motel sales tax revenue was down 3%, while airport boardings were down 5% from the prior quarter. Tax collections on rental car sales have decreased by approximately 10%. Nevertheless, the tourism and hospitality sector added 800 workers and reached 27,200 in total. The two-quarter gain is 1,800 jobs and just 100 workers below its pre-pandemic peak. The sector overtook the education and health division to regain second place on the list of the largest sectors in the region.

On the goods-producing side of the economy, manufacturing added 300 jobs to 18,400 workers. Manufacturing has added 1,400 workers since the pandemic low in 2020. Construction employment increased by 100 workers to 8,300 jobs.

Tensions in the regional labor market continue to drive substantial increases in private sector wages. After adjusting for inflation, hourly wages were 5.6% higher than a year ago. The gains in nominal terms (+14%) are remarkable, but also follow a period of stubbornly stagnant wage growth in the first half of 2021. Hourly wages adjusted for seasonal variations and inflation increased by 1 .9% to $25.48, from $25.01 in the prior quarter.

housing market

The seasonally adjusted number of single-family homes cleared for construction rose 10%, reversing a 16% decline in the fourth quarter. The number of permits issued increased to 651 against 590 units in the previous quarter. The average assessment per single-family unit decreased by 1.7%, from $263,000 to $259,000.

Slower regional growth expected

The Savannah area business forecast index jumped 5.9% in the first quarter. The leading index fell from 172.3 to 182.5. The gain primarily reflects momentum from the improving labor market, although first jobless claims rose late in the quarter. Housing market indicators were generally supportive.

In terms of the labor market, the number of initial unemployment insurance (UI) claims increased by 24%, from 630 to 784 in the previous quarter. Thus, the seasonally adjusted unemployment rate increased by a quarter, rising from 3.2% to 3.3%. The unemployment rate was 4.8% in the first quarter of 2021.

The booming forecast index reads artificially high mainly due to the favorable momentum in the movement of unemployment insurance claims. However, given the normalization of the labor market and the increase in unemployment insurance claims and the unemployment rate at the end of the quarter, the forecast index will return closer to its longer-term trend in second quarter and should therefore not be interpreted this quarter as a signal of strong growth for the regional economy in 2022.

Near-term growth prospects for the Savannah metropolitan economy are reasonably good. Overall indicators of the health of the regional economy suggest that it remains fundamentally sound, but several important sectors, including logistics and tourism, faltered in the first quarter. Wage growth was exceptionally good but tempered by a slight shortening of the working week. Finally, the Federal Reserve’s monetary policy tightening to fight inflation and continued spikes in supply chain and commodity prices threaten to slow the US economy. Continue to closely monitor economic conditions through the end of 2022.