Monday, January 10, 2000
Walter Barnard Hill Awards, Fellowship honor service faculty
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2000 forecast: Economic growth steady but slower
By David Dodson

A soaring stock market and unprecedented wealth and prosperity came to symbolize the U.S. economy of the ’90s. And in spite of the longevity of the decade’s economic expansion, forecasters in the Terry College of Business say the economy still has lots of steam, and the odds of recession in 2000 remain remote.
“The record for uninterrupted economic growth in the United States is eight years and 10 months. That happened in the 1960s, fueled in part by the Vietnam War,” says Terry College Dean P. George Benson. “The current expansion will break that record in February.”
According to the forecast, released last month by the Selig Center for Economic Growth, the economy will continue to grow through 2000, but at a slower pace in Georgia and the United States.
“Georgia has ridden a wave of unprecedented growth,” Benson told nearly 1,000 executives and business leaders attending the college’s 17th annual Georgia Economic Outlook luncheon in Atlanta Dec. 8. “However, slower growth at the national level and the strains of accommodating recent growth here in Georgia--such as traffic congestion--will cause some weakening of Georgia’s very robust expansion.”
Larry Chimerine, a Washington economist invited to the Atlanta luncheon to discuss the U.S. outlook, echoed the enthusiasm of the Selig Center’s forecast, referring to the ’90s string of success as “the Mark McGwire of all expansions in our history.”
“And just as Mark McGwire did, we’re going to break the record for the longest expansion by a lot,” Chimerine said.

2000 Forecasts: Key Predictions
Gross State Product--GSP, the broadest measure of state economic growth, will increase 4.5 percent in 2000, after adjusting for inflation. That’s down slightly from 5.0 percent growth in 1999 and would be the smallest percentage increase since the recession ended in 1991. Georgia should exceed the growth in U.S. gross domestic product by a large margin, which is forecast to be 3.0 percent in 2000.

Income--Personal income in Georgia will rise a healthy 6.6 percent this year, well ahead of the projected U.S. growth rate of 4.8 percent, before adjusting for inflation. But state income growth will fall short of 1999’s expected increase of 7.1 percent.

Employment--Job growth in Georgia is expected to show a moderate decline for the third consecutive year. Non-farm employment was on pace to grow 3.2 percent last year, following growth of 3.5 percent in 1998. However, job growth will pull back this year to 2.1 percent--or about 80,000 new jobs statewide. The projection for U.S. job growth in 2000 is 1.2 percent. And the state’s jobless rate will inch higher from 3.9 percent in 1999 to 4.0 percent in 2000. Nationwide, unemployment will creep up at the same pace, from 4.2 percent to 4.4 percent.

Population--Atlanta is projected to be the fourth-fastest growing metropolitan area among U.S. cities exceeding a population of 1 million. It ranked behind only Las Vegas, Austin and Phoenix. By July, Georgia will have 7.9 million residents, a one-year increase of 142,900. The state’s population growth rate will be 1.8 percent in 2000, about double the national rate.

Interest Rates--In 1999 the Federal Reserve took back all of the interest rate decreases that followed the foreign-markets crisis in 1998. The federal funds rate currently is 5.5 percent, up from the 4.75 percent rate that prevailed at the start of 1999. The Selig Center is predicting the Fed will react to evidence of rising wages and prices and raise the federal funds rate still higher--from 5.5 percent to 6.0 percent in 2000.

Inflation--The consumer price index bottomed out in 1998 at 1.6 percent, and rose to 2.1 percent in 1999, mostly due to higher energy prices. Wage pressure in a tightening labor market, particularly for skilled workers, will push inflation slightly higher to 2.4 percent this year. Also, rising global demand for basic commodities, such as oil, will cause inflationary pressure.

High-Tech Capital--Atlanta, and not North Carolina’s Research Triangle, is the high-tech capital of the South, Benson said. “The Raleigh-Durham-Chapel Hill area grabs the headlines, but these three cities produce less than 1 percent of the nation’s high-tech output. Atlanta produces more than two-and-a-half times as much.”

Biotechnology--Georgia is well-positioned to become a center for biotechnology, Benson said. “Biotech firms most readily take root and flourish in areas rich in high technology, research and medical infrastructure, and venture capital. Georgia has all the necessary ingredients. But it won’t happen unless we declare biotechnology to be one of the state’s development priorities.”

MORE INFO
The Terry College’s annual economic forecast is directed by Jeffrey Humphreys, assistant director of the Selig Center. The forecast booklet is available for purchase, by phone (542-4085) or on the Web (www.selig.uga.edu).
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