Savannah's economic growth is slowing. Will strong labor market help us weather recession?

This is the City Talk column by Bill Dawers, a longtime contributor to the Savannah Morning News.

The most recent Coastal Empire Economic Monitor, which is published by the Georgia Southern University Center for Business Analytics and Economic Research, showed that the Savannah metro area economy continued to experience slower growth in the first quarter of 2023.

More recent data suggest continued softness in the local economy, which of course reflects trends in the national economy. Many analysts have been predicting a recession in the second half of the year, but it seems just as likely to me that sluggish growth will continue until inflation lessens and interest rates decline.

Employment is a lagging of indicator of economic conditions, but the relative strength of the local labor market suggests that we are weathering the slowdown pretty well.

There were 598 initial claims for unemployment filed in the Savannah metro area (Chatham, Effingham and Bryan counties) in May, up 26% from 476 in May 2022. That’s a significant increase, but considerably less than the 43% jump statewide. It’s also worth noting that the number of claims in the Savannah area in May was only marginally higher than the 549 claims in May 2019, when the economy seemed quite strong,

In more positive news, payroll employment in the Savannah area hit 203,000 in May, a solid increase of 1.8% from a year earlier. That is probably somewhat faster than the rate of population growth.

The mix of jobs has changed significantly, however. Employment in the sector that includes trade and transportation declined by 900 during the past year, which is surely a reflection of the relatively sharp decline in port traffic.

The number of TEUs (twenty-foot equivalent units) handled at the Georgia Ports Authority in May was down more than 20% from a year ago.

The Savannah area has also lost about 1,600 jobs in professional and business services during the past year, which is another indication of the length and breadth of the current slowdown.

Not surprisingly, employment in leisure and hospitality increased sharply during the same period, continuing a post-pandemic rebound. The addition of 2,400 jobs offset declines in other sectors, but comparisons are problematic because of the nature of those positions.

We need robust data on wages to get a better understanding of the shift, but private sector wages experienced a “sharp drop” of $1.50 per hour in the first quarter, according to the Coastal Empire Economic Monitor.

On the other hand, manufacturing employment increased by 400 during the past year, and construction employment increased by 600.

No matter what happens to the national economy, regional manufacturing employment should increase significantly when the Hyundai plant and related industries begin hiring aggressively. And even if interest rates remain high, construction employment will likely increase because of the high demand for new homes and apartments.

If the U.S. economy slips into recession in the coming months, the positive trends should cushion the impacts on the Savannah metro area, but declining wages coupled with high inflation could take a significant toll on working class households throughout the region.

Policymakers should seize opportunities to offer relief to those households.

Contact Dawers via @billdawers on Twitter and CityTalkSavannah@gmail.com.

This article originally appeared on Savannah Morning News: Economic data shows Savannah economy slowing but employment strong