The U.S. economy is headed for recession—but it won’t hurt Georgia as much as most of the nation, and Athens still less, according to University of Georgia economic forecasters.
“I think we can call it a ‘slow-cession’ [for Athens] rather than a recession,” said Jeff Humphreys, director of the UGA Terry College of Business Selig Center for Economic Growth.
“Athens is likely to avoid a technical recession. Growth will slow, but it will not stop,” Humphreys said as the UGA Terry College of Business continued its annual statewide Economic Outlook tour, presenting state and local forecasts for each of the state’s seven largest metropolitan areas.
“I expect Athens to add about 1,000 jobs in 2023. That’s good, but it’s not great,” Humphreys told an audience of nearly 500 in the Classic Center on Wednesday, Feb. 1. But “I’m worried about home prices,” in Athens, in Georgia and across the nation, he told the luncheon gathering.
A number of factors shield Athens’ economy from recession, Humphreys explained. Its economy doesn’t depend much on economic sectors likely to be more affected by recession, such as manufacturing and imports, but is built more around less vulnerable sectors like higher education and health care. And a number of multi-year economic development projects are being built out, in particular a couple of biotech projects, which “shows Athens can compete successfully for these projects,” Humphreys said.
Terry College Dean Benjamin Ayers outlined the Selig Center’s national and state forecasts: a short, mild recession mid-year, with economic growth rebounding in 2024. Ayers put the odds of recession at about 75%. Consumer buying, which accounts for about 70% of the U.S. gross domestic project, remains relatively strong, though saving rates are declining and credit card debt is growing, he said.
There’s plenty of uncertainty in their forecast, Ayers said. Many factors could worsen or ease the economic downturn—among others, relations with China, the ongoing war in Ukraine, and whether the Federal Reserve is willing to abandon its stated goal of lowering the inflation rate to 2% and instead settle for 3%. The U.S. central bank has raised interest rates eight times since last March to bring down what has been the nation’s highest inflation rate since the 1980s, and has indicated more hikes are likely.
Employment will remain high this year, Ayers said. The number of U.S. jobs will shrink by about 0.5%, but in Georgia job numbers will actually tick up slightly, by 0.1%, the dean predicted. The state’s unemployment rate will rise a little, from 3.3% to 3.8%—still within the “full employment” range and below the predicted national unemployment rate of 4.4%, he said.
Hard times will continue in the housing sector, the forecasters said, though there won’t be the kind of house price meltdown that defined the Great Recession of 2007–2009. Back then, there was an oversupply of housing, driven in large part by speculation. Now, there’s a national shortage of houses and apartments that’s been building for years. One result has been a dizzying nationwide escalation in housing prices. Athens house prices grew by more than 49% over the past two years, compared to a 14% inflation rate in that time, Humphreys said. “Almost all of the overvaluation appeared very recently and very suddenly,” he said.
According to Moody’s Investment Services, house prices are overvalued nationwide by about 25%, Ayers said. House prices will come down in Athens this year, but not that much—about 12% or a little more, Humphreys said.
One of the local factors driving the escalation in housing prices, and the growth of the Athens economy, is the University of Georgia, Humphreys said. Athens ranks 20th among nearly 400 U.S. metropolitan areas in the percentage of its housing that is rental, he said. The rental market will remain strong because of UGA enrollment and employment growth and because UGA doesn’t have enough on-campus housing, he said.
“Our housing market has become very overvalued,” Humphreys said. That’s slowing in-migration, particularly of retirees, and the cost of living in Athens has now moved above that of the Brunswick area, he said.
Meanwhile, more students and student dollars are headed our way, continuing a trend of increasing UGA enrollment that is likely to be boosted by the UGA football team’s two consecutive national championships, according to Humphreys.
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