Savannah economy turns corner
AASU’s Economic Monitor for the second quarter suggests the region’s recession is over
Posted: August 22, 2010 - 9:51am
By Arlinda Smith Broady
No need to set off fireworks or strike up the band, but the recession, for Savannah, has been declared to be over.
Although last quarter he hinted the most recent period of economic decay had ended late last year, Michael Toma, director of Armstrong Atlantic State University’s Center for Regional Analysis, is just now prepared to declare it outright.
In his Economic Monitor for the second quarter, he said recovery has begun.
“It was at a low point in late 2009 or early 2010,” he said. “It had fits and starts with employment growth in November, but we’ve passed the low point of the business cycle.”
Before the celebrations begin, however, Toma warns that this doesn’t mean the economy has returned to pre-recession levels.
“It will take three years of modest growth to get back to those levels,” he said. “We’re off by about 10,000 jobs or
6.1 percent since the peak in early 2008.”
Unlike the state as a whole, seasonally adjusted employment in the Savannah metro area increased by 800, rising to 151,400 workers.
The gains were concentrated in retail trade (+200), business and professional services (+200) and federal government (+400). The federal government growth is likely because of hiring of temporary workers to conduct the Census, according to the Monitor.
Manufacturing held steady at 13,300 workers, while leisure and hospitality added 100, rising to 20,000. Employment increased 1,300 jobs (+1.2 percent) from the low point of the business cycle in late 2009.
Ports, tourism drive economy
Increases in port activity and tourism were the biggest contributors to regional growth. The coincident index, which measures the current economic heartbeat of the region, increased 1.7 percent to 148.9 from 146.3 during the second quarter.
“Second quarter of 2010 continued to be extremely strong through our ports reporting double digit growths in each of the months,” said Georgia Ports Authority Executive Director Curtis J. Foltz.
“Global demand for vessel space and equipment availability remain in most markets with demand outpacing available capacity.”
For the month of June, the GPA posted a 34 percent increase with 240,734 containers compared with 179,451 containers handled in June 2009.
“Current projections for continued strong activity into the third quarter remain with less certainty as we move out of this year’s upcoming holiday shopping. Georgia’s ports remain well positioned for long-term growth and increased economic gains for our state,” Foltz said.
The regional tourism industry also experienced strong growth during the second quarter. Seasonally and inflation-adjusted hotel sales increased 6.5 percent during the quarter and are up 13 percent from a year ago, according to the Monitor.
This is consistent with a nearly 20 percent quarterly increase in the number of riders on tour buses and trolleys. Through June, the hotel occupancy rate was 61.3 percent, an increase of 2.4 percent from a year ago.
In addition, business travel to Savannah appears to be improving, as marked by increases of 7 percent in airplane boardings and 2 percent in auto rental sales tax receipts — both of which have been weak since 2008, the Monitor reported.
“Visitor numbers have been up 12 percent so far this year,” said Joseph Marinelli, president of Visit Savannah. “And it’s not just the tourism industry that’s reaping the benefits.”
With Savannah being a driving destination for many tourists, gas stations are seeing a surge in business. And as one of the largest consumers of electrical energy, lodgings are adding to the utilities industry.
Another major effect hidden from many — sales at drug stores and small retailers of snacks and pain relievers for those overdoing it in this “city of walkers.”
“There are a lot of vacation rentals, and people staying there use the local grocery stores,” Marinelli said. “The winners in all this go far beyond the hotels and tour companies.”
The impact of ports and tourism growth spread through the economy.
More ships mean more people needed to unload them, more drivers for trucks to transport the goods which means an increase in warehouse and distribution workers.
More tourists translate to an increased need for accommodations staff, a demand for more personnel at restaurants and retail outlets and more work for cab drivers and others who transport people.
“The tentacles of those industries are far reaching,” Toma said. “And that they’re so different says a lot about the diversity of the local economy.”
Housing market sluggish
The leading economic index, which forecasts economic activity, increased by nearly 1 percent during the quarter, rising from 113.6 (revised) to 114.6. The index increased 9.8 percent during its string of four consecutive quarters of gains.
While conditions in the labor market improved, weakness in the regional housing market continued to inhibit additional upward movement.
Residential construction in the region remains moribund. The number of permits issued for single-family homes plummeted 23 percent from 233 units in the first quarter to 180 units in the second quarter.
Given the expiration of the federal housing tax credit at the end of April, the decline is not particularly surprising. The legislation altered the time flow of purchases and new construction but did little to fundamentally change aggregate activity in the housing market.
The average value of a permit issued increased 2.3 percent to $159,400 from $155,700.
“The housing market needs time for the surplus inventory to be absorbed,” said Toma.
He cited the Mitsubishi plant scheduled to open this fall on the megasite at I-95 and I-16 as an opportunity to help the numbers, but said that would rely on heavy in-migration.
“When the housing markets in the North and Midwest improve and people can sell their houses to move South, we’ll see a sharper improvement.”
With each quarterly extension of the leading index’s winning streak, the forecast for near-term economic activity in Savannah improves.
Modest growth will continue through 2010 and is likely to extend into early 2011.
“We’ve survived the worse of the storm,” Toma said. “It will be a while before things get back to the way they were.”
http://savannahnow.com/exchange/2010-08-22/savannah-economy-turns-corner
