“The news is not great,” Niemi told the more than 500 people who came to the Cobb Performing Arts Centre on Tuesday to hear his economic forecast. The annual breakfast event, now in its 20th year, is conducted by the Bank of North Georgia.
“It is unprecedented how sluggish this recovery has been,” Niemi said. He predicts that growth in gross domestic product will slip from 2 to 1.9 percent in 2013, far from the 4 percent number it should be at this point of the recovery based on historical economic trends.
Niemi also believes the unemployment rate will fall from this year’s average of 8.2 to 7.9 percent next year. He said that while the unemployment rate is currently 7.9 percent, the true rate is just below 15 percent when accounting for the underemployed.
He warned that if the “Bush tax cuts” expire, it would be “a job killer” and will “hammer the middle class.”
“The biggest thing holding this economy back is uncertainty,” Niemi said.
He said changes to health care laws, which will not be fully implemented until 2014, are adding to the uncertainty.
“A lot of businesses are holding back until they know the costs,” he said.
The former University of Georgia professor did impart a small degree of optimism for Georgia.
Niemi predicts most of the nation’s growth will occur in the Sun Belt and that metro Atlanta will fare far better than the rest of the nation because of its accessibility and quality of life.
He said the keys to job creation remain constant: low taxes; low land, labor and energy costs; non-union markets; location advantages; a business-friendly environment and a favorable quality of life. He highlighted Georgia’s population growth from 2004 to 2010, which ranked it the third highest in the country.
Niemi also explained why the nation’s shift from manufacturing to retail and hospitality has lowered its position globally and has affected many states in particular, including Georgia.
“No state in the nation’s manufacturing was more tied to the residential housing market than Georgia,” he said.
He said that while the new housing starts are rising annually again, the number of homes being built is dramatically below those of every year between the end of World War II and the beginning of the recession.
Retired banker Rod Knowles has attended nine of Niemi’s annual forecasts.
“It’s not a rosy picture,” Knowles said. “We’ve got a lot of systemic weaknesses that have to be addressed, and Washington has got to take the lead.”
But David Connell, president of the Cobb Chamber of Commerce, said there was good news for Cobb County.
“The facts are discouraging, but you have to do what you can do with what you have today,” said Connell. Citing that Cobb County’s attributes directly mirror Niemi’s keys to job creation, he said “We are positioned in Cobb in a fairly unique way.”
Lisa A. Rossbacher, president of Southern Polytechnic State University in Marietta, said she was particularly listening for implications for higher education.
“I was glad to hear the positive projections about new housing starts, even if the rate is not as high as it was before 2008, because the residential housing market directly affects job opportunities for many of our graduates, including those in construction management, architecture, and civil engineering technology.”