GSU Economic Monitor: Growth slows but ports, tourism offers help to possible recession

If the Savannah region's economy was an engine, it was firing on all cylinders for part of 2020 and most of 2021 in the post-pandemic boom.

"And now maybe we have four out of the six that are firing strongly, but they're rotating among among each other," explained Michael Toma, an economist and professor at Georgia Southern University's Armstrong campus. 

The unprecedented growth Savannah and her neighbors saw from the pandemic's depths in early 2020 is slowing, pointing to a return to normalcy as the economic impacts of the pandemic ease and an early 2023 recession looms. 

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"While things looked wonderful and great for several years in terms of economic growth and recovery from pandemic," Toma said, "We're now entering a phase where growth is is normalizing and subject to additional and increasing uncertainty in the latter half of this year." 

Toma writes Georgia Southern's Economic Monitor, a quarterly report detailing the impacts of local, national and international forces on the Savannah's regional economy. The second quarter report, April to June, was released this week and detailed how industry and employment is faring in Chatham County. 

Port growth and new jobs bolstered economic growth in Q2, but dips in retail spending and single-family home construction permits indicates the economic engine is easing off the gas. Toma said the second quarter is "an inflection point" for the Coastal Empire, signaling a shift from boomtown growth to cautious optimism, but the strength of the region's logistics and tourism sectors offer insulation from a predicted recession. 

"We don't have any control over what's happening in commodity or energy markets. We don't have any control over how foreign governments are restricting their populations' activities as related to COVID... so there's a lot of things that we don't have control over," Toma said. 

Inflation rates — peaking to 9.6% this month — indicate furthering tightening of cash flow from The Federal Reserve, Toma said. Inflation, coupled with continued supply-chain disruptions and the war in Ukraine, indicate that "expectations about the health of the regional economy should remain guarded in their optimism for early 2023."

Locally, 1,100 jobs were added to the economy in the second quarter, with professional and business services (accounting, legal work, advertising and architecture are a few of the jobs within this sector) representing nearly half of that growth, according to the report. Retail, one of the most volatile indicators of economic health, lost 500 jobs, the report found. 

And while construction hit a four-year employment high with 8,500 jobs, new construction on single-family homes "plunged 19%" from the first quarter of the year. Home prices continued to skyrocket, with the average sale price increasing 9% from last year to $282,700. 

"We've got homes that are rising rapidly in value, so they're becoming more expensive, and also mortgage costs are getting more expensive," Toma explained. 

But these weaknesses in Savannah's economy — retail and home construction for this quarter — are on a rotation, Toma said, meaning that cyclical increases and decreases in different sectors of the economy are not intense enough to shut the whole thing down. 

"So, it's not general economic decline by any stretch of the imagination. We are not at that point — at least through second quarter data," Toma said. "But the momentum in the regional economy is slowing."

Zoe covers growth and how it impacts communities in the Savannah area. Find her at znicholson@gannett.com, @zoenicholson_ on Twitter, and @zoenicholsonreporter on Instagram.