Georgia Small Businesses Set to Benefit from Tax Cut, But Not Enough to Break Moderating Trend
Positive tailwinds triggered by income tax cuts are expected to provide a big boost to small businesses, but will not be enough to overcome global headwinds in the Peach State, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business.
“International headwinds from tariff talk will create jitters in globally connected sectors, and moderation in catalyst sector job growth will produce trickle-down impacts throughout the Georgia labor market,” Dhawan wrote in his quarterly Forecast of Georgia and Atlanta, released on May 23. “Maintaining the 2017 pace of 72,100 job additions will be a challenge, as that number was a 30 percent drop from the 101,600 jobs gained in 2016.”
Job creation in manufacturing has been moderating since 2014. The chief reasons were weak global growth, especially among top export destinations, combined with a strengthening dollar in the 2014-16 period. Even as the dollar has weakened in the last few months, it will take time for this to play out for this sector. Meanwhile, this catalyst sector saw a reduction of 100 jobs in the first quarter of 2018.
“However, recent news related to manufacturing goods for domestic consumption as well as relocation of small manufacturers from Europe remains favorable,” Dhawan wrote. “We expect job growth in manufacturing will take place outside Atlanta, particularly in Augusta, Gainesville and Savannah.”
Dhawan expects these metro areas to grow stronger than the overall state’s growth rate in coming years.
Employment in transportation and warehousing, fueled by domestic demand, grew by a decent 6,100 jobs in 2017, a moderation from 9,000 additions in 2016. Going forward, Dhawan expects job growth to be buoyed by online spending growth, which has been spurred by recent tax cuts, demand for air travel and growth at the port. The only constraining factor is the shortage of workers, such as truck drivers.
The corporate sector grew by only 11,600 new positions in 2017, a sharp moderation from 22,400 job gains in 2016. Dhawan expects this trend to reverse in 2018, due in part to small business growth.
“We expect large corporations to experience some turbulence from tariff imposition threats and financial market volatility,” Dhawan wrote. “At the same time, corporate and individual tax cuts will aid small businesses and lift overall growth of the corporate sector.”
Dhawan also expects small business growth due to the tax cuts will contribute to growth in the retail trade sector, which lost 400 jobs in 2017.
Georgia saw a total of 72,100 new jobs in 2017. Dhawan anticipates 69,800 jobs to be added in 2018.
Metro Atlanta is expected to experience the same impacts as the state overall.
Total housing permits in the metro region amounted to 32,205 in 2017. Going forward, it will be what Dhawan characterizes as “a victory” to maintain an annual pace of 33,000 permits.
“Multifamily permits remain near the 2017 level of 8,000 when activity in other counties will not be able to make up for Fulton’s decline,” Dhawan wrote. “Meanwhile, single-family permit growth will remain tempered due to rising financing costs and the lack of affordable lots in the core counties.”
Rajeev Dhawan is the Zwerner Chair of Economic Forecasting and director of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business.