Georgia Southern University’s latest Economic Monitor, which reflects the third quarter of 2022, reports Savannah metro economy continued to grow, albeit at a slower and more sustainable pace.
“While overall employment demonstrated strong growth, important underlying sectors of the economy wavered somewhat,” said Michael Toma, Ph.D., Georgia Southern’s Fuller E. Callaway Professor of Economics. “Port activity eased slightly while retail sales and hotel room sales dipped. Further, electricity sales — a broad indicator of industrial, commercial and residential activity — declined.” Notably, the business forecasting index fell for the second consecutive quarter as weakness in the housing and labor markets pulled the index down. Issuance of building permits for single-family homes declined significantly again. Further, new claims for unemployment insurance jumped. With two quarters of decline in the forecasting index, it is now more strongly signaling potential weakness in 2023, said Toma. However, continued growth in the regional logistics industry and associated real estate development along with ramping up for the Hyundai Motor Group Metaplant should insulate the Savannah metro economy from decline on a similar scale to nationwide economic contraction expected in 2023, Toma said. In general, the forward momentum of the regional economy should continue into early 2023. Thereafter, growth is expected to slow, but avoid a notable downturn in 2023.
Job gains, but some weakness
The business index for the Savannah metro economy increased 0.8% in the third quarter of 2022. The arc of growth has bent downward since the frenetic period of job gains of mid-2021. The quarter’s 3% annualized growth matches the average pace of expansion recorded in the years from 2016 to 2019. The index of current economic activity increased to 212.6 from 211.1. The index was buoyed by overall employment growth and boardings at the airport. Electricity sales, retail trade and hotel room rentals declined roughly 5%, after adjusting for normal seasonal variation. Port activity eased slightly (-0.6%) compared to the second quarter.
Metro Savannah employers added 1,900 jobs, pushing the total to 200,600, which topped 200,000 workers for the first time. This is 3.6% higher than year-ago employment and 5% higher than the pre-pandemic peak in early 2020.
In the service sector, logistics (transportation) added 1,000 workers while education and health added 700. Leisure and hospitality added 400 employees. Business and professional services shed 2,200 workers but remained 6% higher than last year. Logistics employs 18,100 workers to support port activity. Business and professional services, education and health, and tourism remain the top three sectors in terms of employment. They are remarkably balanced with approximately 27,000 employees in each sector.
Indicators of the regional tourism industry remained mixed in the third quarter. Seasonally adjusted hotel and motel sales tax receipts declined about 6%, but boardings at the airport increased 3.5%. Car rental taxes fell 5.2% and alcohol tax revenue declined 2%. Employment in tourism and hospitality increased by 400 workers to 26,900, partially offsetting the previous quarter’s loss. Overall, employment in the hospitality sector is only slightly below its pre-pandemic peak.
On the goods-producing side of the economy, manufacturing added 100 jobs rising to 18,800 workers. Manufacturing has grown 4.5% over the year. Construction employment increased by 400 workers, rising to 8,900 jobs, which is the most employment recorded since 2008.
Private-sector wages remain under substantial upward pressure as a result of continued tightness in the labor market, but there was little change from the previous quarter. Perhaps signaling the beginning of stabilization, the average hourly wage rate in the metro-area private sector was $26.22. Over the year, however, wages are 15% higher and remain 5.5% higher even after adjusting for inflation during the same period. The length of the private-sector workweek shortened by 25 minutes to 32.7 hours, representing a 1.1% decline from the second quarter.
In the housing market, the seasonally adjusted number of single-family homes permitted for construction plunged another 12% following a 19% decline in the previous quarter. The number of permits issued in the third quarter was one-third fewer than in the same period last year. The seasonally adjusted number of permits issued in the third quarter decreased to 463 from 528 in the prev ious quarter. The average valuation per single-family unit increased 3% to $291,600 from $282,700. Note, however, after accounting for inflation, this represents a 4% decline in terms of true purchasing cost.
With respect to forecasting indicators from the labor market, the monthly number of initial claims for unemployment insurance (UI) jumped 20% to 755 from 631 in the previous quarter. Despite the increased number of UI claims, tightness in the labor market resulted in the seasonally adjusted unemployment rate falling slightly to 2.6% from 2.7% in the previous quarter.
Economy to continue to grow in 2023
The Savannah metro economy is expected to continue growing into the new year, but weakening national economic conditions are expected to emerge toward the middle of 2023. In the Savannah area, this is more likely to translate into a leveling off of economic activity rather than a significant decline.
Continued growth in the logistics industry and the accompanying development in both nonresidential and residential development will help insulate the regional economy from a significant downturn. Further, development associated with ramping up for the Hyundai Metaplant and accompanying supplier companies will support the regional economy more so toward the end of 2023 and into 2024 with an expected opening of the plant in 2025. While prospects for the economy are very good in the upcoming two to three years, there likely will be a period of modest growth in 2023.
About the indicators
The Economic Monitor provides a continuously updated quarterly snapshot of the Savannah Metropolitan Statistical Area economy, including Bryan, Chatham and Effingham counties. The coincident index measures the current economic heartbeat of the region. The leading index is designed to provide a short-term forecast of the region’s economic activity in the upcoming six to nine months.