E c o n om y M a i n t a i n s H e a l t h y G r o w t h i n
' 0 6 ; S l o w d o w n i n H o u s i n g S t a r t s K e y
t o S o f t L a n d i n g f o r ' 0 7
Rajeev Dhawan
Director of the Robinson College of Business
Economic
Forecasting Center
The year has started off on the right foot and the nation’s economy will maintain healthy levels for
2006. However, the last 14 rate hikes by the Federal Reserve and the two additional hikes projected by
early summer will make the U.S. economy feel the pinch as we approach 2007.
While some experts are worried about a recession in 2007, I see a moderation which is dependent on a
slowdown in housing starts. The super-charged pace of housing starts over the past two years has put
pressure on economic resources.
Net-net, if the housing sector doesn’t slow down soon and release needed resources for the ongoing
rebuilding in the Gulf region and manufacturing sector’s needs, price pressures will be felt in core CPI
too. My forecast is that of an orderly moderation from the 2.035 million mark in the fourth quarter of
2005 to 1.644 million units by the end of 2006. This appears to be a drastic slowdown of 20%, but if it
doesn’t occur, then the Fed will be forced to raise rates much above the current projected level of 5%,
and that’s when all sorts of nasty things can happen.
The risks for a recession are there, especially if the Fed feels the need to err on the side of caution
to fight inflation. I expect Ben Bernanke to follow in the footsteps of Alan Greenspan and bring the economy
in for a soft landing.
Georgia and Atlanta—Corporate Restructuring Strains Georgia’s Job Growth
The relentless stream of corporate restructuring announcements by General Motors, Ford, BellSouth, and
Hewlett-Packard will impact Georgia’s current economic momentum somewhat, but Delta’s woes will continue to
cause the most long-term harm to the job potential for the area.
The momentum that came in the last six months of 2005 from a job growth surge in hospitality, healthcare,
and business services is impressive but will falter in the second of half of 2006 as Delta’s layoffs, other
corporate restructuring, and an orderly moderation in housing permits put a dent in growth.
However, there is encouraging news including the creation of more than 70,000 jobs in the 2006 calendar
year, of which 23% will be premium-wage jobs that pay more than $45,000. In addition, between an additional
10 conventions, the Sugar Bowl and the new aquarium, the tourism sector is in rock n’ roll mode.
Overall, the bad corporate news will serve to slow job creation but not reverse it. Therefore, our forecast
is not as high as it would have been but considering the barrage of recent depressing corporate news, job
growth in Georgia will stay reasonably healthy.
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