Moderated by Rick Badie
When the president and CEO of the Federal Reserve Bank of Atlanta studies the region’s economy, he sees a balanced portfolio that’s experiencing solid, steady expansion on multiple fronts. Here’s his take on the metro area’s continuing recovery. The companion essay encourages Georgia businesses to map out their exporting niche.
A resilient region moving past recession
By Dennis Lockhart
Over the last eight years, I’ve witnessed big swings in Atlanta’s economy. When I became president of the Federal Reserve Bank of Atlanta in 2007, the economy was booming. We soon learned that economies can reverse momentum quickly. Atlanta’s economy was not as strong in its fundamentals as many thought.
The metro area’s economy shrank by 2.4 percent in 2008 and a further 3.8 percent in 2009, according to data from the Bureau of Economic Analysis. Job losses during those years were more than 160,000 and the unemployment rate more than doubled, going from 5 percent to more than 10 percent.
Atlanta’s recession was especially felt in residential development. A major driver of the region’s economic pre-recession growth was in-migration and home construction. The home-building sector became overextended before the recession and took a nosedive during the recession. Residential building permits issued in the metro area peaked at more than 70,000 in 2005 only to plummet to 6,500 in 2009, according to the U.S. Census Bureau.
Today, the metro economy’s recovery is well established and better balanced than before the recession. Trends in important sectors are quite positive. The business services sector is showing gains. Atlanta is a center of sophisticated knowledge work for the Southeast, the nation and the world.
The metro area is a major logistics and transportation hub and the improving national economy is boosting those sectors. Warehouse development, along with industrial site development on the periphery, are showing strength. Warehouse space under construction has more than doubled from 2013 to 2015.
Home building — still important — is picking up. Sales of new and existing homes and housing starts are up from a year ago. Home prices are also rising. While commercial real estate construction has been slow to rebound, vacancy rates are declining. Multifamily construction is robust, particularly in the city. I see evidence of this every time I look out my window in Midtown.
Atlanta’s economy is better diversified compared to a decade ago. Rising industries are helping to balance the metro economy. For example, we’re witnessing the rise of the fin-tech industry — payments and transaction processing — as well as health care information technology and services. There are several others.
In-migration, a growth driver in earlier times, has resumed. As the AJC recently reported, all 10 metro counties are experiencing population growth accompanied by impressive job growth. Much of that jobs growth has been in higher-quality — that is, higher compensation — employment.
Finally, metro Atlanta workers have enjoyed faster wage growth in recent years compared to the nation as a whole. Rising incomes have supported growth in consumer activity and have contributed to employment growth in industries that directly serve the consumer, such as retail trade, food service and entertainment.
Overall, Atlanta is experiencing a solid recovery. The data clearly demonstrate this. I think it is important for policymakers to understand the ground-level reality behind the data, to have a feel for the texture of economic life the statistics don’t always reveal.
The Atlanta Fed has representatives across the Southeast who regularly meet with business, community and government leaders to take the pulse of local economies. We conduct a variety of outreach programs to keep us in touch with grassroots constituencies. The Bank’s community and economic development team researches issues affecting low and moderate-income neighborhoods, including housing, employment, workforce development and human capital challenges. While data reflect an economy that is putting the recession further and further in the past, grassroots information from our community contacts tells us the recovery has been uneven and challenges remain.
That said, I’m encouraged about Atlanta’s economic prospects. I expect expansion to continue for the foreseeable future. With its better balance, a more diversified employment base, and the growing contribution of young and rising industries, the economy of the Atlanta region is increasingly resilient and should exhibit impressive staying power going forward.
Dennis Lockhart is president and CEO of the Federal Reserve Bank of Atlanta.
Map your export value
By Jacobus F. Boers
With little economic growth in the state and region, companies need to work hard to find new opportunities here at home. On the other hand, many parts of the world have seen a pretty good recovery already. Even with China’s slowdown, the economy is likely to still grow at 6.7 percemt in 2016 and as long as China hovers around 7 percent growth per year it will double the size of its economy again in only a decade.
The Metro Atlanta Export Plan shows that markets outside the U.S. make up 95 percent of the world’s consumers with 80 percent of global purchasing power. Global middle-class consumption will reach $35 trillion by 2020. Not surprisingly, small- and medium-sized manufacturers that took advantage of export opportunities showed an average revenue growth of 37 percent in the last decade.
Georgia companies are in the fortunate position that they have access to excellent resources when contemplating exporting. The challenge is not so much to find the opportunities for growth, but rather to adequately prepare and position oneself to take advantage of the opportunities.
How, then, do Georgia corporations and firms glean value from exporting?
One approach is to draw a map of your surroundings to better understand the export environment and then to plot a course to your destination. You start the map with the excellent infrastructure that forms the Georgia landscape and then mark some important “landmarks” such as the key service providers, partners, agencies, suppliers and customers on your company’s export map.
Every day the busiest international airport brings people to Atlanta and takes Georgians all over the world. Similarly, the facilities of the Georgia Ports Authority and freight services through Hartsfield-Jackson International Airport serves the supply chains of commodity goods and perishable exporters, heavy equipment manufacturers and specialized manufacturers alike. This trade infrastructure is critical to the continued growth of our exports. Companies can participate either by using these resources to export their own products or services or by becoming part of the value chains of those already participating.
With the premier state economic development unit in the country, companies can count on valuable help to grow exports. There is at least one exporter in all but a handful of counties in our state, thanks to the diligence of the Georgia Department of Economic Development. Others prefer to keep the government out of their business and there are many who are successful this way. Either way, there is likely someone who exports right in your back yard.
Quite often a banker, accountant or lawyer is the first person asked for advice when a company considers exporting and these professionals will often tag along the entire ride as the company explores international sales. Becoming part of someone else’s export is therefore another way of gleaning value.
Professionals are critical to export success in areas such as licensing of intellectual property, franchising, consulting, as well as financial, tax and accounting services. Since professional services make up a significant part of the metro Atlanta economy, the access to experienced advisors allows Georgia companies to avoid many obstacles as they learn how to export.
Large numbers of tourists and conventioneers visit the metro area every year where Georgia companies have the opportunity to interact and learn about their business needs and interests. Along with the revenues generated by the airports and hotels, companies that provide services needed to support travelers make up a significant component of Georgia exports. Every dollar an international passenger, visitor, diner or tourist spends in Atlanta is a service export. If you can offer value to them, you can be part of that bonanza.
Once you have a map of the terrain and landmarks, you need to plot a course. Many of the resources already mentioned as well as a host of others would love to help you in this process.
Jacobus F. Boers is an assistant dean for International Engagement at Georgia State University.