The Atlanta Journal-Constitution
Economy taps brakes as uncertainty returns
New wave of COVID-19 infections is a cause for concern for businesses.
While emphasizing safety protocols, Anthony Greenwood’s gym has done well despite the pandemic, so he figures the spread of a virus variant shouldn’t keep him from opening two more.
He and his wife have bought Workout Anytime franchises in Marietta and Kennesaw, their optimism spurred by the addition of 200 members — a 25% expansion — in the Alpharetta franchise they opened a year ago.
They now have a dozen employees, he said. “We felt that we’d already taken the biggest hit from COVID. If we can build this now, we’ll have a pretty bright future.”
If their attitude — and that of their customers — were widespread enough, then robust economic growth might be assured. But instead, the economy seems to be at yet another coronavirus crossroads, with confidence shaky and the path forward suddenly less certain.
Eighteen months after the start of the pandemic and more than a year after the start of a strong rebound, another wave of COVID19 infections is worrying consumers, companies and economists. Last week, Georgia hospitalizations reached a pandemic high, fanned by the delta variant.
For an accelerating economy, it is that health-centric caution that is effectively tapping the brakes, Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, said during the center’s quarterly conference Wednesday. “The immediate risk to Georgia’s recovery is from the ongoing virus wave.”
The Georgia economy has regained 84.5% of the jobs lost at the start of the pandemic and will add about 157,500 jobs this year and 109,500 jobs next year, Dhawan predicted. However, he thinks the pace of hiring during the next few months will be muted.
The fuel of the spring’s fiscal stimulus is fading, but more crucial is the impact of the virus. Spending — and hiring — will be dampened in restaurants, stores, in-person services like haircutting and even in health care, where non-virus treatments will be postponed, he said. “They will not go to zero, but they will be weaker.”
Among the portents of that trend were fewer travelers passing through airports in recent weeks, the cancellation
of concert tours by the likes of Garth Brooks and the Foo Fighters, and a number of large companies delaying a full return to office work, Dhawan said.
Nationally, the University of Michigan consumer sentiment survey plunged 13.4% in August from July. The closely followed gauge has only recorded larger losses in six other monthly surveys since 1978.
To be sure, some parts of the economy are thriving, a sign that many professionals have prospered. The housing market has seen double-digit price increases over the past year. Apartment rents are up. The S&P 500 stock market index has risen more than 20% this year.
And diamond sales are
solid, even in a usually slow time of the year, according to the Rapnet Diamond Index. Universal Diamonds in Atlanta has seen “a huge spike in early holiday shopping,” according to a company spokeswoman.
Yet some of that spending may be what economists call substitution, a shift from other spending like travel or large parties. As the number of infections in Georgia climbed in late summer, weakness seeped into many kinds of consumption, according to firms that monitor the economy daily.
Homebase, a software provider that tracks small companies, reports the number of businesses that were opened and the number of hours that were worked in metro Atlanta rose from late June to late July, but dipped in late August.
Something similar was happening in restaurant bookings, according to Open Table. The number of Atlanta reservations rose through the early summer, peaking in early July, only to start dipping again through August.
So far, some of the mostwatched monthly data has looked positive, but some of that data is weeks old. In mid-august, job postings in Georgia were 51% higher than they were before the pandemic, while the national average was up 38%, according to Indeed, the job listing site.
Georgia’s unemployment rate dropped to 3.7% in July, compared with the national average of 5.4%.
The state’s progress doesn’t look as good by other metrics, said Atlanta economist Mike Wald, former southeast regional economist for the U.S. Bureau of Labor Statistics.
The share of working-age people in the labor market has not returned to its pre-pandemic level, and it is the same as that of the U.S. overall. Meanwhile, the pace of job growth this year has been slower in Georgia than nationally, after it was faster last year, he said.
“It is difficult to depend on just one number, like the unemployment rate, to tell the whole jobs picture,” Wald said.
With the population growing, there’s a lot of ground still to make up. And while the government is not imposing restrictions, the delta variant has shaken people’s confidence and added uncertainty, he said. “People are voluntarily limiting themselves and their behaviors. That makes it much more difficult for companies to anticipate their level of business.”
The ability of many workers to do their jobs from home is a boon in some ways, since it lets many companies keep their technical, science, finance and marketing functions churning.
But the more a region works remotely, the less people are spending in restaurants, bars and stores as a matter of their daily routines, and that depresses hiring in those sectors that depend on consumers, according to Jed Kolko, Indeed’s chief economist.
Metro Atlanta’s corporate sector has more jobs than before the pandemic. But there are fewer jobs in retail, construction and manufacturing. And the leisure and hospitality sector is still 31,000 jobs shy of its early 2020 level, according to the Bureau of Labor Statistics.
Georgia’s economic fate is also linked to that of the national and international economies at a moment when the resurgent virus is a burden on that broader growth, said University of Michigan professor Betsey Stevenson in a conference call Wednesday organized by the U.S. Department of Labor.
“I think we are going to see some of the great gains we saw in July start to taper,” she said. “I think we’ve got a bumpy road ahead of us.”