Predicting South Carolina’s future
Posted on: December 10, 2014; Updated on: December 10, 2014
By Peggy Binette, peggy@mailbox.sc.edu, 803-777-7704
Doug Woodward got hooked on the idea of prediction at an early age. What started as a childhood fascination in forecasting the weather turned into a scholar’s penchant for forecasting the economy.
“Economics is more difficult, but it’s just as fascinating. People want to know what is going to happen,” says Woodward, an economist and director of research at the Darla Moore School of Business who has provided South Carolinians with the state’s annual economic forecast for 27 years.
“Recessions are the most difficult to predict. Each one has its own character,” says Woodward. “Our forecast for 2008 was our most difficult year. We forecast the slowdown, but we didn’t see employment deteriorating as dramatically, with unemployment rising from 6 percent to 12 percent. We knew there would be a recession, but we didn’t know the extent. We also thought the recovery would happen more quickly.”
Years with unforeseen economic “shocks” such as a Lehman Brothers collapse in 2008 or the dot-com bubble burst in 2001 are rare. Typically, Woodward’s analysis of data and understanding of global market forces on the economy bears an accurate annual forecast that South Carolina leaders have come to trust and rely on for planning.
“That was the vision of our late Dean Jim Kane and economics professor Randy Martin. They saw the need for an objective forecast that state government, business leaders and the public rely on,” Woodward says. “They saw it as a valuable service. I do, too.”
The university’s Economic Outlook Conference is in its 34th year and has become the state’s premier business event.
“All economics is local. What people really care about is what is going on and what will happen in their own region,” says Woodward, who, with fellow economist Joey Von Nessen, released their annual forecast to media Wednesday (Dec. 10). They will present their full forecast to government and business leaders around the state at the upcoming Economic Outlook Conference on Tuesday (Dec. 16).
Their 2015 forecast calls for the consistent positive growth seen across most industries and regions in 2014 to continue.
That stable growth and employment gains will mean more personal income for South Carolinians. Job creation – the single best indicator of overall economic performance – is expected to grow at 1.9 percent in 2015, mirroring the 2 percent job growth rate seen in 2014, according to Woodward and Von Nessen.
“If you liked 2014, then you’ll like 2015,” Von Nessen says. “South Carolina’s economy hit its stride this year, and we expect that trend to continue.”
The manufacturing industry continues to be a major economic driver in South Carolina, though job creation is now shifting more toward the leisure and hospitality sector and the employment services sector, he says.
“Consumers are in better financial shape this year. Households are carrying less debt and their net worth has increased,” Von Nessen says. “This means that consumers have more disposable income, which is increasing demand for tourism-related industries, especially in South Carolina’s coastal regions.”
Energy prices, including the price of gasoline, also have declined dramatically in 2014, which is effectively a tax cut for consumers and a generator of further economic activity, he says.
Their analysis also shows major gains in the employment services sector, an industry comprising employment placement agencies, temporary help services, contract labor and staffing firms. Von Nessen says the gains in the sector points to a possible structural change in business hiring practices.
“We normally see an increase in the employment services sector during the early part of an economic recovery because uncertainty is high,” Von Nessen says. “However, the fact that job growth is relying more and more heavily on this sector over time implies that businesses are viewing the use of employment staffing firms and contract labor as a realistic, long-term hiring model to obtain their workforce.”
More people have joined the labor force in South Carolina, causing a slight increase in the unemployment rate in recent months. The rate, however, has dropped to 6.7 percent from 7 percent a year ago.
“This increase in the labor force is positive because it shows that South Carolinians are more optimistic and are seeing more opportunities for work,” Von Nessen says.
The Moore School forecast calls for the unemployment rate to decline to 6.3 percent over the next 12 months.
Despite the positive outlook for continued steady growth in 2015, the economists warn that moderate forecasts for global economic growth as well as the recent slowdown of the European economy potentially could impede South Carolina’s growth in 2015.
“As a percentage of total economic activity, South Carolina exports more goods and services to Europe than most other states,” Von Nessen says. “This means that we are more vulnerable to a European recession than other parts of the country.”
Real income growth in South Carolina – though positive – is expected to remain relatively mild, with a growth rate of 1.8 percent predicted for 2015. Real income across most regions of South Carolina has been consistently growing at a rate below the national average, he says.
In addition to the 2015 economic forecast, this year’s Economic Outlook Conference will include a presentation by Woodward titled “The Economic Impact of BMW: 20 years of Economic Development in South Carolina.”
The conference also will feature a keynote address from Sue Helper, chief economist of the U.S. Department of Commerce, on the current and future state of U.S. manufacturing and the implications for South Carolina. David Crowe, chief economist of the National Association of Home Builders, will address the lackluster growth in U.S. housing markets and the role housing will play in the future. Robert Key, senior vice president at CCM Investment Advisors, will examine the likelihood of a significant change in monetary policy in 2015 and how that would affect interest rates and financial markets more generally.
If you are going
Register at the Darla Moore School of Business to attend the 34th Annual Economic Outlook Conference Tuesday (Dec. 16). A networking reception will be held 11:30 a.m.-1 p.m. and conference runs from 1 to 4 p.m.
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