GSU economist predicts Fed won’t hike rates; local job gains remain muted

By David Pendered

The head of Georgia State University’s Economic Forecasting Center has discounted the likelihood that the Federal Reserve will raise interest rates at meetings next week.

Housing construction, apartments

The construction of this apartment building along Northside Drive, north of Atlantic Station, is fueling a surge in construction jobs that GSU economist Rajeev Dhawan expects to taper off as vacancy rates rise. Credit: David Pendered

GSU economist Rajeev Dhawan suggested the noise created by the media over various economic reports drowns out the lessons to be learned from the reports. In his “Forecast of the Nation,” released May 26, Dhawan wrote:

  • “The Federal Open Market Committee (FOMC) dot charts are of interest to the press for their noise potential. These are submitted weeks in advance of the meeting and as such are purely opinions and not policy projections, resulting in confusion.”

Dhawan noted that the FOMC reported that consumer sentiment is high, which he said is true. However, Dhawan went on to observe that because of, “volatility in the stock market and the political uncertainty surrounding the presidential primaries and upcoming elections, ‘the momentum indicator for confidence is not up, but down.’”

Meantime, the May 20 labor report for metro Atlanta by the U.S. Bureau of Labor Statistics underscores Dhawan’s observations that the economic recovery has yet to make up for loss incurred during the Great Recession.

Consider jobs creation.

Rajeev Dhawan

Rajeev Dhawan

The year is already off to a sluggish start. Dhawan said the state added 22,800 jobs in the first quarter of 2016, which is almost half the number added in the fourth quarter of 2015. Dhawan predicted job growth in 2016 will be weaker than in 2015.

Furthermore, in metro Atlanta, Dhawan predicts that just 23 percent of all jobs created will be well-paying premium jobs – 15,800 premium jobs out of 68,500 jobs he expects will be created.

“We also must take into account the types of jobs being created,” Dhawan said. “In the mid-1990s the economy created one high-quality tech or corporate job for every three jobs. Now, the economy creates one high-quality job for approximately every four jobs.”

The Labor Department’s report for metro Atlanta appears to bear out Dhawan’s observations.

Some of the greater job creation from April 2015 to April 2016 occurred in fields that don’t pay premium salaries:

  • Mining and logging, up 7.1 percent;
  • Construction, up 6.7 percent;
  • Leisure and hospitality, up 5.3 percent.
ARC unemployment rate, 5:31:16

GSU economist Rajeev Dhawan predicts job growth will slow in metro Atlanta in 2016, compared to last year, and only one in four jobs will pay a premium wage. Credit: dol.georgia.gov

The surge in construction jobs is likely to taper off. Dhawan foresees the local construction industry moderating, in line with the national sector, as apartment vacancy rates edge up. The number of building permits for multifamily structures for the first quarter of 2016 are up 10-fold in Cobb County, and are up three times in Fulton County, according to Dhawan.

Meanwhile, some of the region’s lower job creation rates occurred in sectors that traditionally have paid premium salaries:

  • Zero percent growth in information, which the BLS defines as the publishing, broadcasting and movie industries;
  • 0.4 percent growth in financial activities, which the BLS defines as finance and insurance, and real estate rental and leasing;
  • 2.9 percent growth in education and health services, which the BLS defines as teachers and school administrators, and health care and social services delivered by trained professionals.

 

 

 

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

1 reply
  1. Burroughston Broch says:

    Anemic GDP growth, minimal inflation, minimal growth in jobs – and this author thinks an interest rate hike will imorove matters?
    The Fed has run out of options but dare not admit it.Report

    Reply

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