State of Georgia personal income increases, individual income tax revenues decline: All driven by changes in the Atlanta metro area

Personal income in the State of Georgia grew by 3.8% in the third quarter of 2019, the same growth rate as the nation.

State personal income totaled $515.06 billion compared to $510.258 billion in the second quarter of the year placing the state as ranking 19th in its personal income growth rate.

Since the third quarter of 2018, the state’s personal income has risen by more than 4.3%.

The increase occurs even as Georgia reports lower Individual Income Tax collections over the quarter.

In July, Individual Income Tax collections came in $72.5 million above the amount collected in July 2018. In August and September, Individual Income Tax collections came in below amounts for the previous year by -$58.3 million, and -$27.4 million respectively. 

Combined, Individual Income Tax collections decreased by -$14.2 million compared to the same period last year.

GDP growth driven by the Atlanta metro area

Newly released information from the U.S. Bureau of Economic Analysis (BEA) demonstrates how the state’s development is being driven by the Atlanta metro area.

Georgia is highly dependent on the Atlanta metro area for the state’s prosperity and suffers when growth in the Atlanta area slows.

In 2018, the Atlanta metro area’s real GDP (a measurement of all goods and services adjusted for changes in prices, either inflation or deflation) rose by 2.5% compared to 2.4% for the State of Georgia and 2.9% for the nation.

The previous year, the Atlanta metro area’s real GDP rose by 4.1% compared to the state’s 3.7% and the nation’s 2.4% growth rate.

Five-year growth rates

More evidence for the outsized role that the Atlanta metro area plays in the state’s growth comes from recently released county GDP numbers.

The Atlanta area’s real GDP rose by 21.6% in the most recent five-year period compared to a rise of 17.35% for the state.

Five of the six counties showing the greatest dollar growth in GDP are located in the Atlanta area, including Fulton, Cobb, Gwinnett, DeKalb, and Clayton counties, each with real GDP growth greater than $2 billion over the past five years.

The only other county in Georgia with GDP growth of more than $2 billion was Chatham County, part of the Savannah metro area.

Fulton County was responsible for the largest GDP in the state, at $152.3 billion and recorded a 24.42% real GDP growth rate since 2013.

Georgia has 159 counties, the most of any state east of the Mississippi River, and Fulton County’s GDP exceeds the combined GDP of 144 of those 159 counties.

Georgia jobs data for 3rd quarter revised up; job growth concentrated around Atlanta metro area

Georgia 12-month percentage job growth rate, Jan 2017-Oct 2019

Source: U.S. Bureau of Labor Statistics

With release of revised job numbers for September, the Bureau of Labor Statistics has revised upward seasonally adjusted job growth in Georgia for the 3^rd quarter of 2019.

Preliminary data indicated the state had added 22,000 jobs in the July-to-September period.

With the revised data, that number grew to 22,400, besting the numbers for the 3^rd quarter of 2018, which showed job growth of 22,100.

The Atlanta area recorded a better than originally reported job increase over the quarter. Preliminary estimates indicated that Georgia’s largest metro area had added 14,700 jobs but the revised data showed the increase to be 16,400.

With the revision, Savannah lost fewer jobs than originally reported with preliminary data showing a quarterly loss of 1,800 jobs and revised loss of only 1,500 jobs. Over the past 12 months, Savannah’s job growth has been anemic with an increase of only 1,000 net new jobs out of a total job market of more than 180,000 jobs.

Altogether, the number of new jobs added in all metro areas in the state rose from 3,900 in the preliminary estimate to 16,700 in the revised estimate.

Job Growth Concentrated in the Atlanta Metro Area

Despite the upward revisions, new jobs have become increasingly concentrated in the Atlanta metro area.

With the concentration of new jobs in the Atlanta area, the state’s overall job growth rate can be misleading.

While Georgia has a statewide job growth rate of 1.6% over the past 12 months, if you subtract out the Atlanta metro area, the rest of the state is posting a job growth rate of less than 0.8%. The Atlanta metro area is currently posting a 2.1% job creation rate.

Even though Georgia’s metro area is home to 61% of the state’s employment, for the first 10 months of 2019 (January-October), the Atlanta metro area accounted for more than 9 out of 10 new jobs.

Of the 54,400 net new jobs created in Georgia over the recent 10-month period, 50,400 were in the Atlanta area.

As a comparison, in the first 10 months of 2018, of the 74,400 net new jobs created in Georgia, the Atlanta area saw 49,100 net new jobs, or 2/3’s of the state’s total.

Georgia employment rebounds in the third quarter of 2019

Nonfarm employment in Georgia grew by 22,000 in the third quarter of 2019, rebounding from a disappointing 11,700 job gain in the second quarter of the year.

The state’s gain over the quarter was similar to the third quarter of 2018 when Georgia posted an increase of 22,100 jobs.

Over the past 12 months, employment in the state grew by 77,400 jobs to a total of 4,635,600. The increase of 1.7% over the past year shows a slowdown compared to September 2018 when the state had posted a 12-month increase of 97,200 jobs that translated to 2.2% job gain.

Georgia Nonfarm Job Growth, 3rd Quarter, 2014-2019

Source: U.S. Bureau of Labor Statistics

Private Sector and Government In Georgia

Compared to the second quarter of the year, both the private sector and government job markets showed significant improvement in the third quarter.

Private sector employment (excluding agriculture) grew by 17,300 jobs over the quarter compared to a 9,000-job growth in the second quarter, while government employment grew by 4,700 jobs compared to a 2,700-job improvement in the second quarter.

Private Sector Industries

Education and health services posted the largest employment gains in the third quarter, adding 6,900 jobs, followed by leisure and hospitality services, up by 3,900 jobs.

Although professional and business services employ the largest number of private sector workers (705,800), the industry grew by only 2,000 jobs over the quarter.

The dominance of education and health service jobs and leisure and hospitality jobs over professional and business services is a change for a state where business-to-business employment has been the main jobs engine for a number of years.

The professional and business services sector remains the largest private employment sector in the state but the trend is toward more consumer-focused industries such as healthcare and restaurants.

Due to several factors, healthcare plays a smaller role in the state’s mix of employment relative to the nation. As of September, health services accounted for 11.3% of the state’s jobs compared to 13.6% for the nation.

Industries recording losses over the quarter included construction (-400), wholesale trade (-800), information (-200), and financial activities (-100).

Metropolitan Areas

The Atlanta metro area continues to be the engine for job growth in the state. Over the quarter, the metro area added 14,700 (66.8%) of the state’s 22,000 nonfarm jobs.

Over the past 12 months, the Atlanta area accounted for 49,900 of the state’s 77,400 new jobs.

Outside Atlanta, other metro areas recording job growth in the third quarter included Albany (300), Gainesville (1,200), Hinesville (300), Rome (100), and Warner Robins (300). Areas recording declines in the third quarter included Augusta (-400), Brunswick (-100), Columbus (-300), Dalton (-100), Macon (-100), Savannah (-1,800), and Valdosta (-200). The Athens area showed no net change in jobs over the third quarter of the year.

For the 12 months ending in September, all metro areas in the state posted job gains except for the Columbus area that showed a drop of 600 jobs over the year.

Note: All data come from by the U.S. Bureau of Labor Statistics, are seasonally adjusted and are preliminary subject to revision.

Georgia's 2nd quarter employment growth revised downward

Job creation in Georgia was not as strong in the second quarter (April-June 2019) as originally reported.

Based on new information from the U.S. Bureau of Labor Statistics, the state saw creation of 11,700 new jobs, down from the original estimate of 14,600 over the three-month period.

Georgia 12-month employment gains, June 2009 - June 2019

Source: U.S. Bureau of Labor Statistics. All data are seasonally adjusted.

With the revised figures, Georgia’s employment growth from the 2^nd quarter of 2018 to the 2^nd quarter of 2019 increased by 77,500 (1.7%) rather than the originally reported 80,400 (1.8%).

The increase was the smallest 2^nd quarter growth rate recorded by the state since 2013 and marks the third consecutive year of continuous slowing in the creation of new jobs.

Industry Data

The 20% decline (-2,900) in new jobs between the preliminary and revised quarterly reports can be attributed to lower employment growth estimates for several industries in the state.

The private sector saw creation of 9,000 new jobs, 1,900 fewer than originally estimated.

Professional and business services declined by 3,200 compared to original estimates of a 2,400-job loss.

Leisure and hospitality showed as smaller decline than originally reported, dropping by 2,100 over the quarter, as opposed to original estimate of a 2,400-job loss.

Health care and social assistance employment rose but by a lower amount than originally estimated. Employment in the sector grew by 3,500. The preliminary estimate had shown an increase of 4,800 jobs.

Construction added fewer jobs than originally reported, growing by 3,500 jobs rather than the previously reported 4,000 job growth.

Public sector jobs (federal, state, and local governments combined) added 2,700 new jobs, down by 1,000 from original estimates.

Georgia job creation slows in the second quarter

Job creation in Georgia slowed in the second quarter of 2019. Over the April-to-June period, 14,600 jobs were created in the state compared to 14,900 in the first quarter of the year. Compared to previous second quarters, 2019 saw the slowest job creation since 2011.

Data source: U.S. Bureau of Labor Statistics

Second quarter by industry

Professional and business services declined by 2,400 jobs offsetting a growth of 1,800 in the first quarter of the year. The second quarter was the first quarter in which the industry had posted a net loss of jobs since the first quarter of 2017.

Leisure and hospitality dropped 2,400 jobs after adding 8,200 jobs in the previous quarter. In the second quarter of 2018, the industry had added 500 jobs.

Wholesale Trade dropped by 2,000 jobs following a drop of 1,100 jobs in the first quarter. In comparison, the industry added jobs every quarter in 2017 and 2018.

Transportation, warehousing, and public utilities employment fell by 700 jobs adding to the 1,100-job loss in the first three months of the year. Prior to these two quarterly losses, the industry had added 10,200 jobs over the previous three quarters.

Health care and social assistance was a bright spot in the quarter with employment growing by 4,800, although this pace was below the 5,400 jobs created in the sector in the previous quarter.

Construction added 4,000 jobs in the April-to-June period after gaining 2,100 jobs previously.

Private sector employment accounted for 10,900 net job gains (nearly 75%) over the quarter with the remainder (3,700) new jobs created by federal, state, and local governments.

Total jobs reach a new record

Despite the slowdown in new jobs, the state posted a new record with 4,616,500 nonfarm jobs in June 2019.

The state’s unemployment rate in June stood at 3.7% in June 2019 compared to 3.9% in June 2018.

Sectors scoring their new highest levels of employment in June included retail trade (500,400) and financial activities (251,000), private educational services (83,600), and health care and social assistance (519,400).

Over the year, Georgia saw 80,400 jobs created for a 1.8% growth rate. The number of jobs created and the percent increase in June compared to the previous 12-month period was the lowest since 2013 when the state saw 68,800 new jobs in June and a growth rate of 1.7%.

All data are seasonally adjusted and reflect preliminary information provided by the U.S. Bureau of Labor Statistics.

Georgia keeps adding jobs, but lower paying ones

Georgia added 5,900 jobs over the first four months of 2019, and an additional 2,600 in May, according to preliminary seasonally adjusted employment statistics from the U.S. Bureau of Labor Statistics.

If you graph out the results, as shown below, the job numbers look positive, if a bit sluggish compared to previous years. All in all, a bit of a slowdown and perhaps a "leveling-off" but not a decline.

Georgia Nonfarm Jobs, January 2018 to May 2019, seasonally adjusted

Source: U.S. Bureau of Labor Statistics

Look closer under those numbers, and the statistics are both more revealing and less positive for the state’s economy.

Higher Paying Industries Losing Workers

In 2018, the industries with the highest average salaries in the state were Information ($96,810), Financial Activities ($84,636), and Wholesale Trade ($76,681).

These are also the three industries posting the largest numerical declines for the first third of the year.

Information jobs have declined by 3,600, Financial Activities by 1,700, and Wholesale Trade jobs by 3,200.

Georgia Information Sector Employment

Georgia Financial Activities Sector Employment

Georgia Wholesale Trade Sector Employment

Preliminary data for May does not change the picture significantly. 

The Information sector added 100 jobs in May, Financial Activities added 900 jobs, and Wholesale Trade added 100 jobs. Despite preliminary indications of job increases, all three industries remain below their levels at the end of December when seasonal factors are excluded from the data.

Job Growth in Lower Paying Industries

In contrast, the Leisure and Hospitality industry has added the most jobs in the first four months, gaining 3,100 positions followed by Retail Trade with 2,500 net new jobs. 

The two industries are among those with the lowest average pay in the state. In 2018, Leisure and Hospitality jobs in Georgia averaged $20,602 while Retail Trade jobs averaged $31,093.

In May, Retail Trade added another 600 jobs, while the Leisure and Hospitality industry lost 300, according to preliminary data.

Georgia Retail Trade Employment

Georgia Leisure and Hospitality Employment

One bright spot is the growth in Education and Health Services in the state. For the first four months, the sector grew by 7,900 jobs with an additional 1,100 jobs added in May.

The Education and Health Care sector sits in the middle of the pay range by industry with salaries in the sector averaging $52,251, just below the state average of $53,543 for all nonfarm jobs.

Lower Pay Results In Lower Spending and Tax Revenues

Lower incomes results in lower consumption, which ultimately feeds back into lower government revenues through sales taxes.

If the state does not experience a rebound, not only in the number of jobs created but also in the salaries associated with the new jobs, then Georgia will have greater difficulties raising revenue in the future year.

How has Georgia changed in 10 years after the last recession

Georgia has made a remarkable recovery since the last recession, 

but the state is still vulnerable to any downturn in the national economy.

A decade ago, Georgia was mired in the national recession. 

In 2008, the state’s gross domestic product (the broadest measure of economic activity) declined by more than 6%, and employment in the state fell by 3.4%, a sharper decline than the nation.

Since 2008, the State of Georgia has seen a remarkable recovery from the most recent recessionary period.

Over the past decade, the state’s real (inflation-adjusted) GDP has grown by more than 23% to $588.17 billion.

State of Georgia GDP 

Source: Federal Reserve Bank of St. Louis

Georgia Real GDP 2007-2018

 

Data Source: U.S. Bureau of Economic Analysis

Employment has risen by more than 13% even as the population increased by 8.5% up to 10.5 million, due to a combination of births and in-migration to the state.

Median household income has risen as well, growing from an average of $46,227 to $56,183, an increase of 21.5%. Unfortunately, when inflation is taken into account, median income reduces to a net gain of only 1.7% for the average household over the past decade.

Georgia Industries

Over the past 10 years, the largest industries in Georgia have become more concentrated and core to the state’s economy.

In 2007, the year before the recession took hold, Georgia’s four largest private sectors represented a total of 42.3% of the state’s economic activity.

In 2018, these four sectors combined for 43.4% of the state's economy.

·         Manufacturing in the state has slipped from 11.3% to 11.0%

·         Information sector has declined from 8.6% to 8.2%

·         Real estate and rental and leasing has increased from 11.2% to 11.9%

·         Professional and business services have climbed from 11.2% to 12.3%

One area of note is the arts, entertainment, and recreation sector. The industry recorded a significant increase in economic activity over the decade, rising by more than 59% and now represents more than $3.57 billion in economic activity.

No doubt, the decision to encourage movie and television production in the state through tax incentives has contributed to this rise, as well as individuals’ interest in more leisure activities.

In contrast, the state’s agriculture, forestry, fishing and hunting sector continues to shrink as a share of the state’s overall economic activity.

While the sector did rise by 4.8% over the decade, it actually became less important to the state’s economy, dropping from 0.9% of the state’s GDP in 2008 to 0.7% in 2018. In total, the state's agricultural interests represents $3.96 billion of economic activity in 2018.

2018 has seen a slowdown

Although growth has continued over the past decade, 2018 marked a slowdown in the rate of growth, in terms of GDP, although employment growth accelerated.

In 2018, the state’s inflation-adjusted GDP grew by 2.6%, a decrease from the 2017 rates of 2.9%.

For the fourth quarter of 2018, state’s inflation-adjusted GDP growth was 2.1%, slightly below the nation’s 2.2% growth rate.

Source: U.S. Bureau of Economic Analysis

Employment in the state grew by 1.9% in 2018, more than the 1.6% growth rate recorded for 2017.  

As a comparison, the nation’s employment grew by 1.8% in 2018.

Looking ahead

Georgia has had a significant recovery since the recession but remains dependent on many of the same industries that powered it before the last recession.

Since the value of its largest sectors has increased since the last recession, the state is even more dependent on these same industries’ health for its future growth.

Traditionally, Georgia does better than the nation in employment growth during good economic times, and worse than the nation during a downturn.

Data Source: U.S. Bureau of Labor Statistics

Despite employment growth, median household income remains below the nation giving residents less ability to build up savings in anticipation of any recessionary period.

At the same time, government, normally a reliable provider of employment and income during recessions, has shrunk in the state making it less of a counter-balance if the private sector begins to decline.

There is every reason to believe that if the nation goes into another recession, the state’s economy and its labor force will disproportionately again suffer.

Georgia employment in 2018: Where it went wrong

Up until March 11, 2019, Georgia had a good jobs story to tell. The state appeared to be growing faster than the nation with employment up by 2.6% in 2018, its fastest job growth rate since the end of 2015.

Then the U.S. Bureau of Labor Statistics published the benchmark data for 2018 and the Georgia story went up in smoke.

With the revisions, the number of new jobs added in the state last year dropped from 119,200 to 87,500 and the job growth rate fell to 1.9%.

When normal statistical variance is factored in, Georgia’s employment growth turned out to be little better than the nation as a whole.

Using the newly benchmarked information as a measure, Georgia’s job growth rate ranked 10^th in 2018 and behind its neighbor states of Florida and South Carolina.

Industries revised downward

For Georgia, several sectors stood out as having over-estimated job growth in 2018.

Employment in the construction industry was revised down by 9,900 jobs for 2018.

Employment in wholesale companies was decreased by 13,900 jobs, the second straight year that employment in wholesale firms had been significantly overstated in the preliminary figures.

The number of workers engaged in health care and social assistance dropped by 8,400 over the year.

Industries revised upward

The net revision downward of 31,700 jobs would have been even worse if employment in a couple of industries had not been underestimated.

The number of workers employed in financial activities was revised up by 9,000. Within this group, both the finance and insurance sector as well as the real estate sector had employment counts significantly revised upward. The upward revision follows a similar upward revision in the 2017 numbers.

At the same time, employment in private educational services was raised by 4,800.

In general, Georgia’s growth in financial activities has been underappreciated even if its construction sector was overestimated.

Producing a monthly employment count is always a hectic experience and prone to revision as better data comes in later in the year.

It is important that estimates be as accurate as possible, but it is also important to remember that these numbers are just estimates and better at providing a direction to the larger economy rather than providing absolute confidence, especially for small samples.

Georgia’s unemployment rate remains low in December, but does it matter?

Georgia’s unemployment rate was essentially unchanged in December at 3.6 percent compared to a 3.5 percent rate in November after revisions and seasonal adjustment. Speaking statistically, the 0.1 percentage point change is within the error parameters, so there was no statistical movement in the rate between November and December.

Historically, economists in the United States put a great deal of emphasis on the unemployment rate, as they saw it as a meaningful measure of the overall strength of the economy. To simplify the idea, a low unemployment rate meant a high percentage of people were employed and therefore earning income that they could use to boost the overall economy through their purchases.

Alternatively, a high or rising unemployment rate meant that fewer people were earning income and so the outlook for the economy would dim with the idea that fewer people working would buy fewer goods and services. Since about 70 percent of the U.S. economy is driven by consumer purchases, this relationship seemed to make sense.

Problems with using the unemployment rate as a measure

Over time, though, the useful correlation between the unemployment rate and economic progess is showing a breakdown.

You need look no further than the estimated 800,000 Federal employees affected by the partial government shutdown to see the problem. Those employees who are furloughed are defined as unemployed, but nearly half of the workers are being treated as “excepted” employees, which means they are working and counted as employed but not receiving pay.

Working but unpaid employees is only part of the problem with reading too much into an unemployment number.

Overall, the number of people who are no longer in the workforce continues to grow even after the recession ended. Partially this is because of an aging population with more people of retirement age. Retirees living off their Social Security, pensions, and savings have income that does not vary with their employment status. As this group enlarges, the relationship between employment and income declines.

For the 10 years ending in December 2018, nonfarm employment in the U.S. has risen by 11.4 percent, while the number of people not in the labor force has grown by 19.4 percent.

For all of these reasons, the unemployment rate no longer offers the value that it carried in the past as a barometer of the overall economy.

Using wages and income as a better economic measure

Economists must become more focused on wages and income rather than employment to judge the future direction of the economy. After all, it is income that drives household consumption not merely having a job.

By that measure, Georgia’s workers have struggled to keep up with the national average. In 2008, the average wage in Georgia was $786 per week, 7 percent below the national average. After 10 years, a Georgia worker’s average weekly wage has risen to $979 per week, but had risen at a slower pace than the nation, resulting in the gap growing to nearly 8 percent.

Using information from DeptofNumbers.com, you can see that “the current median household income for Georgia is $56,183. Real median household income peaked in 2007 at $58,234 and is now $2,051 (3.52%) lower. From a post peak low of $50,253 in 2011, real median household income for Georgia has now grown by $5,930 (11.80%)."

Real Median Household Income: Georgia, National

Compare this graph to the one at the beginning of this article showing unemployment rates for Georgia, and you can see that the income data provides a more valid picture of the state’s current economy.

To truly judge a state’s economic progress, ignore its unemployment rate and focus on data that provides a better description of its economic progress.