With oil prices surging, it worth a look back at the last time Georgia’s economy faced this situation and how it unfolded. Georgia last faced a peak in oil prices and a decline in private sector employment in 2008, as the state and the nation fell into a recession that lasted 18 months from December 2007 to June 2009, according to the National Bureau of Economic Research.
After the 2001 recession
Private sector jobs fell from the onset of the recession in
March 2001 until July 2003 (long after the recession officially ended) and then
gained consistently until December 2007 nationally.
In Georgia, the turnaround began a couple of months earlier,
in May 2003, and continued a steady climb up until January 2008. From May 2003
until January 2008, private sector employment grew by 262,000 jobs (8.16%).
(All employment data are based on seasonally adjusted data supplied by the U.S.
Bureau of Labor Statistics.)
As the economy recovered, so did oil prices, but the
increases did not hurt the jobs recovery in the early stages. Oil rose from
around $26 a barrel in January 2003 until it peaked in July 2008 at $147.50.
(In today’s dollars, that would translate to $188.53 per barrel.)
2008 to 2010
For Georgia beginning in January 2008, the upward trend in
job creation reversed long before oil prices peaked. Between January 2008 and
December 2010, the state saw a loss of 286,600 (-8.25%) private sector jobs from
employers’ payrolls.
Among the major sectors, the construction industry saw the
largest percentage decline in employment over that period, down by 32%,
followed by manufacturing (-18%) and wholesale trade (-11.8%). In terms of net
job losses, manufacturing carried the heaviest load, down 76,000 jobs over that
period.
2010 to 2020
As the 2007-2009 recession eased, Georgia began again to
regain jobs but again long after the recession had officially ended in June
2009. Between December 2010 and February 2020, the state added786,100 private
sector jobs (24.67%), and sectors such as construction, which had shed so many jobs
during and after the recession added back in 61,600 jobs (41.99%), although
manufacturing employment recovery was much weaker, up by only 59,000 jobs
(17.08%).
The largest net gain in jobs occurred in the professional
and business services sector, which had lost a comparatively small 31,200 jobs
during the recession only to gain 179,000 afterwards.
Equally impressive was the health care and educational services
sector, which had actually added 27,100 jobs during the recessionary period,
and then gained another 134,700 jobs in the recovery period.
2020 recession
In early 2020, layoffs and shutdowns related to the
coronavirus slammed Georgia. Between February and April 2020, the state saw 592,800
jobs disappear (-14.92%).
Hardest hit was the leisure and hospitality sector, which
had only suffered relatively minor layoffs during the previous recession. Over
that two-month period in early 2020, 223,200 jobs in hospitality and leisure
disappeared in Georgia. Other sectors with large losses included professional
and business services (-80,100 jobs), heath care and educational services
(-70,900 jobs), and retail (-67,600 jobs).
In comparison, construction, which had been so hard hit in
the 2007-2009 recession, saw the loss of only 11,700 jobs (-5.62%), while
manufacturing recorded 45,000 in job losses.
April 2020 to December 2021
After the devastating loss of so many jobs over only a few
months, private sector jobs began a slow but significant recovery. From April
2020 to December 2021, Georgia saw 594,300 new jobs (17.58%) created in the
private sector bringing the state back to where it stood pre-pandemic in February
2020.
Some sectors in the state have fully recovered to their
pre-pandemic levels, including retail; transportation, warehousing, and
utilities; information; financial activities; and professional and business
services sectors.
Other sectors have not fully recovered their pre-pandemic
employment levels with leisure and hospitality jobs 10% below and other services
(which includes maintenance and repair jobs as well as personal care occupations)
down 8% compared to February 2020.
Rising oil prices bringing on another recession?
It is too soon to judge whether another recession is on the
horizon but a steady increase in oil prices beyond current levels, as happened in 2008, makes a recession a
distinct possibility, especially if the oil prices continue to climb into the
summer.
Whether a recession comes in 2022 depends on a combination of increasing oil prices plus higher interest rates plus some unforeseen variable that will cause people to become more pessimistic about the economic future.
At current inflation-adjusted prices, oil still sits far below its 2008 peak, and it will have to continue to move towards the $188 or above level to equal its impact in 2008.
This recession, if it comes, may be more driven by finances, as higher energy costs force people to cut back on more discretionary activities and higher interest rates makes borrowing prohibitively expensive.
The 2007-2009 recession in Georgia saw the state lose in 35
months what it had taken 55 months to gain, as the state’s private sector
employment rose by 262,000 jobs between 2003 and 2008 only to lose 286,600 jobs in the 2007-2009
recession.
If the state suffers the same percentage loss in the next
recession, it will see a drop of 327,000 jobs, bringing it back to near its
July 2020 levels. Better than its coronavirus-related 2020 recession but still
a blow.
Related to the 2007-2009 recession, construction took the deepest percentage job loss, but that recession has been closely tied to overbuilding and easy mortgage financing prior to the downturn. In 2020, the leisure and hospitality sector received the most pain as people avoided travel and public contact in places such as restaurants, movies, and airlines.
As such,if a recession occurs, the recessionary impact on jobs may be more be more evenly spread out among the sectors with no sector losing more than 10% of its jobs. Of course, that will be of little comfort to the leisure and hospitality sector in the state, which has not yet fully recovered from the 2020 recession.
It pays to remain vigilant as higher oil prices and expected higher interest rates work their
way through the economy and both consumers and businesses make decisions on how
to allocate their resources to cover these higher costs along with the possibility of some unexpected variable that will cause people to change their opinion of their economic future.
