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Friday, December 30, 2016

NOTES FROM THE SENATE, DECEMBER 30, 2016

TEN REASONS TO BE OPTIMISTIC FOR 2017

I started compiling "Ten Reasons" back in the midst of the recession, in 2008, when there seemed to be little to look forward to in the following year. The nation was frozen in a "Great Recession" and state revenues had dropped by $3 billion or so. Georgia suffered as much as most any state during the recession, being overbuilt in the housing market and the resulting real estate collapse. But even in those times, we found reasons to believe our state would recover and fight our way back to prosperity. Each year since, we have had a building number of encouraging signs about the future of our state. Steady leadership from Governor Deal, Lieutenant Governor Cagle and the Legislature has guided our way, and Georgia finds itself growing and leading the Southeast in progress in many areas.

REASON NO. 1 - Population growth can help solve many problems or promote workable solutions. Georgia was the 7th fastest growing state in population growth between 2015 and 2016, gaining some 110,973 during the period.

REASON NO. 2 - Job growth continues to be a strength in Georgia. Projections from economists in the state believe Georgia will outpace the nation in job growth in 2017, predicting a gain of from 65,000-94,000 jobs. Georgia's Department of Economic Development reports 25,341 new job announcements for FY 2016 with $4.4 billion in investment.

REASON NO. 3 - The national unemployment rate (4.6%) continues to point to almost full employment. While Georgia's rate inched up slightly to 5.3% in November, the growth in jobs points to the rate increasing mostly because of more people coming to the state in search of jobs and outpacing the vibrant jobs growth. Workforce-wise, that's a good sign. Metro Atlanta's unemployment rate dropped to 4.8% in November. This past year the workforce pool expanded by 3.9%.

REASON NO. 4 - Oil prices remain one dollar or more under prices of two years ago, even after an increase after the agreement by the oil cartel to limit production. The fact that oil prices only increased 10% or so after the announcement may indicate the active role U.S. oil production now plays in the world marketplace.

REASON NO. 5 - Two new developments are bolstering an already highly successful film industry ($2.02 billion) in Georgia. The completion of the first year of the Georgia Film Academy will have produced about 1100 graduates who will be certified in many skills needed in the film industry. Ten Colleges and Technical Colleges are teaching the courses and helping point students to internships.

Secondly, on January 2, 2017, Blackhall Studios will open a new 200,000 square foot studio with 9 sound stages, bringing the total square footage to 400,000 square feet. The construction of studios in Georgia, including Pinewood, EUE/Screen Gems and Raleigh Studios all demonstrate the investment and permanency of Georgia's 3rd ranking status in film production. There were 245 film and television projects shot in Georgia in FY 2016.

REASON NO. 6 - Maybe it is it is just a sign of how bad agricultural commodity prices have been the past 4 years, but there is some optimism because of a "less pessimistic" outlook for 2017. Reports of peanut contracts for 2017 are up a little and soybean prices are up slightly over a year ago. Cotton, at 70 cents per pound, is better than the bottom of the barrel 60 cents where they were for so long. There are as many who want low corn prices as there are who want higher ones given the importance of the poultry industry in Georgia. Pecans have enjoyed a good price this year, but down our way, there were serious tree losses incurred from the winds associated with hurricane Matthew. Vegetables seem to be a strength for rural Georgia but there is a nervousness concerning the outcome of the water suit in the Supreme Court.

REASON NO. 7 - This has been a year where world shipping has seen upheaval in the industry with a bankruptcy and consolidations following the slippage of the economy in many countries and subsequent reduction in trade. But Georgia's ports have steamed right along with record setting growth in October and 6.5% growth in November. Loaded containers trade increased 11% in November with exports growing 10% and imports 12%. Total cargo was up 2%. The Brunswick autoport is the second busiest port in the U.S. for vehicle shipping imports and exports. This year, Georgia's ports are headed towards the 2nd best year ever.

REASON NO. 8 - While the current strong dollar is a mixed bag in some ways, as how it affects U.S. manufacturing, there are positives. For one, travel overseas will be a bargain as the exchange rate will be the most favorable in a long while. In Canada, $1 now buys $1.31 Canadian dollars. The difference with Japanese yen is 46% higher and up 23% in England.

REASON NO. 9 - The rising Federal interest rate also has winners and losers, but unless inflation rears its head, the positives are pretty strong. Interest rates being paid by banks will surely rise if the promise of additional increases in the Federal interest rate comes true next year. Retirees and seniors on fixed income will benefit from rising interest rates. The fact that the Fed believes increasing the fed rate won't hurt the U.S. economy is encouraging for the state's retirement plans whose investment returns are important to the funds.

REASON NO. 10 - The 2016 election has infused an optimism not just in consumers but in the stock market (pushing 20,000) as well as the outlook from economists. A recent Morning Consult poll showed that 72% of the public say they are feeling hopeful about 2017. The ranking of feelings reported 61% being optimistic, 51% excited, and only 50% as feeling anxious. A recent meeting of economists from around Georgia revealed uncharacteristic enthusiasm for the economy, based on the prospects of a corporate tax cut and a change in tax regulations concerning foreign corporate profits/cash. Also the prospect of large infrastructure investments was a positive in their eyes. They predicted strong growth in Georgia in 2017 of over 5%.

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