Recent economic news presents consumers with a wide array of contradictions.
At the end of the first quarter of 2012, the economic arrows pointed in the right directions. Unemployment claims were down. Auto and single family home sales in the Atlanta metro area were up. But economists, pointing to depressed home values that are also eating into local government tax digests, say there is still room for improvement.
Still, local business owners say they are seeing signs of a turnaround.
Joey Riley, owner and chef at Kaleidoscope Bistro & Pub in Brookhaven, said when he opened 17 months ago, there was concern the competition would hurt other restaurants nearby. As it turned out, there was enough business to go around. He had a better March this year than last year and said he’s thinking about opening up another restaurant.
“It seems like the more the merrier,” Riley said. “I think there is still a lot of room for business in Brookhaven to grow.”
Other local business owners, some who have been at it for decades, also had a strong first quarter of the year.
Brad Jackson, whose family owns the Sandy Springs Toyota and Sandy Springs Ford dealerships, said Toyota sales are up 23 percent and Ford sales are up 31 percent over the first quarter of 2011. Jackson attributed the increase in sales to pent-up demand and low interest rates.
“It’s good compared to last year, good compared to the last two years, probably good compared to the last three or four years, really,” Jackson said. “It’s probably not good compared to 2006, but it’s improving.”
But is it all an illusion? One economist warns against reading too much into the early gains of 2012.
Rajeev Dhawan, director of the economic forecasting center at Georgia State University, said the milder-than-usual winter woke many consumers early from their usual winter-spending hibernation. Car purchases usually made in the spring came in February and March as lower heating bills left more money in consumers’ pockets, he said.
The economic picture at the end of the first quarter of 2012:
- At the end of March, there were 357,000 initial unemployment claims, a four-year low according to the U.S. Department of Labor.
- People bought more cars, pushing auto sales up 13.4 percent more than the first quarter of 2011, according to the National Automobile Dealers Association.
- S&P/CaseShiller on April 24 published a report on U.S. home prices showing a 3.6 percent annual decline in February in a 10-city composite study for national home prices, and a 3.5 percent annual decline for a 20-city composite study. The report said, “Atlanta had the only double-digit negative annual with a (decline of 17.3 percent.) This was the fifth consecutive month of double-digit negative returns for Atlanta and the lowest annual return in its 20-year history.”
- Georgia’s unemployment rate is 9 percent; the national average is 8.2 percent. The metro Atlanta rate is 8.7 percent, according to the Atlanta Regional Commission.
- Single family residential sales in metro Atlanta increased 23.5 percent in March 2012 to 3,768, compared with 3,051 in February 2012, according to the Atlanta Board of Realtors. ABR reported an annual increase of 7.7 percent compared with the 3,499 total sales for the month of March 2011.
All of that will catch up to consumers this summer with higher fuel prices and high cooling bills, he said.
“The momentum that is there is decent, but it’s not to the point where you can declare victory and say, ‘I can breathe easy,’” Dhawan said.
Ken Heaghney, a GSU professor of economics who is also the state’s fiscal economist, said things are improving locally. Though the state’s 9 percent unemployment rate lags behind the national rate of 8.2 percent, initial unemployment claims were down 15.2 percent in March, compared with last year, according to the Georgia Department of Labor.
“We’ve seen pretty healthy growth in the labor force, which means people are becoming pretty confident in finding jobs so they’ve started looking,” he said.
Some local business owners agreed 2012 is off to a good start.
Bob Albright, who co-owns Document Pros in Buckhead, said the recession caused his company to tighten up, leaving one staff position unfilled. This year he said he’s been able to hire an additional part-time staffer and, if the demand keeps growing, the staffer could work his way up to a full-time job.
Custom printing jobs are 30 percent of his business, and 70 percent involves printing for local law firms.
“We’ve gotten a few new accounts, but our current accounts are busier,” Albright said. “I don’t know if that means the lawyers are suing more. Maybe in a recession, people are more guarded. Maybe as the economy gets better, people want to go to trial now.”
Mark Erbesfield, owner of Greenmark Landscaping, a company with customers in Dunwoody, Buckhead and Sandy Springs, said the recession caused him to cut hours but not employees.
“Things seem to be picking up,” Erbesfield said. “I think there was a good bit of pent-up demand that appears to be opening up a little bit. We’re hopeful we’re going to see some improvement.”
Heaghney said the state’s key weakness holding back the recovery is housing. Too many foreclosures are dragging down the value of homes around them. Recently Fulton County’s Chief Appraiser David Fitzgibbon told local elected officials he expects the tax digest to drop 6 to 8 percent for some local governments as a result of foreclosures.
Heaghney said the only thing that can correct the imbalance in the housing market is time and job growth.
“If you’ve got a job, you’re more likely to be able to pay your mortgage,” he said.
Peter Kower, associate professor of economics at Oglethorpe University, is an expert in economic history. From that perspective, he noted that recessions caused by outside events – such as 9/11 – typically resolve themselves more quickly than recessions caused by a collapse within the financial market, like the current recession. That’s because a financial collapse directly impacts homeowners who are carrying large amounts of debt, he said.
“Things are getting better,” Kower said. “It’s just taking a very long time.”