By C. Grant Jackson
Published Dec. 1, 2015
South Carolina is experiencing its greatest economic growth in six years, and research economists from the University of South Carolina predict growth will continue for a seventh year in 2016.
Economists Doug Woodward and Joseph Von Nessen of the Darla Moore School of Business research division delivered a preview Tuesday of their 2016 Economic Outlook forecast. The Moore School’s 35th Annual Economic Outlook Conference will be Dec. 17 at the USC business school, where the two will present their full economic forecast.
Woodward said that, in 28 years of forecasting, rarely has he seen South Carolina’s economy in such good shape. The economy is strong even in the face of October’s historic flooding.
|Darla Moore School of Business economists Joseph Von Nessen (left) and Doug Woodward expect South Carolina to experience a seventh straight year of economic growth in 2016. (Photo/James T. Hammond)|
“We are in a long recovery and expansion that began in mid-2009. The current year, 2015, has been the best year of that expansion.” He and Von Nessen predict that by July the state will enter its seventh year of economic growth. “Most of the state now is better off than it was a decade ago,” Woodward said.
Job creation, the single best indicator of economic performance, is expected to grow by 2.9% in 2016, according to the two economists’ projections. Woodward and Von Nessen also expect a moderate increase in total personal income from 4.6% to 4.9% in 2016.
Major drivers of these economic gains have been wage growth and disposable income. And while manufacturing has played a role, the current year’s growth has been fueled by the construction and housing markets, they said.
The growing economy is expected to lead to increases in the labor force, which, however, will preclude any significant drop in unemployment during 2016. People who have quit looking for work are likely to jump back into the labor force. As a result, the forecast calls for a slight increase in the unemployment rate over the next 12 months from 5.6% to approximately 6%.
Sustained growth has come despite the historic rains and flooding that slammed the state in October.
The rainfall and flooding caused damage to the state of the same magnitude as Hurricane Hugo in 1989, Woodward said, adding that in today’s dollars, Hugo caused about $12 billion in damage throughout the state of South Carolina.
Richland County suffered the greatest amount of damage from the rainfall and flooding followed by Lexington County, Woodward said. Other damage was concentrated in Charleston, along the coast and in the Pee Dee. Damage was least in the Upstate.
But the flooding had both a bad and good effect economically. Those areas affected will be bolstered economically in 2016 by additional spending on rebuilding and recovery efforts.
“We know from our analysis of Hurricane Hugo that a natural disaster like the historic 2015 rainfall and flooding has the potential to act as a modest stimulus for construction and retail trade during the rebuilding phase, which will continue throughout 2016,” Woodward said. “However this short-term boost will not compensate for the wealth of losses incurred by citizens and businesses that were not fully insured or given other forms of disaster relief to pay for their damage.”
Agriculture, one of the state’s largest industries, suffered about $375 million in damage, according to some estimates. Most of the damage has been to row crops and grain farmers, said USC economics lecturer Stephen Slice. Farmers simply can’t get into the saturated fields to retrieve what little of their crops is left.
Slice worked for 32 years with the U.S. Department of Agriculture in the Farmers Home Administration Farm Service Agency before coming to USC.
While agriculture was affected, Woodward said he does not expect a macro impact on the state’s economy because of the agricultural damage. However, Slice said he does expect some farmers to simply “get out of the business” as a result of the flooding.
Recovery from the historic flood and the future of the state’s economy will be the focus of the Annual Economic Outlook Conference later this month. Attendees can expect a detailed look at how the historic flooding will affect the state’s economy and the economy of individual regions as well.
In addition to the economic forecast, which will be presented by Von Nessen, the conference will also feature New York Times bestselling author Martin Ford. His latest book, Rise of the Robots: Technology and the Threat of a Jobless Future, focuses on the impact that mechanized work could have in industries like advanced manufacturing, of particular concern in South Carolina.
Conference attendees will also hear from Jay Bryson, a Charlotte-based managing director and global economist for Wells Fargo Securities. Bryson will discuss the Federal Reserve’s expected increase in interest rates and the impact of S.C. businesses and consumers. The Fed, which has held the interest rate at zero and has not raised rates in nine years, generally is expected to announce an interest rate hike on Dec. 16, the day before the Annual Economic Outlook Conference.
Moore School Dean Peter Brews will speak on how business education must adjust to plan for and adapt to a world dominated by technology and automated work.