By C. Grant Jackson
Amid concerns that new COVID-19 variants could derail the national economy again, South Carolina’s economy is booming and has recovered almost all of its losses from the pandemic, according to state experts at the University of South Carolina’s annual economic conference.
South Carolina is doing well, said Doug Woodward, director of the Division of Research at USC’s Darla Moore School of Business, “because we make things” that people want.
Much of the state’s recovery has been fueled “by the fact that South Carolina has really been at the center of our national recovery on both the supply and the demand side,” said University of South Carolina research economist Joey Von Nessen.
Consumer spending on goods is currently about 25% higher than it was before the pandemic began, according to data presented at the 2021 conference. This has generated a significant consumer goods bubble and is part of the reason for the supply chain issues that are currently impeding parts of the national recovery.
“The general high level of demand has been great news for South Carolina manufacturers over the past year, spurring growth and demand for the products they are supplying,” Von Nessen said. “That sizeable increase in demand and consumer spending is benefitting manufacturers and explains why the Upstate — which has the largest concentration of manufacturing jobs in South Carolina — has been among the state’s leaders recently in terms of the rate of recovery of lost jobs.”
In addition to the Upstate’s manufacturing might, coastal South Carolina has also had a strong recovery fueled by growing logistics and construction industries as well as a growth in population.
The economy’s comeback was the message at the Moore School’s 41st Annual Economic Outlook Conference, held in-person this year after moving to an entirely online version in 2020. About 120 people attended this year’s conference at the USC Alumni Center, with another 60-70 attending on-line.
In addition to Von Nessen and Woodward, attendees also heard a keynote address on inflation concerns from Mick Mulvaney, former White House chief of staff, S.C. congressman and acting director of the Consumer Financial Protection Bureau.
“South Carolina’s economy really is in good shape going into 2022,” said Von Nessen. Metrics show the state can anticipate being fully recovered from the COVID recession in 2022, barring any new setbacks from additional variants, he said.
“One reason for that is that this was a very unique recession,” Von Nessen said. “This was a recession not because of any economic failing, but because of a government-imposed shutdown.”
As a result, when South Carolina’s economy reopened, it was able to recover far faster than expected, he said. For example, it took the state about six years to recover all the employment losses from the Great Recession in 2008.
“Contrast that with what is going on now, and we anticipate full employment recovery in South Carolina sometime in 2002,” Von Nessen said. The state’s unemployment rate already has fallen to 3.9% as of October, down from 12% during the darkest days of the pandemic, “well below the traditional measure of full employment of 5%,” he said.
But the rapid recovery has led to concerns as South Carolina enters 2022: a tightening labor market and higher inflation.
“The problem going into 2022 is not the lack of jobs, but they (employers) can’t find the workers,” Woodward said. This is despite that South Carolina is one of only 11 states to have fully recovered the size of its pre-pandemic workforce, unemployment insurance claims are back to pre-pandemic levels, and the total size of the state’s labor force is 1.8% above February 2020 levels.
The tight state labor market is largely the result of strong demand, Von Nessen said. “Consumer spending on goods is currently about 25% higher than it was before the pandemic began,” he said.
In South Carolina, much of that demand has come from population growth.
“South Carolina had the second-largest in-migration rate in the country last year in 2020, and that has persisted into 2021,” Von Nessen said.
By some projections, the Southeastern states are expected to see the nation’s highest population growth during the next 20 years, at least into 2040, Von Nessen said. “That spurs housing demand and is why both construction and the logistics industries in South Carolina are fully recovered now,” he said.
But for South Carolina, that population growth has also contributed to the tightening labor market. Von Nessen noted that South Carolina is a huge draw for retirees. For every three people who move to South Carolina, two are over the age of 55 and not likely to be in the labor market long-term.
“All three of them are going to be purchasing goods and services, but only one of them is in their prime working years,” Von Nessen said.
Rising inflation is also a concern for the recovery.
While South Carolina has seen strong wage growth, Von Nessen said, “that hasn’t been true in every specific industry. And for those workers who have not seen substantial wage gains, high inflation is already impacting their purchasing power.”
Wage growth on average in South Carolina has been about 2% year over year, compared to an inflation rate around 6%, he said.
“We estimate that about 40% of the state’s work force has seen an erosion in purchasing power over the last year,” Von Nessen said.