Good news, bad new: Coming recession should be moderate

Alan Mauldin, The Albany Herald, Ga.
Updated ·2 min read

Jan. 26—ALBANY — If there's going to be a recession, better that it be short and sweet — or at least short and mild.

While a recession seems to be on the way toward the end of 2023, its duration and impact should be less severe than other recent economic downturns, according to a prediction by the University of Georgia's Terry College of Business.

"We don't expect the recovery to begin until early in 2024," Benjamin Ayers, dean and Earl Davis chair in taxation, at the Terry College of Business, said.

Ayers gave a statewide perspective on the outlook for the economy during a Thursday luncheon. The annual Economic Outlook is in its 40th year and includes a series of programs at seven cities around the state, with Albany being the fifth stop.

Despite headwinds, the national economy has stayed strong, mostly owing to the strong labor market and consumer spending remaining high.

Against the backdrop of inflation and soaring energy prices, the U.S. Federal Reserve Board has hiked interest rates a number of times, and at some point it is expected those efforts will tip the nation's economy into recession, Ayers said. If "the Fed threads the needle perfectly," the prediction of a recession could be wrong.

"It's possible," he said. "We hope that will be the case, but we don't think that's the most likely (outcome)."

Some of the risks that could make a recession more likely, or worse, include more durable inflation that requires more rate hikes, more severe energy shocks or an international crisis such as worsening relations with China, Ayers said.

On the upside, in the event of easing international risks, a recession could be less severe.

"For example, a swift, positive end to the war in Ukraine," Ayers said. "That outcome is not in our forecast."

Georgia is poised to do better than the rest of the country in the event of an economic downturn. The state has been successful in landing a number of large development projects, including a Hyundai electric vehicle production facility expected to bring 8,100 jobs.

While that project is the largest industrial project in state history, the Rivian plant expected to bring 7,500 jobs is close behind. And in Novembe,r Freyr Battery announced a $2.57 billion investment for a facility in the state.

"Another reason our state's recession will be less severe is our population growth is double the national average," Ayers said. "Typically, net migration does drop during a recession. However, this year we expect only a modest drop."

Georgia's housing values, which rebounded last year to 46% higher than their pre-pandemic levels, also are expected to rebound quickly after a recession.

Ajongwa Ngwafu, dean of Albany State University's College of Business, Education and Professional Studies, gave a presentation on the local economy during the luncheon.