Economists: South Carolina on solid footing for 2016
Posted on: December 1, 2015; Updated on: December 1, 2015
By Peggy Binette, peggy@mailbox.sc.edu, 803-777-7704
Even historic flooding in 2015 couldn’t wash away South Carolina’s highest rate of growth in the last six years – a level of growth that University of South Carolina economists at the Darla Moore School of Business say will persist in 2016.
Doug Woodward and Joseph Von Nessen, economists in the Moore School Division of Research, say South Carolinians can expect broad-based growth across most industries with accompanying gains in employment and income.
They will present their full economic forecast at the upcoming 35th Annual Economic Outlook Conference Dec. 17.
Job creation — the single best indicator of economic performance — is expected to grow by 2.9 percent in 2016, according to Woodward and Von Nessen’s projections.
“We’re optimistic going into 2016,” Von Nessen says. “The economy appears to be firing on all cylinders.”
Major drivers of these economic gains are wage growth and disposable income. As a result, the economy has seen an uptick in consumer spending.
“This year represents the first time in the current expansion (2010–present) that we’ve seen the creation of high wage jobs accompanied simultaneously by significant wage growth across multiple industries,” Von Nessen says. “This means that more South Carolinians are feeling the effects of the expansion.”
Although the manufacturing industry has played a key role in the state’s economic growth over the past several years, this year’s growth has been led by construction and housing markets, according to their analysis.
“Housing demand in 2015 has been primarily fueled by new construction, rather than by remodeling. This represents a transition from previous years when the reverse was true,” Von Nessen says. “Because of increases in disposable income, more consumers are making new home purchases instead of remodeling their existing homes.”
Additionally, nonresidential construction is benefiting from major increases in the growth of retail trade. Employment growth in retail trade has nearly doubled over the past year, Von Nessen says.
Professional and business services is the other leading economic sector this year. With industries ranging from engineering, accounting and computer software design to management and technical consulting, this sector has helped to increase statewide income levels.
“The professional services sector encompasses a variety of industries that generate both relatively higher-wage and relatively lower-wage jobs,” Von Nessen says. “However, another positive trend we’ve seen developing this year is that the percentage of higher-wage jobs generated in this sector has been increasing substantially.”
Woodward and Von Nessen expect a modest increase in total personal income growth from 4.6 percent to 4.9 percent during 2016.
Engulfing the forecast for 2016 will be the impact of the early October floods on South Carolina’s economy. The economists say the implications of the deluge on growth will be significant.
“Preliminary estimates suggest that the October floods will have a comparable economic impact to that of Hurricane Hugo,” Woodward says. “These include losses associated with property and infrastructure damage as well as a four- to six-week period of major disruptions to business activity.”
The impact primarily will be concentrated within the Midlands, followed by Charleston, Myrtle Beach and the Pee Dee region.
These same regions, however, likely will benefit in 2016 through additional spending activity arising from rebuilding 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 says. “However, this short-term boost will not compensate for the wealth of losses incurred by citizens and businesses who were not fully insured or given other forms of disaster relief to pay for their damage.”
A review and analysis of the magnitude of the flood’s impact on the state’s economy in 2016 will be presented at the Economic Outlook Conference.
Woodward and Von Nessen expect that the growing economy will lead to increases in the labor force, which likely will prevent any significant declines in the unemployment rate during 2016.
The Moore School forecast calls for a slight increase in the unemployment rate over the next 12 months from its current rate of 5.6 percent to approximately 6 percent. Total personal income is anticipated to increase from 4.6 percent to 4.9 percent during the same time period.
The Economic Outlook Conference is the state’s premier business event, attracting hundreds of corporate and small business leaders throughout the state as well as public officials.
The daylong conference on Dec. 17 also will feature a keynote address from Martin Ford, whose book, “Rise of the Robots: Technology and the Threat of a Jobless Future,” recently was named the Financial Times and McKinsey best business book of the year.
Several additional speakers will address the impacts of automation in South Carolina. Rick Kaglic, staff economist at the Federal Reserve Bank of Richmond, will address what increasing automation trends will mean for the state’s economy, while Moore School Dean Peter Brews will discuss how business education will adjust to prepare future workers.
Complementing the 2016 forecast will be Jay Bryson, managing director and global economist at Wells Fargo, who will discuss the impact that expected increases to interest rates will have on financial and global markets.
2015 Economic Review ● South Carolina Communities at a Glance
- South Carolina experienced steady gains in employment across the state throughout 2015 (October 2015 employment compared against October 2014). The largest gains occurred in Anderson (+3.5 percent), Rock Hill (+3.4 percent), Spartanburg (+3 percent), Greenville (+3 percent), Columbia (+2.8 percent) and Charleston (+2.1 percent). More modest gains occurred in Augusta (+1.6 percent), Myrtle Beach (+1.6 percent), Darlington (+1.4 percent), Florence (+0.7 percent) and Sumter (+0.3 percent).
- South Carolina’s retail trade employment growth nearly doubled statewide over the last twelve months (+4.5 percent in October 2015 over October 2014 versus +2.4 percent in October 2014 over October 2013) and saw significant gains across much of the state. The primary gains in retail trade this year occurred in Greenville (+6.2 percent), Spartanburg (+5.6 percent), Columbia (+4.3 percent), Myrtle Beach (+4.1 percent) and Charleston (+1.8 percent).
- Residential building permit activity was up across most of the state over the last year. Comparing total residential building permits issued in October 2015 with those issued in October 2014, major gains were seen in Spartanburg (+39.4 percent), Greenville (+37.5 percent), Columbia (+16.9 percent) and Augusta (+16.4 percent). Small gains were seen in Charleston (+5.1 percent), while losses were observed in Myrtle Beach (-9.8 percent), Sumter (-13.6 percent) and Florence (-25.2 percent).
- Unemployment rates in October 2015 have declined across all metropolitan areas compared to October 2014. The largest decline (in percentage points) occurred in Rock Hill (-1.4 percent). This was followed by Florence (-1.3 percent), Darlington (-1.3 percent), Anderson (-1.1 percent), Augusta (-1.0 percent), Sumter (-1.0 percent), Greenville (-1.0 percent), Columbia (-0.9 percent) and Charleston (-0.8 percent).
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