South Carolinians overall can expect to see more money in their pockets next year, two USC economists predicted Wednesday, but not necessarily due to higher wages.
Increased employment and stable economic growth will boost personal income, the economists said. And job creation is the single best indicator of overall economic strength. Jobs are predicted to grow about 1.9 percent in 2015, practically identical to the 2 percent job growth registered this year, bringing the jobless rate down modestly to 6.3 percent. October’s rate – the latest available – was 6.7 percent.
That equates to moderate overall economic growth for 2015, with no recession in sight, University of South Carolina economists Doug Woodward and Joseph Von Nessen of the University of South Carolina’s Moore School of Business said Wednesday.
“If you liked 2014, then you’ll like 2015,” Von Nessen said. “South Carolina’s economy hit its stride this year, and we expect that trend to continue.”
Woodward and Von Nessen issued their annual state economic forecast to journalists Wednesday, in preparation for their annual full forecast presentation to government and business leaders from around the state at the upcoming 34th Annual Economic Outlook Conference Dec. 16 at the university.
Real income growth in South Carolina will be up in 2015, but only mildly, the USC research duo said, predicting a 1.8 percent growth rate in 2015. Real income across most regions of South Carolina consistently has been growing below the national average rate of income growth in recent years, they said.
Still, this is the best two-year period the state’s economy has had since the Great Recession began in late 2007, Woodward said, which gives momentum to the state’s economy for 2015.
“Consumers are in the best shape they’ve been in since 2008,” Woodward said. It’s not because of bigger paychecks. Instead, gas prices, for example, are lower, he noted. And, after a long and steep five-year economic downturn, consumers also are carrying less household debt. Finally, residents’ net worth is higher because of rising home prices, the economists said.
That means consumers can spend, Woodward said, which has the biggest impact of any sector on the state’s economy, accounting for 70 percent. Increased consumer spending could lead to more businesses and offices opening, which would help sustain the economic gains.
Even state government’s finances are in better shape, the USC economists noted.
However, some uncertainty remains in the state and national economies, which causes employers to hold back on hiring full-time workers, the economists said. In a normal economic recovery, employers generally become more sure-footed and turn to more traditional hiring patterns. The opposite is happening now.
Between 2003 and 2007, 7 percent of employment growth in the state was driven by employment services, which includes temporary workers, Von Nessen said. Between 2010 and 2013, the employment growth driven by employment services was 13 percent. In 2014 alone, that percentage has jumped to 32 percent.
Housing is probably the biggest major under-performing sector in the new economy, Woodward said. While as a sector, housing construction is growing, it remains far below where it normally would be at this stage of an economic recovery, he said.
Among other concerns, the quality of jobs is not where it needs to be. “We’re not seeing the kind of income growth we’d normally expect in a more robust expansion. Some shifts are also occurring in South Carolina in terms of regional strengths,” Woodward said.
Manufacturing in South Carolina for years has been strongest in the Upstate, for instance, the USC economists pointed out, but the coastal areas now are starting to lead the state economy, especially in construction.
Many of the state’s economic indicators continue to hit pre-recession levels, Von Nessen said. “Yet the composition of that growth has been changing.”
The automotive sector around BMW in the Upstate and in Charleston have been strong, along with an emerging aerospace cluster in Charleston centered around Boeing, Von Nessen said. The emerging aerospace cluster in Charleston looks almost identical to the automotive cluster that developed in the 1990s around BMW in the Upstate, Von Nessen said, which is a good sign.
Those two clusters have been driving economic growth in the state as it has emerged from recession.
“This year has been different,” Von Nessen said. “We have seen a shift away from manufacturing as the major generator of jobs, toward the leisure and hospitality sector, and also toward the employment services sector.
Myrtle Beach and the Pee Dee region have been the major jobs growth leaders in the state this year, Von Nessen said, due to leisure and hospitality.