ATLANTA — Although U.S. employers have added an average of 181,000 jobs per month during the past year, Americans shouldn't expect a significant economic rebound until 2014. That's the sobering message from Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University (GSU), who urges consumers to just breathe.
“In between now and 2014, the economy will have this stop-and-go progression that will really bother you,” said Dhawan during his presentation at GSU's student center on Wednesday morning. “Don't keel over. Have some hope.”
Higher federal taxes will lead to less consumer spending during the first and second quarters of 2013. The workers' share of the Social Security payroll tax, which jumped from 4.2 percent to 6.2 percent in January of this year, means that a family that earns $50,000 will now pay an additional $1,000. That would mean the highest tax burden for most U.S. households since 2008, according to the Wall Street Journal.
Source: Georgia State University Economic Forecasting Center
Dhawan said that discretionary spending is already getting weak and the data from February, March and April is likely to reflect this trend. But, once the shock of higher taxes wears off, the consumer will begin spending again.
“You blame me for the economy — you tightwads, go out and spend money,” Dhawan stated bluntly.
Walmart reported a solid fourth quarter, but management said that fears regarding higher payroll taxes, delays in income tax refunds and higher gas prices have negatively impacted the company's sales since mid-January, according to CNN Money. Walmart has started adjusting the size of the products it offers in response to the dim outlook. Consumers are making adjustments and pulling back on discretionary spending.
Growth in consumer spending will average 1.7 percent in 2013, followed by 2.1 percent in 2014 and 2.3 percent in 2015, projects Dhawan.
Dhawan also predicts real GDP to grow by only 1 percent in the first half of 2013 and 1.5 percent during the second half of the year. For 2013 as a whole, GDP will average 1.2 percent. Dhawan is more optimistic about GDP in 2014, expecting it to expand at a stronger rate of 2.1 percent, followed by 2.6 percent in 2015.
“If you don't invest today, you won't have jobs tomorrow,” he said.
The veteran economist expects Georgia to add 63,200 jobs in 2013 for an annual growth rate of 1.7 percent. Dhawan's forecast for 2014 anticipates a 1.9 percent growth rate with the addition of 80,700 jobs, followed by 2.1 percent growth in 2015 with 90,700 jobs created.
The information sector is leading the rebound in Atlanta, according to Dhawan. For example, General Motors plans to hire approximately 1,000 workers during the next three to five years at a new $26 million technology development center in Roswell. In addition, Airwatch, a mobile software company, will add 800 jobs at its Sandy Springs headquarters during the next two years. Dhawan expects the metro area to generate 38,900 jobs in 2013.
When compared to other economies globally, the U.S. is faring well, says the veteran economist. Dhawan described the United States as being the cleanest dirty shirt in the laundry basket.
“Last part of 2013 will be topsy-turvy, but the economy won't be as bad as 2010,” said Dhawan. “It won't be as good as 2012 and 2014 though.”
— Brittany Biddy