Recession over. ‘Joyless’ recovery ahead for Georgia schools

A UGA economist said the recovery will be slow for schools due to the drop in real estate values. AJC Photo/Kim Smith

First the good news from UGA economist Jeff Humphries: The recession ended in Georgia in July.

Now, the bad news: It’s going to take a while for schools to notice.

Speaking to educators at a UGA College of Education “State of the State” conference Thursday, Humphries said, “One year ago, we witnessed economic panic. We were on the edge of an economic abyss. It brought the Georgia economy and US economy to its knees. The news today: The recession is over. I believe the recession did end in July. It is time to plan for recovery.”

But the headaches from this economic free-fall won’t go away any time soon for schools because of the deep hit to property values. Humphries doesn’t see an increase in k-12 spending until 2011.

Humphries predicted an 80 percent chance the recovery will stick, and a 20 percent chance it will fall apart. However, the first half of next year will be pretty tough as the aftershocks continue and consumers remain wary and restrained in their spending.

Humphries expects full recovery for the state in 2013. “It might be a joyless recovery, but it will not be jobless,” he said.

Nationwide, the recession sucked up $14 trillion in household net worth, an unprecedented loss of 22 percent of the worth that Americans had accumulated over their entire lifetimes. “That was a massive wealth reduction,” Humphries said. “It will be difficult to rebuild it completely.”

Middle-class households lost so much wealth this time, he said, because of the meltdown of residential real estate.

He said federal efforts are working, citing the boost to automobile-related industries from the cash for clunker program and the improving picture for single family home sales from the first-time buyer tax credit.

Humphries predicted a 5 to 7 percent drop in local revenues collections. The biggest problem for schools is the drop in local property  digests and the increase in Georgians challenging their appraisals.

Georgia home values didn’t plummet as much as Florida since we don’t have the same speculator market. People buy homes here mostly to live in them.

But the headlines about housing values dropping 35 percent in Florida spooked Georgians, who appealed their valuations. Prices here are down 11 percent, he said.

Although the recession hit Georgia harder than many other states because housing was the epicenter of our economy, Humphries said our recovery will keep pace with the rest of the nation. “This will be a synchronized recovery,” he said. “Georgia and the nation are attached at the hip.”

In Georgia’s 2001 recession, 151,000 jobs were lost. This time, Georgia lost 350,000 jobs or 8 percent. The nation lost less, 6 percent. The period of heavy job losses is over, Humphries said, and job growth should kick in this spring.

All in all, Georgia has seen no job growth in the last 10 years. We had 3.9 million jobs in 1999 and that’s what we have today.

“We lost an entire decade in terms of job growth,” Humphries said.

The last industry to come out of this mess will be private nonresidential construction, he said. (The industry that proved recession-proof was healthcare.)

Although housing prices will start to appreciate, Humphries warned of the “shadow inventory.” These are the homeowners waiting and watching for a market rise to rush their houses to sale, thus increasing an already large inventory.

As bleak as that all sounds, several educators noted it was an improvement over Humphries’ presentation last year when it seemed that selling blood or a kidney was the only hope for school leaders.

Still, schools face another tough 18 to 24 months.