Posted 11:50am 8/27/08

(WSB Radio) The economic outlook for both Georgia and the nation is grim and it won't be getting much better anytime soon.

So says Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, in his annual Forecast of the Nation report.

Dhawan says the aftershocks from the credit crisis which continue to spread to other sectors have "not only put the economy into a recessionary state but also have damaged its growth prospects until 2010."

The outlook for metro Atlanta and Georgia isn't much better.

"Georgia's job picture continues to look bleak despite gains in education, healthcare and government jobs during te second quarter of 2008," Dhawan says. ""The problem stems from the housing downturn which has had a negative ripple effect throughout Georgia's economy."

WSB's Jon Lewis reports

Dhawan says other factors are also dragging the local economy down.

"High gas prices and the credit crisis have added to the area's problems" he writes, "and, like the national economy, Georgia's growth prospects will not return until 2010."

The forecast says Georgia's commercial and residential real estate sector continues to show signs of weakness which "not only impacts construction jobs but has spread to supporting sector jobs, as well."

The road to recovery, Dhawan says, is dependent on oil, and where the crude market goes. Dhawan is hopeful, but cautious.

"The price of oil will drop to an average of $89 a barrel in the fourth quarter of 2008," the report predicts, "allowing the Fed to hold off on rate hikes until next spring." However, he expects the Fed to be aggressive raising the federal funds rate by 250 basis points by mid- 2010.

"If the price of oil does not retreat below $100 per barrel by October on a sustained basis, worries of inflation will cause the Fed to raise rates much earlier than expected."

For metro Atlanta and Georgia, Dhawan says it will be two painful years before the recovery gains strength.

I expect job losses to continue at a somewhat heavy rate for the rest of the year," he writes, "and anticipate a net loss of 35,500 jobs for the calendar year 2008. In 2009, we'll see the decline slow to 2600 losses before the recovery strengthens in 2010, where we can expect to see 61,700 new jobs."

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