WELCOME TO BOOMTOWN

Citing Boeing and tourism, economist sees strong area rebound

By Yvonne Wenger
The Post and Courier

Thursday, December 3, 2009

COLUMBIA -- Boeing and tourists are expected to lift the Charleston economy out of the nationwide recession next year and perhaps skyrocket the Lowcountry into the top 10 growing economies in the United States, a University of South Carolina economist said Wednesday.


The outlook for the rest of South Carolina is not so bright, although small gains also signal a statewide end to the two-year recession, Doug Woodward said at the Darla Moore School of Business' 29th annual Economic Outlook Conference.

"There is a recovery unfolding," Woodward said. "The recession is over."

Personal income will grow by 3.3 percent and the job base will see a 0.2 percent uptick, but neither is expected to be enough to draw down the record-high unemployment rate, Woodward said.

The recovery is fragile, he said; any shock to the financial market could send the state back into an economic downturn.

Boeing changes it all

Boeing's decision to locate its second Dreamliner jet production line in North Charleston will pay dividends in the state for years to come, Woodward said.

Boeing is expected to create at least 3,800 jobs and invest more than $750 million in seven years. The expected investment is the largest made anywhere in the country in 2009, Woodward said.

"We are very fortunate to have a major capital investment in South Carolina," he said. "That will have a big impact in the Charleston area and, I think, over time, will spread its influence throughout the South Carolina economy."

Boeing's direct influence in the Lowcountry will signal to the rest of the country that the area is one of the best places for business going forward for the next couple of years, Woodward said.

Besides being a confidence booster, Boeing's influence will start as a big construction project, and in the next couple of years produce a cluster of activities in the Lowcountry, he said.

The jobless rate will stay relatively low in the Charleston area compared to the rest of the state because of the Boeing impact, he said.

Statewide unemployment will average 11.2 percent in the next year before it is expected to leave the double-digits, Woodward said. It will, however, take years to get back to pre-recession unemployment, which was half that rate, he said.

The statewide rate for October is 12.1 percent and 9.7 percent in Charleston.

The Charleston area economy also is tied closely to tourism, and Woodward said tourism should pick up. Leisure and hospitality dropped by 3.8 percent from 2008 to 2009.

"People are going to take vacations," Woodward said. "There will be more foreign tourists, especially the Canadians, with the dollar depreciating. The weaker dollar means that foreign tourists have more money to spend here. They will look at the U.S. as an attractive destination."

Personal income growth, which includes rental income, dividends, interest and profits, had a 1.4 percent decline in 2009.

Even though the projected increase in income growth is small -- an estimated 1.3 percent after inflation is factored in -- the growth will have a cascading effect throughout the economy reaching down to retail sales and other areas, Woodward said.

Consumers are needed

He credited federal stimulus efforts with helping to strengthen the economy.

The $787 billion American Recovery and Reinvestment Act infused some cash, the first-time homebuyer tax credits helped kick-start the housing market, and work by the U.S. Treasury and Federal Reserve opened up financial markets for lending, all of which have influenced the expected recovery in South Carolina.

Continued growth will depend on moderate energy and fuel costs, a housing rebound and a steady stock market, Woodward said. Consumers are another piece of the puzzle.

"Consumers, who have been sharply cutting spending, will have to get back in the market to have a vigorous recovery. It will be important to see how retail sales perform this Christmas," he said.

Woodward put together the economic outlook with fellow USC economist Paulo Guimaraes, but university President Harris Pastides acknowledged the limitations of a forecast.

"Let's look into the crystal ball," he said as the conference began.

Reach Yvonne Wenger at 803-926-7855 or ywenger@postandcourier.com.
File photos by Brad Nettles(top)and Leroy Burnell - Staff

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