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South Carolina's economic situation: Fall 2014

Dr. Bruce Yandle, Clemson University

South Carolina's economy is moving at a fairly good pace. There are some really bright spots. Housing starts are accelerating, employment is expanding, and when they vote with their feet, more people are coming to the state than are leaving.

When it comes to jobs, the state has recently done better than the nation. In 2013, state employment growth was 2.3 percent, the national average was 1.7 percent. On top of this, newly announced plant expansions hold the promise of even better days ahead.

 SC Employment growth chart

We-ve got room for growth. The state is still catching up.
 
If we focus on growth in per capita personal income, the state lags the nation. In 2013, South Carolina saw per capita personal income increase 1.1 percent; the national change was 1.8 percent. Much of the difference here relates to the larger share of population that relies on welfare and retirement benefits. These income sources just don't grow very much.

But while economic action across the state has gotten much healthier since the 2008 recession, the slowing U.S. economy and new uncertainties in Europe, Russia and Japan are taking a bit of wind from our sails.

To put some dimensions on this, the forecast for U.S. GDP growth for 2014 is 1.7 percent. By comparison, the national economy grew 2.2 percent in 2013, and 2.3 percent in 2012. Put another way, 2014 has a bad case of the slows. The national picture should improve in 2015. Forecasters call for 3 percent growth, and that will help South Carolina.

State revenue as an economic indicator

We can see the 2013-2014 weakness when we examine growth in state total general fund revenues, shown below. Keep in mind that the chart reports growth not revenue levels. All but one of the monthly values are positive-revenues are growing but at a sharply falling rate.

SC general fund revenue fund chart 

By the way, if we examine similar data for other southeastern states, we will see a similar pattern for all but Florida and Georgia. Those two states were late bloomers following the recession. They are now outperforming the region. South Carolina should see stronger revenue growth rates in 2015.
 
Taking a look at county employment performance

Probing a bit further, an interesting picture forms when we examine the 2013 county employment growth chart shown below. In doing so, we must be aware that examining data for just one year is hazardous. The year in question may be the best, worst or just not representative for particular counties. Even so, the relative strength of regional patterns can still be revealed.

The 2013 data tell us employment growth was positive for all but 10 counties, and the strongest growth is seen in rural counties. Of course, arithmetic makes it easier for lower population counties to experience higher relative growth. After all, a plant expansion that brings 100 workers to Kershaw County will have a much larger relative impact than when the same number of jobs are added in Greenville County.

That said, 15 counties grew at a greater than average pace. While Calhoun, Union, Fairfield and Williamsburg were high performers, some urban counties did well also. The data here tell us that major expansions were occurring in places like Anderson, Lexington and Spartanburg.

Because it is difficult to see regional patterns in the bar chart, consider the county outline map below.

We can see that a two-tier network of coastal counties form a moderate to high growth region. The piedmont seems to form the second strongest region. The remainder of the counties form a somewhat random assortment of negative to highest growth without forming a dominant pattern.

By focusing on the map, I believe we can identify the strong influence of urbanization: The Charleston influence is observed in Berkeley, Dorchester, Colleton and Charleston counties. The Charlotte effect is seen in Union, Lancaster, York and Cherokee, and an I-85 effect is noticed in the Spartanburg-Greenville-Anderson-Laurens network.

2013 county employment growth chart  

2015 opportunities and challenges

The year ahead should bring overall better times for the state economy. Population growth will continue apace. Stronger U.S. GDP growth will lift lots of SC boats. Employment growth should be stronger in the year ahead, and construction activities should continue apace. While the economy will be on the rebound, lower gains in state revenues signal a continuing challenge for improving infrastructure and operating municipal governments.

Dr. Yandle will talk about South Carolina's economic outlook at the Joint Annual Academy for the SC Business Licensing Officials Association and the SC Municipal Finance Officers, Clerks and Treasurers Association on October 16 in Greenville.