Outlook for S.C. economy sunnier in 2012

COLUMBIA -- More workers will find jobs, employees will get raises and modest homes could increase slightly in value in South Carolina next year, according to economists at USC.

But the economic recovery will remain fragile, according to Darla Moore School of Business economists Doug Woodward and Joey Von Nessen, who spoke Wednesday at the university’s annual economic outlook conference.

The state’s economy “is looking pretty good,” Woodward said. “South Carolina is in relatively good shape and if there is growth in the U.S. economy we are positioned to do fairly well.”

The Myrtle Beach area outpaced the rest of the state in total employment growth, jumping 2.6 percent between 2010 and 2011, according to the economists. The area may not have added the most jobs in the state, but did have the largest percentage increase in jobs, which was likely driven by a boost in hospitality hiring, Woodward said.

“Myrtle Beach really outpaced everybody else,” he said. “I didn’t expect that, but that’s what the data is saying.”

The percentage change may be larger because it is coming from a smaller total number of jobs, Woodward said. The faster growth may also be due to the fact that the hospitality industry also usually hires employees quickly if there is a demand, faster than other sectors like manufacturing, which have led to growth in other parts of the state.

But Von Nessen warned the 200 or so business and economic leaders at the conference that “uncertainty is still high, and any market change could easily rock the boat.”

The most important factor in the state’s recovery is jobs, the economists said. And, surprisingly, manufacturing is leading a rebound in South Carolina, which state leaders termed a “renaissance.”

The state has added more than 21,000 manufacturing jobs in the past year. And with big hitters like aerospace giant Boeing, tiremakers Continental and Bridgestone, and online retailer Amazon.com opening facilities in the state, that number will continue to rise.

The tiremakers in particular are serendipitous, because no one thought the tiremaking industry in the country would rebound, Woodward said.

However, in 2009, President Barack Obama imposed a 35 percent duty on Chinese tires, over the objections of many Republican lawmakers, and plants are now being opened and expanded here, he said.

“It worked,” Woodward said.

Also expected to swell the job rolls are business and professional services, and health and education — higher paying jobs requiring college educations.

But Von Nessen said the state’s job gains may not be reflected in the overall unemployment rate next year, because more people will enter the market seeking those jobs.

Jobless rates are determined by both the number of jobs created and those people actively looking for work. It discounts those who have given up on finding a job or have become self-employed.

“So those two factors will balance out,” Von Nessen said.

Unemployment is presently at 10.5 percent. The economists predicted it will remain at that level or a tenth of a point lower in 2012.

Woodward said the state’s measure of success should be in job growth, not the unemployment rate.

“A stagnant unemployment rate doesn’t mean a stagnant economy,” he said. “We just get obsessed with this stuff. Every month I’m asked by reporters, ‘What does (the jobless rate) mean?’ It doesn’t mean much. We overdiagnose these things, particularly the jobless rate.”

Construction and housing continue to hamper the recovery.

Home sales are off around 40 percent from the peak of the market in 2007. Buyers are reluctant despite historically low mortgage rates that have dipped below 4 percent, and banks’ lending standards are still rather stringent.

Home prices remain depressed in many areas with a glut of foreclosures on the market.

“Until people see appreciation (in home prices) they aren’t going to buy,” Woodward said.

Von Nessen said there is a slight chance of that happening, but only for modest homes. Executive homes — deemed $300,000 and up — will continue to lose their value.

Home construction likely will rebound after dipping in the first quarter next year, the economists said.

But despite the optimistic outlook, the economists warned the looming European debt crisis, an uncertain stock market, the U.S. presidential election and gridlock in Congress all threaten to stymie the recovery.

“The economy is very delicate right now,” Von Nessen said, “and any increase in market uncertainty has the potential to knock us off course if it paralyzes businesses and prevents them from investing and hiring.”

-Staff reporter Adva Saldinger contributed to this report.