Ready Steady Grow
Aug 02, 2018 12:36PM ● Published by Emily Stevenson
A decade after the Great Recession, the Upstate is experiencing steady economic growth, low unemployment rates, moderate increases in wages and prices, and a housing boom. And despite rising interest rates--and holding constant the effect of a trade war--greater spending by consumers and firms will propel the Upstate economy to a higher level in the second half of 2018.
Gross Domestic Product
According to the Bureau of Economic Analysis, South Carolina’s current-dollar GDP was $219.1 billion in 2017, up from $160.1 billion in 2007. This moved the state’s ranking from 27th to 26th in the country. The Palmetto State’s real GDP growth rate was 2.3 percent in 2017, higher than the national change of 2.1 percent, from 2016 to 2017.
The Upstate’s gross regional product is almost $60 billion, with manufacturing responsible for $13.3 billion, or about 21 percent, of it. There are more than 1,800 manufacturers, including about 460 foreign companies in the area. Other industries that have 5,000-plus employees include professional and business services, retail, education, health services, financial activities, and leisure/hospitality, as per the Upstate Alliance.
Job losses in the Upstate have continued to decline since the end of the recession; in fact, 6,212 new jobs were created last year. Job creation is expected to grow at around two percent in 2018, including high-skilled and white-collar positions, such as engineers, executive staff, sales associates, and jobs in research and development, according to the SC Department of Employment and Workforce.
All things considered, the Upstate should continue to see steady growth in most industries.
Currently, the Upstate has a total labor force of 677,931, with 18,074 unemployed, making the unemployment rate 2.7 percent. This is below the national unemployment rate of 3.8 percent.
The unemployment rate can be misleading, however, as those who have left the labor force are not counted in it.
The Upstate’s low unemployment rate accompanies a dropping labor force. The labor force participation rate (LFPR) has been on a downward trajectory over the past 17 years, according to the Bureau of Labor Statistics. At 60.5 percent, the Palmetto State is below the national rate of 62.7 percent. The LFPR is considered a better measure of economic well-being than the unemployment or employment rate.
Low unemployment rates, coupled with a dropping labor force, make labor availability a growing problem. Basic supply and demand analysis puts forth that when labor demand is greater than labor supply, wages and benefits should rise as a way for companies to retain their current employees and attract new ones.
In response to growing labor shortages, Upstate industries have partnered with local schools, colleges, and universities, in some creating apprenticeships to increase the supply of trained employees.
In the long run, however, prolonged labor shortages may compel companies to invest in automation as a substitute for labor.
According to Upstate Alliance, the Upstate’s median household income is $46,793, slightly less than the state median income of $46,898 and considerably less than the national average of $59,039. The cost of living, however, is lower in the Upstate compared to Atlanta, Charlotte, or Charleston.
Given industrial growth and increased labor demand, personal income is projected to grow at 4.3 percent next year, which is greater than the 3.8 percent increase seen in 2017. This figure should be greater than the inflation rate as well, meaning an increase in purchasing power for Upstate residents.
The Upstate housing market is booming, in spite of rising housing costs over the last year. Zillow reports that the Upstate has seen an increase in single-family residential building permits, with Greenville’s increase in permits around seven percent, and Spartanburg’s 20 percent. The average housing price in Greenville rose around 10 percent last year, and is currently $176,700.
In Spartanburg, the average housing price is $108,700, with a nine percent increase from the year before.
The Upstate economy is on track to grow at a moderate pace, between two and three percent during the second half of 2018, according to the University of South Carolina 2017 Economic Outlook Conference. Given that demand for housing is outstripping supply, housing prices will likely rise, along with interest rates.
The one thing that could dampen this economic growth is a trade war.
No one wins a trade war, especially not the consumers or the trade-driven industries of the Upstate, who rely on tariff-free inputs and outputs. Trade barriers only put us on “the road to serfdom”, (The Road to Serfdom, Friedrick Hayek) that much faster.
Dr. Madelyn Young is an Associate Professor of Economics, former Chair of the Economics, Accounting and Business Department at Converse College, the 2018-19 Faculty Senate President, and recent past president of the National Economics Teaching Association. Earlier this year, she won the SCICU (South Carolina Independent Schools and Colleges) Excellence in Teaching Award.